February 10, 2022
SINGAPORE – A package that will be rolled out to cushion the impact of the impending goods and services tax (GST) hike is set to cover about 10 times the extra amount some families will spend, said Finance Minister Lawrence Wong on Wednesday (Feb 9).
He was addressing people’s concerns that the cost of living may go up with the tax increase, which is needed to raise additional revenue for Singapore’s growing healthcare and social needs.
Mr Wong pledged that there will be a comprehensive set of measures that will offset the increase for lower- and middle-income households as well as retirees, including permanent enhancements to the GST Voucher scheme.
His video message comes amid prices rising steadily in Singapore, with core inflation hitting an eight-year high of 2.1 per cent in December, up from 1.6 per cent in November.
As groceries and utilities bills soar, some have raised concerns that the planned GST hike of two percentage points, from 7 per cent to 9 per cent, will drive up prices.
Giving a better idea of how the $6 billion Assurance Package that is meant to offset the increase will work, Mr Wong said that a couple with two children and earning $5,000 a month will receive around $6,500 in benefits under the package.
This works out to about 10 times the extra GST that they will have to pay each year, he added in the video posted to his social media accounts.
Besides these transitional offset measures, the Government will also permanently enhance the GST voucher scheme, introduced in 2012 to offset some of the cash outlays as well as medical and utilities expenses of lower-income Singaporeans, he said.
He added that he would share more details in the Budget statement on Feb 18.
The GST hike was first announced in 2018 and the Government has said that it will have to be implemented by 2025.
Prime Minister Lee Hsien Loong said in his New Year message this year that the Government will have to start “moving” on it, with Singapore’s economy recovering from the Covid-19 pandemic.
Reiterating a point made when the GST hike was first announced in 2018, Mr Wong said that it will bring in the additional revenue that Singapore needs to take better care of its elderly and pay for growing healthcare needs.
“Singapore is now at a critical turning point. We are still seeing through the pandemic today. At the same time, we are working hard to build a better Singapore for tomorrow,” he added.
“To do so, we will need to invest more in our people and social infrastructure. The GST increase will help generate the revenue we need for this purpose.”
Singapore’s healthcare expenditure is set to hit $59.1 billion in 2030, up from $20.7 billion in 2018. And the proportion of those aged 65 and older will make up 25 per cent of the population by 2030, up from 17.6 per cent currently.
In the 2020/21 financial year, the Government collected $10.3 billion in GST, accounting for 21 per cent of the Government’s tax revenue. It was the largest contributor after corporate income tax at 33 per cent and individual income tax at 26 per cent.
With the two percentage point increase, GST could overtake individual income tax as the second-highest contributor to the coffers.
Mr Wong, who will deliver the Budget statement on Feb 18, said: “When I was growing up, my mother taught me the importance of financial prudence to live within our means and take care of those around us.
“These values continue to guide me, and I’m sure they resonate with many of you.”