SINGAPORE — The expected hike in Singapore's Goods and Services Tax (GST) rate will have to come sometime during 2022 to 2025, said Deputy Prime Minister and Finance Minister Heng Swee Keat in Parliament on Thursday (16 February).
The increase would have to be done "sooner rather than later" in order to properly fund the country's recurrent spending needs, Heng said while delivering his Budget 2021 speech.
"No finance minister likes to talk about tax increases, certainly not when the (COVID-19) pandemic is still raging around the world. But we do this because we plan for the long term and and do not shy away from explaining to fellow citizens why we need to make tough but necessary decisions to ensure that we have enough to provide for our nation's future," said Heng.
The raising of the GST rate was first announced during Heng's Budget 2018 speech, at which point it was expected to be implemented sometime between 2021 and 2025. Given the economic conditions caused by the pandemic, Heng said during his Unity Budget speech in February last year that the increase would not take place in 2021.
In his speech, Heng noted that even prior to the pandemic, had already expected Singapore's recurrent spending needs to increase, especially in areas like healthcare. He said that healthcare expenses had already tripled from $3.7 billion in the 2010 financial year to $11.3 billion in 2019.
Heng also reiterated the government's commitment to ensure that the country's overall taxes and transfers system remains "fair and progressive".
To this end, GST on publicly subsidised education and healthcare will continue to be fully absorbed. A $6 billion Assurance Package has also been set aside to help delay the impact of the GST increase on most Singaporean households by "at least five years".
Higher GST offset amounts will be offered to those living in one- to three-room flats, with this group receiving about 10 years' worth of GST expenses incurred. Heng also noted that the GST Voucher scheme that helps defray GST expenses for middle- and lower-income families has become a "permanent feature of our system".
Based on past collections, foreigners residing in Singapore, tourists and the top 20 per cent of resident households make up over 60 per cent of the net GST borne by individuals and households, he added.
"If you consider our entire system of taxes and benefits, it is a progressive one. In 2020, the top 20 per cent of Singaporean households paid 56 per cent of the taxes and received 11 per cent of the benefits, whereas the bottom 20 per cent paid 9 per cent of the taxes and received 27 per cent of the benefits," said Heng.
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