The way forward for GST hike in Singapore as funding needs rise

FACED with Singapore's growing expenditures in healthcare, security and other forms of social spending, the government had announced during Budget 2018 that it plans to raise the Goods and Services Tax (GST) by two percentage points from 7 per cent to 9 per cent, sometime between 2021 and 2025. This is expected to raise additional revenues amounting to almost 0.7 per cent of Singapore's gross domestic product per year.

At the People's Action Party convention last November, Deputy Prime Minister and Minister for Finance Heng Swee Keat said that the permanent GST Voucher scheme will be enhanced when the GST rate goes up to help Singaporeans cope with the rate change. Details of the GST support package will be shared at this year's Budget announcement on Feb 18, possibly together with information about the impending GST hike.

The last GST hike was in 2007, when the rate was increased from 5 per cent to 7 per cent. Then, the GST Offset Package to help Singaporeans manage the hike had included GST credits, senior citizens' bonus, assistance for low-income families with young children, aid for pensioners, help for lower-income families in reducing public transport costs, and additional subsidies for healthcare, education, as well as service and conservancy charges. The GST Offset Package cost the government S$4 billion over five years. It is likely that the new support package would contain similar measures.