'More responsible' to proceed with GST increase amid uncertain inflation outlook: Lawrence Wong
This will help Singapore secure the revenues needed for its growing expenditure needs, says the Deputy Prime Minister.
SINGAPORE: The global inflation outlook may be uncertain but Singapore's growing spending needs are clear.
And to pay for these, the "more responsible approach" is for Singapore to proceed with a planned Goods and Services Tax (GST) hike in the coming years, said Deputy Prime Minister Lawrence Wong on Friday (Oct 14).
He was speaking at a press conference to announce up to S$500 in cash handouts for each eligible Singaporean, as part of a S$1.5 billion support package targeting the lower- to middle-income groups.
The Government had announced in June a similarly sized S$1.5 billion plan to also help with rising inflation and cost of living.
Mr Wong, who is also Finance Minister, was asked by reporters if these were stopgap measures to deal with the longer-term impact of a rise in GST.
The tax is set to increase from 7 per cent to 8 per cent in 2023, and to further go up to 9 per cent in 2024.
"I understand the concerns that people have about raising the GST rate at a time when inflation is high, and the desire to defer the GST increase until a situation when inflation may be better," said Mr Wong.
"(But) we must also be realistic that inflation is not going back to the situation which we were used to over the past decade, where it was very low rates of inflation."
Singapore’s core inflation has reached decade highs this year and earlier on Friday, its central bank tightened monetary policy for the fifth time since October 2021, in another attempt to curb inflation.
Mr Wong said on Friday that going forward, the new normal would be "a much higher rate of inflation than we were used to in the past".
"At the same time, this inflation outlook is also very uncertain," he added, pointing to the possibility of a protracted Russian invasion of Ukraine, resulting in fresh disruptions to food and energy supplies.
'While we have this uncertain inflation outlook, our spending needs are very certain. They are just going up year by year," said Mr Wong.
"It's going to be very hard for us to time our revenue-raising measures with the uncertain inflation outlook. So we think, having looked at the matter, that a more responsible approach is to proceed with the GST increase, so that we can secure the revenues we need for our growing expenditure needs."
The minister stressed that the Government would offset and cushion the impact of the GST increase on Singaporeans, especially the lower- and middle-income groups.
"We will make sure that they are well taken care of," he said.
The Assurance Package - first announced in 2020 to cover additional GST expenses for households - will be updated to take into account higher inflation, with more details to come at next year's Budget, said Mr Wong.
"What it means is that the higher income Singaporeans, the foreigners who are here, the tourists who are here will be paying an additional GST increase," he added.
"And helping us to provide the revenues we need to fund all the spending that we have to do, to take better care of our seniors and to provide for our vulnerable groups."