The exact timing for the increase will depend on the state of the economy, growth in expenditure and the buoyancy our existing taxes.
File photo of shoppers in Singapore. (Photo: Ernest Chua/TODAY)
SINGAPORE: The much-rumoured goods and services tax (GST) increase was confirmed by Finance Minister Heng Swee Keat during his Budget 2018 speech on Monday (Feb 19), and it will go up from 7 per cent currently to 9 per cent some time in the period between 2021 and 2025.
Mr Heng said the exact timing of when the GST increase will kick in depends on the “state of the economy, how much our expenditures grow and how buoyant our existing taxes are”. "But I expect that we will need to do so earlier rather than later in the period."
That said, the minister said the GST hike will be implemented in a “progressive manner”. This means the Government will continue to absorb GST on publicly subsidised education and healthcare, and enhance the permanent GST Voucher scheme when the hike kicks in. The enhanced GST Voucher scheme will provide more help to lower-income households and seniors, he added.
The Government will also implement an offset package for a period of time to help Singaporeans adjust to the GST increase, with lower- and middle-income households receiving more support, the minister said, with more details to come after the timing of the GST increase has been determined.
PLANNING AHEAD, RESPONSIBLY
The decision to increase GST was made to help fund expenditure in areas like healthcare, security and other social spending, Mr Heng explained, who added the increases in these areas will be recurrent, benefit Singaporeans broadly and directly benefit current generations.
Healthcare expenditure, for example, has been increasing over the years, with the Government spending S$3.9 billion in Financial Year (FY) 2011 and this figure jumping to S$10.2 billion in FY18, the minister highlighted.
In the next decade, an ageing population and increasing chronic diseases will mean building new healthcare capacity to meet rising demand and invest in new medical technologies to improve care quality – and these will lead to spending that will leapfrog expenditure on education within the next decade, he said.
Today, the average annual Government healthcare subsidies received by an elderly person is more than six times that of a younger person, or about S$4,500 more. Additionally, by 2030, the number of elderly will increase by about 450,000 to 900,000, the minister said.