Swallowing bitter pill of GST hike for the collective good

IT has been 14 years since Singapore last raised its GST rate from 5 to 7 per cent. Arguably, any hike in taxes will be a bitter pill to swallow for those affected. For a consumption tax like GST, it is important that people and business have adequate time to adapt to the changes, while the lower-income and vulnerable are extended targeted support. The introduction of GST vouchers in 2012, which is now a permanent feature, bears testimony to this principle.

At 7 per cent, Singapore's GST rate is one of the lowest compared to double-digit rates in many developed economies around the world. In the near future, it will be raised to 9 per cent.

The intention to raise GST rates sometime between 2021 and 2025 was announced much earlier in February 2018. Many may have been prepared for the earliest implementable date. Given the drastic economic fallout from the Covid-19 pandemic, implementing the hike this year would be untimely, or even insensitive. Unsurprisingly, the rate hike has been deferred to sometime between 2022 to 2025 - and as Deputy Prime Minister and Finance Minister Heng Swee Keat said, to have it "sooner rather than later".