SINGAPORE: An upcoming increase to the Goods and Services Tax (GST) will not be delayed despite rising inflation, said Deputy Prime Minister Lawrence Wong on Tuesday (Jun 21) as he announced a new S$1.5 billion support package to help Singaporeans with rising costs.
The GST is set to rise from 7 per cent to 8 per cent in 2023, and to further increase to 9 per cent in 2024.
When asked by a CNA reporter at a press conference if the Government would consider delaying the GST hike, Mr Wong said the issue had already been debated extensively in Parliament.
“Our spending needs are rising very sharply, especially because of an ageing population and healthcare spending.
"We have looked at all the different possibilities for raising revenue and we have made various revenue moves in the budget, including on personal income tax, property tax, and luxury car taxes, but they are still not enough and that’s why we have to raise the GST,” said Mr Wong, adding that the tax hike has been pushed back "as late as possible".
The GST increase will be cushioned by an offset package, which was announced during Budget 2022.
When the question was raised again by other reporters, Mr Wong said that the issues to be tackled by the GST increase are medium- to long-term, and go beyond the current inflation issue. He added that Singapore’s revenue needs have to be met in a “responsible and sustainable manner”.
“This is not just tackling an inflation issue right now happening to Singapore,” he said.
“The challenges we face are longer term, we do not know how prolonged or deep these challenges will be. And we will be better positioned if we enter into this new environment with a strong economic and fiscal position.”
Elaborating on the challenges beyond inflation, Mr Wong said that Singapore has to deal with a "very different operating environment" and contend with climate change, a more bifurcated world, and domestic challenges such as an ageing population.
"To prepare Singapore well for these challenges, we have to press ahead with our economic reforms. We cannot afford to slow down, and that includes ensuring that we have a strong and sustainable fiscal position going forward because that will enable us to deal with a more uncertain future," he said.
When asked if the Government is doing anything to tackle rising petrol prices, Mr Wong said that Singapore is trying to transition to cleaner energy and vehicles.
"This is a timely opportunity for us to do so, so we will try our best to accelerate the shift to cleaner, more energy-efficient vehicles and therefore reduce our reliance on fuel."
MOF said in a press release that any support measures should not "distort price signals", as these are needed to guide Singapore's economic restructuring and transformation.
It emphasised that Singapore needs to "press on with efforts to tackle climate change and to care for our rapidly ageing population".
Mr Wong added that for those who are more badly affected by high fuel prices, such as taxi and private hire car drivers, there are specific measures to help them.
They include a one-off relief of S$150 for eligible taxi main hirers and private hire car drivers.
There will also be up to S$300 in cash under the NTUC freelancers and Self-Employed Unit relief scheme for association members, which include self-employed limousine drivers and delivery riders.
Mr Wong also noted that new Omicron variants are pushing up the number of COVID-19 cases, when he was asked about the impact of any resurgence of the coronavirus.
"The downside risks are growing, both for the economy and for inflation. At this stage, we won't know exactly how severe the slowdown will be. It may well be that we are in a more benign situation where we are dealing with inflation ... but overall, the global economy is still able to grow despite some slowing down," he said.
But there could also be a different scenario in which the world and Singapore go into a "severe recession" where there is negative growth and rising unemployment.
"Of course we don't rule these things out. But if indeed, we are in such a scenario, then we'll have to think through all the different drawer plans to help Singapore tide through such a global recession and a domestic recession," he said.
"If there is an immediate emergency scenario, then we will have fiscal resources available, including our reserves to help tide through such an emerging national emergency scenario.
"But whenever we do any of these measures, we have to bear in mind the importance of doing things in a responsible and sustainable manner for the medium to longer term."
He added that all the Government's revenue measures, including the GST changes, will have to "take that perspective".