EVEN when taking into account the latest inflation and today’s higher prices, the government stands by its assurance that the majority of Singaporean households will not feel the impact of the Goods and Services Tax (GST) increase for at least 5 years, with the impact for lower-income families delayed by about 10 years.

Speaking in Parliament on Monday (July 4), Deputy Prime Minister and Finance Minister Lawrence Wong said that the S$6.6 billion Assurance Package — to cushion all households from the impact of the upcoming GST increase — was designed with a buffer in the event of higher inflation.

“We will continue to assess the adequacy of the Assurance Package as the inflationary outlook evolves. If need be, we will further enhance the Assurance Package to uphold our commitment,” he told the House.

“You have my word that if the situation worsens significantly, we will be prepared to do more, especially to provide targeted help for the lower-income groups. We will continue to do so while living within our means, and upholding prudence and responsibility in fiscal management,” he said.

Wong said in his speech that the government had already anticipated the higher inflation outlook earlier this year, and reiterated that the GST increase will go ahead as planned. The tax will go up by 1 percentage point to 8 per cent in January 2023, and to 9 per cent in January 2024.

“We should not push back the GST increase any further, as we will need the funds urgently to take better care of our growing number of seniors, and to meet our rising healthcare expenditures,” he said.

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The Assurance Package was first announced by then-Finance Minister Heng Swee Keat in 2020. In his maiden Budget speech in February this year, Wong announced that the Assurance Package will be topped up by S$640 million to S$6.6 billion, and complemented by a beefed-up permanent GST Voucher scheme.

Last month, Wong announced a S$1.5 billion support package targeted at providing immediate relief to lower-income and more vulnerable groups.

On Monday, Wong stressed that the Assurance Package and this new support package are 2 examples of how the authorities are carefully monitoring global and domestic developments, and ensuring that the country’s support measures are “adequate and fit for purpose”.

Asked by People’s Action Party MP Yip Hon Weng (Yio Chu Kang) of the consequences of further delaying the GST hike, Wong said that without the GST increase, Singapore “will be at risk of a persistent structural funding gap which will continue to widen year by year”.

He added: “In the near term, there are cost increases, higher prices, and lots of concerns and anxieties, and we will do our best to deal with them. But we cannot neglect the medium and longer-term challenges either.“

Wong also said that the government does not expect a recession or stagflation in 2023, even as he acknowledged that “things are unpredictable, volatile, and there can be new shocks”.

In a separate exchange, Leader of the Opposition and Workers’ Party chief Pritam Singh noted that Singapore’s tax collection for fiscal year 2021 was higher than pre-Covid levels.

“In light of this information, can I understand what is the minister’s assessment of the government’s current fiscal position and how much fiscal room it has to introduce more cost of living support measures for the lower and middle income end of Singapore, particularly families and small businesses?” said Singh.

Wong replied that these were “largely one-off upsides” due to higher-than-expected collections on property and vehicle transactions.

“These are sentiment-based transactions. We can, in no way, count on them to happen year after year. And certainly, we cannot rely on them to fund our longer-term, recurrent, and structural spending increases,” he said.

On the expenditure side, meanwhile, the spread of the Omicron variant was “milder than we had expected”, said Wong.

“That was exactly why - because of both the revenue and expenditure savings - we were able to mount this recent S$1.5 billion package within our current budget,” said the minister.

Singh also asked if the government was considering more acutely targeted and temporary road tax rebates similar to those previously introduced. This would benefit Singaporean households that need a vehicle for family use and are unable to switch to electric vehicles at the moment due to the current high Certificate of Entitlement prices.

Wong acknowledged that besides families, there are others who “rely heavily” on their vehicles for their livelihoods.

But “it will be very hard for the government to shield businesses, workers directly from these cost increases which are externally induced”, he said.

“What we are trying very hard to do is to provide short-term relief. And in the process of providing that relief, we will also want to encourage businesses, families, individuals, wherever possible, to become more energy-efficient (and) for business to become more productive,” he said. “So that even as we navigate through the immediate crisis, we will emerge stronger, greener and more productive, and therefore better prepared for the challenges before us in a new environment.”