Government yet to decide on exact timing of GST increase to 9%: Heng Swee Keat

THE government has yet to decide on the exact timing of the planned Goods and Services Tax (GST) hike by two percentage points to 9 per cent, and it will exercise care in doing so, Finance Minister Heng Swee Keat said on Thursday.

"We will continue to monitor the prevailing economic conditions, spending trends and the buoyancy of our revenues carefully," he added.

In a speech responding to 55 MPs who spoke over three days, Mr Heng noted the reservations some had raised over the approach and timing of the GST hike, which was announced in last year's Budget and is slated to kick in sometime between 2021 and 2025.

Foo Mee Har (West Coast GRC) had urged the government to delay the planned increase for as long as possible, suggesting that funds set aside in this term of government as well as the decision to use government debt to finance infrastructure could provide some leeway to postpone the hike.

But Mr Heng said the increase is necessary in the light of needs in healthcare and others. This decision, he stressed, was not made lightly.

In 2019 alone, the Health Ministry is expected to spend S$6.1 billion to subsidise patient bills through existing permanent schemes enjoyed by all Singaporeans, he noted. This figure excludes further spending to boost healthcare facilities and medical research.

"As our population ages, spending on permanent healthcare schemes and other parts of the healthcare system will continue to increase structurally. Funding this requires a structural increase in our operating revenues," he said.

A GST hike is therefore necessary to support this structural increase in healthcare, among other critical needs like pre-school education and security, he said. This is also of "a completely different scale and nature" from cohort-based packages set aside for the Merdeka and Pioneer generation, he added.

Such a tax increase is also similar to measures taken by other governments that face ageing societies, he said. "To address the growing fiscal burden from higher healthcare spending and demographic change, without further ballooning of public debt, there is a need for these governments to raise primary revenues," Mr Heng added.

Member governments in the Organisation for Economic Co-operation and Development are estimated to require additional median revenues of 6.5 percentage points of gross domestic product by 2060.

The planned two percentage point GST increase is expected to raise Singapore's GDP by about 0.7 percentage point, said Mr Heng.

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