The two per cent increase in the Goods and Services Tax (GST) will proceed as planned because of a rise in Singapore’s spending needs, largely due to an ageing population and healthcare, Deputy Prime Minister Lawrence Wong said on Jun. 21, according to The Straits Times.
Wong, who is also the Finance Minister, highlighted that the move had been extensively debated recently during the Budget.
He noted that the government has already made alternative measures such as personal income tax, property tax and luxury car taxes to raise revenue.
However, as these are still insufficient, the GST has to be raised.
In addition, Singapore is not just facing the challenges of inflation and the cost of living, but also climate change, an ageing population and a more divided world, Wong pointed out.
Singapore must therefore press ahead with its economic reforms to be in a strong position fiscally, so that it can address these issues.
Package in place to help Singaporeans
Wong added that he was cognisant of the challenging economic situation however, along with concerns about the GST adding to inflation and cost of living.
He said that the GST had been pushed back as late as possible, along with staggering the increase in two steps.
A package to offset its impact has also been put in place under the Budget.
Most Singaporean households will not feel the impact of the GST increase for at least five years, while lower-income groups will not feel the impact for a decade, he said.
A long time coming
The two per cent planned increase in GST, from seven to nine per cent, was first announced in 2018 by then-Finance Minister Heng Swee Keat.
The hike was meant to take place between 2021 to 2025.
In 2020, Heng announced that the GST hike would not take place in 2021, considering revenue and expenditure projections, and the economic outlook.
More details were given during Budget 2021, with Heng specifying that the hike was likely to be implemented sometime from 2022-2025, and will happen "sooner rather than later".
Ahead of the Budget 2022 statement, on Feb. 9, Wong touched on a need to invest more in "our people" and "our social infrastructure".
He shared that a GST increase will help generate the revenues needed, to fund Singapore's growing healthcare needs and better take care of senior Singaporeans.
Top screenshot via Lawrence Wong/Facebook