SINGAPORE – The Budget’s new $6 billion Assurance Package will effectively delay the impact of the goods and services tax (GST) increase for the majority of Singaporean households for at least five years, Deputy Prime Minister and Finance Minister Heng Swee Keat said on Friday (Feb 28).
For lower-income Singaporeans, the offset will be even higher, and there will effectively be no increase for them for 10 years, said Mr Heng, responding to concerns from MPs raised during the debate on the Budget statement about the impact of the GST hike on households.
There have been calls to delay or not even increase the GST rate, which will rise from 7 per cent to 9 per cent by 2025, noted Mr Heng.
But he clarified that delaying the GST increase is not the same as raising the GST and providing offsets.
Through this system of providing offsets, a larger proportion of the net GST – the amount of GST borne by each household, after accounting for the GST Voucher they receive – will be borne by foreigners and higher-income households, he explained.
When the GST is raised, the permanent GST Voucher scheme will be enhanced, it was announced at the Budget. Launched in 2012, the GST Voucher is given in three components – cash, Medisave top-ups and Utilities-Save (U-Save) rebates, which helps households offset their utilities bills.
Foreigners residing in Singapore, tourists, and the top 20 per cent of resident households are estimated to account for over 60 per cent of the net GST borne by all households and individuals, said Mr Heng.
This is after taking into account GST refunded under the Tourist Refund Scheme for goods bought here for consumption abroad.
“This is partly because foreigners do not benefit from the GST Voucher and offsets, which are available to Singaporean households,” he said.
Conversely, the bottom 40 per cent of resident households are estimated to account for less than 10 per cent of the net GST borne by all households and individuals with the GST voucher, he said.
The GST is only one part of Singapore’s fiscal system, added Mr Heng.
The overall system of taxes and benefits is a progressive one, which sees those who are better off contributing more, and lower- and middle-income households receiving proportionately more benefits than the taxes they pay.
The top 10 per cent of taxpayers pay about 80 per cent of Singapore’s personal income tax revenue, he added.
“In designing our fiscal system, we have always sought to achieve a fair and progressive balance, where the better-off contribute more, and the lower-income receive more support. This overall philosophy is a key consideration in how we design the GST, and how we will implement the GST hike,” said Mr Heng.
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