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The increase in the Goods and Services Tax (GST) will take place at an unspecified date between 2022-2025, and will be done "sooner rather than later", subject to the economic outlook.

The announcement was made by Deputy Prime Minister (DPM) and Finance Minister Heng Swee Keat during his 2021 Budget statement in Parliament on Feb. 16.

DPM Heng announced in last year's budget that the GST hike will not be raised in 2021.

The planned 2 per cent hike was previously announced in the 2018 Budget.

Singapore will not be able to meet its rising recurrent needs without GST move

In adding that the government will not be able to put off the budget increase "for too long", Heng explained that Singapore will be unable to meet its rising recurrent needs, especially healthcare, if the move is not made.

In addition, while Singapore was fortunate to tap on its reserves for Covid-19, it is not tenable for the government to run "persistent" budget deficits outside times of crisis.

Acknowledging that the pandemic was still an ongoing issue, he said:

"But we do this because we plan for the long-term 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."

S$6 billion package to be set aside to soften the blow

This brought up Heng's next point that S$6 billion has since been set aside as an assurance package to help cushion the impact of the raise.

The package will essentially delay the effect of the GST increase for the majority of households in Singapore by at least five more years, he pointed out.

This is expected to rise to about 10 years for lower-income Singaporeans living in one- to three-room HDB flats.

In addition, the GST voucher scheme will also be enhanced once the increase takes place.

Such a scheme, according to Heng, has helped to ensure that Singapore is able to provide "targeted help" to those who need it the most.

Tax system will remain "fair and progressive"

Heng also reiterated the government's commitment to ensuring that the overall taxes and transfer system remains "fair and progressive".

On this matter, he gave the following figures, based on past collections:

• Tourists and the top 20 per cent of households are estimated to account for over 60 per cent of the net GST borne by households and individuals,

  • This is after taking into account the GST voucher scheme and GST refunded under the Tourist Refund Scheme for goods bought locally for abroad consumption.

• In 2020, the top 20 per cent of Singaporean households paid 56 per cent of taxes and received 11 per cent of the benefits,
• While the bottom 20 per cent paid nine per cent of taxes, and received 27 per cent of the benefits.

Top image screenshot via MOF