Singapore still waits for timing of 2% GST hike

It is still monitoring economic conditions as well as expenditure trends and revenue buoyancy.

The Singapore government has yet to decide on the exact timing of the 2% Goods and Services Tax (GST) hike, which was announced as far back as the 2018 Budget, finance minister Heng Swee Keat said in his Budget round-up speech.

“We will continue to monitor the prevailing economic conditions, trends in expenditure, and buoyancy of our revenues carefully. And as I said in the Budget Speech, we will also be preparing a transitional package when this comes in,” the minister said.

This was a response to parliament member Foo Mee Har’s proposal to postpone the GST hike for as long as possible, which suggested that the funds that Singapore set aside this term for various future expenditures like the Merdeka Generation Package (MGP) and the use of borrowing for future infrastructure expenditures could provide sufficient fiscal space to postpone the GST increase.

“The decision to raise GST was not made lightly,” Heng said and added that the government had to distinguish between one-off factors and underlying structural increases. He noted that the Ministry of Health (MOH) expects to spend $6.1b in 2019 alone to subsidise patient bills through existing permanent schemes.

Parliament member Saktiandi Supaat also raised the possibility of introducing tiers of GST for different goods in order to lower the tax burden on the lower income.

“Our approach is to have a flat GST rate whilst providing structural offsets through the GST Voucher scheme,” Heng responded. “This is a permanent scheme to provide more help to lower-income households and seniors. It is also more targeted, as those who need help most get it directly. This is in addition to other schemes and programmes to help the less well-off.”

He also argued that drawing from experiences of other countries, a multi-rate GST system raises businesses' compliance and administrative costs significantly, which are then passed on to consumers.