GST concerns: Will the hike from 8 to 9 per cent mean less donations to Singapore charity organisations?

SINGAPORE — Amid the recent hike in Singapore's goods and services tax (GST) from 8 per cent to 9 per cent, a concerning trend has emerged: a drop in charitable donations, even as the resilience of Singapore's philanthropic spirit remains evident.

Yahoo Southeast Asia spoke with charities such as The Salvation Army, Food from the Heart, and The Food Bank Singapore, who detailed their efforts to garner donations and navigate through these challenging times.

Marcus Moo, director of Social and Community Services at The Salvation Army, emphasises the multifaceted nature of decisions regarding charitable donations, "These could be influenced by personal values, experiences, empathy, and a sense of responsibilities for the vulnerable. Those who donate would largely have this underlying principle of doing good."

Will Singapore's extended tax deduction spark a surge in charitable giving?

Building on this ethos, the Singapore government had announced an extension of the 250 per cent tax deduction benefit for qualifying donations in its 2023 Budget. This extension, spanning an additional two years until 31 December 2026, is a move aimed at nurturing philanthropy and ensuring that contributors to qualifying charities receive financial incentives for their benevolence.

Moo suggests that the prospect of more taxes in the future could prompt both individuals and corporations to increase their donation contributions to registered charities under IPC (Institution of a Public Character). IPC status grants registered or exempt charities additional benefits, including the issuance of tax deduction receipts for qualifying donations.

"Moreover, it might encourage a greater number of new donors to join in, contributing not only to charitable causes but also potentially alleviating their overall tax burden," he added, while acknowledging the potential impact on a more risk-averse group managing costs tightly, affecting their willingness to donate.

Economic pressures and global crises

In the wake of the recent GST hike, Moo acknowledges the strain on the cost of living, while noting that there are other economic factors that are placing increased pressures on disposable income, influencing individuals' decisions regarding charitable contributions. He highlights the impact of overall inflationary pressures, resulting in a surge in daily living costs, spanning housing, transportation and utilities.

Beyond economic challenges, he points to additional factors shaping public attention, including immediate global conflicts and humanitarian crises, leading to increased donations to overseas causes.

In light of these considerations, Moo suggests that both individuals and corporations may be rethinking the amount they are willing to donate or even contemplate whether to donate at all. This is a worrying sign, as donations have steadily declined over the past few years at about 10 to 15 per cent lower from the preceding year.

Despite these economic strains and policy changes, Moo continues to keep faith in Singapore's unique culture of giving, affirming, "The amount might trend slightly lower in tougher years, but you can be sure that people are still giving on a recurring basis. We see people who donate even just a dollar every month. Our donations bins, needless to say, are still overflowing with generosity."

"There is a certain resilience among donors; even in tough times, those who are part of the community of givers continue to give, and some even give more because they are aware that the needs are greater."

Sustaining support from donors

Robin Lee, chief executive of Food from the Heart (FFTH), is also concerned at how increased tax burdens are affecting individual donors. He stressed to Yahoo Southeast Asia on Tuesday (16 January) the role played by corporate donations in sustaining FFTH's funding.

"We did not see any significant changes in the number of donations - cash and in-kind - to FFTH after last year’s increase to 8 per cent GST, mainly because we receive most of our donations from corporations," he revealed.

"Similarly for this year, we don’t foresee much changes. However, this does not mean that the general public is giving less, as we also observe a higher interest from the public to volunteer for our programmes such as our Bread Run and food donations."

While Lee recognises the positive impact of tax deductions for charities, he is concerned on its sustainability. He emphasises FFTH's proactive approach to encourage donations, saying, "Our charity is active in meaningful public outreach and external stakeholder engagements through campaigns and events, to maintain top-of-mind awareness for our organisation and the social service sector."

"We collaborated with Singaporean artiste Lee Jun Le to create a set of two exclusive red packet designs this year as a token of appreciation to volunteers, sponsors, donors and friends, while we support local talents and sustain food support for underprivileged children."

Changing landscape of philanthropy

Nichol Ng, co-founder of The Food Bank Singapore, sheds light on a prevalent perception issue in which donations are deemed less crucial for larger organisations like hers. "Donations have also 'watered down', because people just feel that larger organisations don't really need the money," she said.

The Food Bank Singapore has witnessed a downward trend in donations from 2021 to 2023, encompassing both tangible items and monetary contributions.

In terms of items, there is a decrease from $3.574 million in 2021 to $3.249 million in 2022, further dropping to $2.890 million in the first 11 months of 2023. Similarly, for cash and grants, the trend is comparable, starting at $4.213 million in 2021, decreasing to $3.547 million in 2022, and dipping to $2.29 million in 2023.

Looking ahead to 2024, Ng anticipates challenges, not just from an economic perspective but also due to multinational corporations tightening their budgets. She then outlines The Food Bank's strategic approach to overcome these challenges, stating, "Part of our commitment to the ecosystem is that the Food Bank may not be the largest charity, but we can always be the biggest one that stirs ideas and thought."

"People are always finding interesting new projects to support. Volunteering in the warehouse no longer cuts it. It's about creating fun experiences, and our team needs to step up our game in terms of creativity to keep things fresh so that people keep coming back."

Strengthening collaboration and boosting donations

Ng wants to focus on increased collaboration with government agencies and other non-profit organisations in the coming year, in order to avoid duplication of aid.

She urged people to consider alternative ways of support, saying, "The amount is never too big nor too small. So, even if you can't give us $50 this year, we will accept $10. It can still help, and it can also be accumulative. Please feel free to also drop food donations off at your closest charity, just to make sure every product is consumed and not wasted."

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