Consideration for Windfall Taxes on Energy Companies

Parliamentary Question by Mr Chua Kheng Wee Louis:

To ask the Deputy Prime Minister and Minister for Finance (a) whether the Government has considered implementing windfall taxes on energy companies in light of record profits by oil majors; and (b) what are the considerations behind implementing or not implementing such a tax.

Parliamentary Reply by Senior Minister of State for Finance, Mr Chee Hong Tat:

In light of elevated global oil and gas prices over the past year, some countries have introduced windfall taxes on the extraordinary profits of energy companies.  Such taxes can yield short-term revenues.  But they will damage the economy in the longer-term.

In particular, it is typical for energy markets to experience up and down cycles. Higher profits in good years help the energy companies smooth out past losses, and prepare for future downcycles. Windfall taxes arbitrarily applied to companies just because of their recent “record profits” will lead to considerable business uncertainty and disincentivize long-term private investments. Energy companies will hold back on investing in greener fuels and decarbonization measures, which will make it harder for us to achieve our net zero targets.

More generally Singapore’s value proposition as a trusted business hub has been based on our long-term stability, anchored on strong rule of law and a predictable regulatory environment. Arbitrary measures like windfall taxes will send the wrong signal to businesses and discourage them from investing in Singapore. This will erode investor confidence, and in turn affect Singapore’s competitiveness and the livelihoods of our workers, who could either lose their jobs or have fewer career advancement opportunities when businesses divert their investments elsewhere. 

We must not let the temptation of short-term revenue gains come at the expense of our long-term economic competitiveness. We must be careful not to resort to populist ideas to raise revenue that will ultimately hurt businesses, our economy, and Singaporeans.