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Government 'carefully considering' overall economic conditions to determine exact timing of GST hike: Indranee Rajah

Government 'carefully considering' overall economic conditions to determine exact timing of GST hike: Indranee Rajah

The plan to raise the GST by two percentage points, from 7 per cent to 9 per cent, was first announced in 2018. (Photo: iStock)

SINGAPORE: While a planned Goods and Services Tax (GST) hike cannot be put off “forever”, the Government is "carefully considering" overall economic conditions to determine the exact timing of the increase, said Second Minister for Finance Indranee Rajah on Tuesday (Jan 11).

The plan to raise GST by two percentage points, from 7 per cent to 9 per cent, was first announced in 2018 during then-Finance Minister Heng Swee Keat’s Budget speech. At the time, he said that the hike would take place sometime from 2021 to 2025.

The increase did not take place last year because of the impact of COVID-19 on the economy.

In his New Year message last month, Prime Minister Lee Hsien Loong said the Government would have to "start moving" on the planned hike in Goods and Services Tax (GST) in Budget 2022 as the economy emerges from the pandemic.

Member of Parliament Liang Eng Hwa (PAP-Bukit Panjang) had filed a question asking if the Government would consider delaying the GST increase to avoid adding on to inflationary pressure.

In her reply, Ms Indranee pointed out that there were two aspects to his question: Delaying the date of the GST hike and if the Government can delay the impact of that increase on Singaporeans.

Addressing the first part of the query, Ms Indranee said that the exact timing would depend on the state of the economy, the growth in expenditures and how "buoyant" existing taxes are.

“We are carefully considering all the overall economic conditions. The economy is recovering steadily and barring fresh disruptions, it should grow in step with global economic recovery, and we expect GDP to grow by 3 to 5 per cent in 2022,” she said.

Turning to the impact of a GST increase on Singaporeans and whether it can be delayed, Ms Indranee said that the Government has designed things in a way that, irrespective of when the increase takes effect, its impact will only be felt several years after implementation.

"Through the Assurance Package, for the majority of Singaporeans, we will delay the impact for them effectively by five years," she said. "And for the low income, the impact on them will be delayed effectively for 10 years."

The S$6 billion Assurance Package, first announced in the 2020 Budget, will offer cash payouts of between S$700 and S$1,600 over five years to all adult Singaporeans. This will help offset at least five years' worth of additional GST expenses.

Those living in one- to three-room flats will get enough to offset about 10 years' worth of extra GST expenses.

“Essentially, whatever the increase to the expenditure as a result of GST, the Assurance Package is designed to buffer them for that increase. The Government is directly supplementing them so that they won't feel the impact,” Ms Indranee added.

“The date that it takes effect, and the date that the impact is felt are two separate things," she added. "We will continue to look out for the low income households and the majority of middle income households.”

Source: CNA/vl(ac)

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