Property stamp duty collection jumps to S$3.2b; corporate, income taxes race past pre-Covid levels

Corporate, personal income taxes were also key drivers for growth in tax revenue, which will help fund Covid support moves

Nov 06, 2021



A ROBUST property market has contributed to a surge in stamp duties collected in the first half of Singapore's current financial year - a trend that could continue amid expectations of a banner year.

Tax revenue for April 2021 to September 2021 totalled S$39.43 billion, outstripping the S$23.74 billion collected in the corresponding period in FY20, going by data from the Accountant-General's department, available online at the Singapore Department of Statistics. The FY21 figure also surpasses the S$37.2 billion chalked up for the six month period in FY19, prior to the pandemic outbreak.

Economists cited stamp duties, as well as corporate and personal income taxes, as key drivers for the boost. They also said that the overall Budget deficit for FY21 may turn out smaller than the S$11 billion the government has projected, because higher tax collections in certain areas are expected to continue for FY21 amid a recovering economy.

Vishnu Varathan, head of economics and strategy at Mizuho Bank, said: "We will continue to see strong contributions because the overall underlying activity continues to pick up." However, corporate tax contributions may trend a bit more sideways due to swiftly rising costs, he added.

Stamp duty collections have hit nearly S$3.22 billion so far in FY21, thanks to a flurry of activity in the private property sector, up sharply from S$1.2 billion in 2020 and S$2.08 billion in 2019.

The HDB resale market is also active; the delay in the construction of BTO flats has sent home-buyers flocking to the resale market.

"The private property market saw an increase of 22.6 per cent in transactions in the first nine months of 2021, compared to the whole of 2020," said Huttons Asia's senior director for research, Lee Sze Teck.

"Even the private and HDB rental market in 2021 experienced similar levels of activity despite the tight border measures."

In addition, the Good-Class Bungalow (GCB) segment has been flourishing with over S$2.5 billion in deals as at end October, Lee added.

Cushman & Wakefield's head of research, Wong Xian Yang, reckons that stamp duty collections should tick higher for both October and November, in line with strong demand for private homes and the uptrend in prices. However, he added that the year-end festivities and upcoming Chinese New Year could result in an easing in activity in the private residential market in December and January, especially as travel re-opens amid pent-up demand.

Corporate income tax collection for FY21 stands at S$12.76 billion, versus S$5.69 billion in FY20 and S$12.5 billion in FY19; personal income tax collection for FY21 works out to some S$8.03 billion. This is up from S$6.93 billion in FY20 and S$7.03 billion in FY19.

"It shows how uneven this recovery has been," pointed out Maybank Kim Eng senior economist Chua Hak Bin, noting that sectors such as finance and insurance have performed well. "This pandemic has hit low-wage workers disproportionately, whereas high-wage or high-skilled workers have not been hit as hard or ... even (saw) a windfall."

Varathan said: "Wage-subsidy schemes and liquidity measures extended to SMEs also made sure we did not see unemployment or retrenchment shooting through the roof. That helped to bolster personal income taxes."

Dr Chua also suggested that the government could afford to delay the Goods and Services Tax (GST) hike, which at present is due between 2022 and 2025. GST collections for FY21 clocked some S$6.04 billion, up from S$4.66 billion in FY20 and S$5.56 billion in FY19.

While property taxes nearly quarupled year on year to S$1.98 billion in FY21, analysts pointed out that this could be coming off a low base in FY20, when the government doled out a property tax rebate to prop up the economy in the early days of the pandemic.

Wong added: "Given the recovering economy and progressive re-opening of Singapore's economy, we could see an increase in property taxes, as both residential and non-residential rents - with the exception of retail - are largely expected to increase."

The higher-than-expected revenues raked in to date are certainly proving useful; they are helping to fund support measures as Singapore battles a surge of Covid-19 cases with safe-distancing measures extended till Nov 21. "There will be no further draw down on past reserves," the Ministry of Health said in October, when it announced further support measures.

Looking ahead, Huttons' Lee projects a banner year for the property market in 2021, with the number of deals hitting a new high since 2012, with over 32,000 transactions. The HDB resale market should also log more than 29,000 transactions. Prices of private property may go up by between 6 and 6.5 per cent this year, and HDB price gains may rise by more than 11 per cent, Lee added.

Property analysts said that the private property market could benefit slightly as travel curbs ease and foreign buyers return. According to Cushman & Wakefield, foreign buyers accounted for 4 per cent of all private residential non-landed deals in the first nine months of 2021.

In 2019, the figure stood at 6 per cent. China, Malaysia, India, Indonesia and the United States comprised 59 per cent of total foreign demand for private non-landed homes island-wide in 2019, Wong noted. At present, of those five markets, Singapore has a vaccinated travel lane (VTL) with only the US.

Huttons chief executive Mark Yip reckons that districts 9, 10, 15, 18 and 19, in particular, could benefit from an expanded vaccinated travel lane (VTL) scheme.

"We may see more buying in the Core Central Region (CCR) once more VTLs or travel without restrictions are in place," Yip said. "If VTLs are set up for Asean countries, it would further boost transactions in the property market."