GST hike: Short-term cost vs long-term benefit

THIS WEEK'S TOPIC: Should Singapore raise the Goods & Services Tax (GST) this year? And should the tax hike from 7 per cent to 9 per cent happen at one go, or in two steps?

Marcus Lam Executive chairman PwC Singapore

There is no perfect time to raise taxes. The challenge is finding a balance among the conflicting needs of raising tax revenue, managing inflation and the cost of living, and the compliance cost to businesses. A 2-step increase in the GST rate will help to ease the inflationary pressure; however it will mean higher compliance costs and administrative challenges. Since a 2 percentage point increase is inevitable, a possible compromise could be to implement the hike at one go, but at a later date such as Jan 1, 2023 and to "front load" the S$6 billion Assurance Package. This will give businesses sufficient lead time to prepare for the GST rate hike and upfront relief to the lower- and middle-income groups.