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Singapore

Government to boost Assurance Package by S$1.4b to help households cope with impact of GST hike amid inflation

03:35 Min
The Government will spend S$1.4 billion more to offset additional GST expenses for most Singaporean households for at least five years, announced Deputy Prime Minister Lawrence Wong on Monday (Nov 7). Brandon Tanoto with more.

SINGAPORE: The Government will spend S$1.4 billion more to offset additional GST expenses for most Singaporean households for at least five years, announced Deputy Prime Minister Lawrence Wong on Monday (Nov 7). 

Speaking in Parliament at the second reading of the Goods and Services Tax (Amendment) Bill, Mr Wong said that after reviewing the elevated inflation situation, this amount would be added to the Assurance Package, bringing the total sum to S$8 billion. 

“This ensures that the package continues to offset additional GST expenses for the majority of Singaporean households for at least five years, with around 10 years offset for lower-income households,” said Mr Wong, adding that he will share more details at next year’s Budget. 

“For those who ask the Government to delay the GST rate increase, the Assurance Package in effect does precisely that, for the majority of households. The cash and other forms of support under the Assurance Package amount to more than what most citizens will pay in additional GST for at least 5 years.” 

A sum of S$6 billion was initially set aside for the Assurance Package when it was first announced in 2020, and another S$640 million was added at Budget 2022, said Mr Wong, who is also Finance Minister. 

“With the Assurance Package, we had committed that the majority of Singaporean households will not feel the impact of the GST increase for at least five years, and that lower-income households will not feel the impact for about 10 years,” he added. 

“Put another way, they will effectively not face additional GST expenses for many years. So we will continue to uphold these commitments even as the inflationary outlook evolves.” 

With higher inflation this year and in coming years, household expenditure and GST expenses are expected to increase, said Mr Wong.

“The size of the Assurance Package would therefore need to be correspondingly increased to meet our committed levels of offsets.”

The GST hike will be from 7 per cent to 8 per cent from Jan 1, 2023, and from 8 per cent to 9 per cent from Jan 1, 2024. 

The changes to the GST rate have been “robustly debated” in Parliament, Mr Wong noted. 

“This Government looks after our people, our families and our seniors. We have been expanding support for their needs, including their healthcare, social and ageing needs, and we will continue to do more,” he continued. 

“We also want to improve social mobility, invest in skills upgrading and green our economy and city.” 

To achieve this, the Government will need to spend more on a structural and recurring basis, said the Deputy Prime Minister. 

“This is why at this year’s Budget, I had raised a slate of taxes, including personal income tax, property tax, GST and the ARF (additional registration fee) rates for vehicles. This is how, as a responsible Government, we plan ahead and we meet our future needs in a sustainable way,” said Mr Wong. 

“This GST rate increase is an important revenue move that will provide us with additional resources to meet our growing healthcare expenditure and to take better care of our growing number of seniors. 

“The Government will help all Singaporeans adjust to the GST increase, especially the less well-off.” 

Mr Wong also stressed that households will continue to receive GST Vouchers, and that the Government will continue to absorb GST for subsidised education and healthcare services, alongside and after the Assurance Package is rolled out. 

“Through the GST Vouchers, we help lower- to middle-income households defray a significant part of their GST expenses permanently,” he added. 

The GST Vouchers comprise four components: cash, MediSave for seniors, USave rebates to offset utilities bills, and rebates for service and conservancy charges bills, noted Mr Wong. 

“And besides the GST Vouchers, we will continue to absorb GST for publicly subsidised healthcare and education,” said the Deputy Prime Minister. 

“After putting together the permanent GST Vouchers and the GST absorption, what we have is an overall GST system that taxes consumption in a fair and effective manner.” 

The GST system is tiered by income levels, with lower-income households paying a much lower effective GST rate than higher-income households, said Mr Wong. 

“As I had explained in the Budget this year, on average, the bottom 10 per cent of households do not pay any GST at all after the permanent offsets. This includes many retiree households without income.”

Even after the GST increase, the effective rate for households in the first three income deciles remains unchanged at below 3 per cent, said Mr Wong. 

“That means the GST increase will not negatively impact them. The full impact of the GST will be borne largely by higher-income households, as well as tourists, and foreigners based here,” he added. 

“And this is also the group that contributes the biggest share to net GST revenues from households and individuals.” 

As Singapore’s inflationary outlook evolves, the Government will continue to monitor the scheme to make sure it upholds its objectives, said Mr Wong. 

“The GST is therefore a key part of our fair and progressive system of taxes and transfers, that takes care of the less well off, and ensures that those who are better off contribute their fair share in revenues.” 

Source: CNA/hw(gr)
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