Budget 2020: GST to remain at 7% in 2021; S$6b package when it rises

Budget 2020: GST to remain at 7% in 2021; S$6b package when it rises

A S$6 billion Assurance Package will be given to Singaporeans to help cushion the impact of a higher GST when it is raised, said Deputy Prime Minister Heng Swee Keat in his Budget speech on Tuesday (Feb 18). A S$1.6 billion Care and Support Package will also be provided to help households with their expenses “during this period of uncertainty”. Cheryl Goh reports. 

SINGAPORE: A previously announced increase in the Goods and Services Tax (GST) will not take place next year, said Deputy Prime Minister Heng Swee Keat during his Budget 2020 speech on Tuesday (Feb 18). 

As such, the GST rate will remain at 7 per cent in 2021, he added. 

In his 2018 Budget speech, Mr Heng - who is also the Finance Minister - had said the GST would be increased to 9 per cent some time between 2021 and 2025 to raise revenues to meet Singapore’s growing recurrent spending, particularly for healthcare. 

The decision not to increase the GST rate came after a review of the country’s revenue and expenditure projections, and also took into account the current state of the economy, he explained on Tuesday. 

“However, we will not be able to put off the increase indefinitely,” he said. 

Referring to the ongoing COVID-19 situation, Mr Heng said the outbreak “reinforced the importance of continued investment in our healthcare system, including the capability to deal with outbreaks”.

He added that in the medium term, recurrent sources of revenue will be required to fund recurrent spending needs. 

As such, an increase in the GST will still be needed by 2025, he noted. 

“We will assess carefully the appropriate time for the increase. But rest assured, we will provide Singaporeans sufficient lead time.”

Even when the GST is increased, the Government will ensure Singapore’s system of taxes and transfers remains progressive, Mr Heng said, adding that the authorities will continue to absorb the GST on publicly-subsidised healthcare and education. 

Budget 2020 GST card infographic

S$6 BILLION ASSURANCE PACKAGE

When GST is increased, a S$6 billion Assurance Package for Singaporeans will be introduced alongside it, to cushion the increase, said Mr Heng. He noted this was in line with what the Government had done during previous GST increases. 

The previous increase in the GST rate from 5 per cent to 7 per cent in 2007 came with a S$4 billion offset package.

While GST is paid by everyone in Singapore, including foreigners visiting or working here, the package is meant to benefit Singaporeans, the minister said. 

The majority of Singaporean households will receive offsets to cover at least five years worth of additional expenses incurred because of the higher GST, he added. 

More will go to lower-income households. Mr Heng said those living in one-room to three-room Housing and Development Board (HDB) flats will receive offsets equivalent to about 10 years of additional GST expenses. 

As part of the Assurance Package, all adult Singaporeans will receive a cash payout of between S$700 and S$1,600 over five years. 

“To illustrate, a family of four with a combined income of S$6,000 living in a four-room HDB flat can receive in total about S$7,000 in offsets over five years. This includes cash of about S$4,000,” he said. 

The GST voucher scheme - which defrays the cost of the tax for lower-to-middle income citizens - will also be enhanced when the GST rate is increased, said Mr Heng. 

This will help offset the GST for the lower half of retiree households, and also “significantly offset” the GST for the upper half of such retiree households. 

About half of the GST for lower-income households with no elderly members will also be offset as a result, he said. 

“This is the Government’s way of ensuring our system of taxes and transfers remains progressive and supports Singaporeans through the change, while enabling us to fund our future needs in a sustainable way.”

Source: CNA/az

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