GST Assurance Package to be updated amid higher inflation, details in Budget 2023: DPM Wong
The $6.6 billion support package to offset the upcoming goods and services tax (GST) hike will be updated to take into account higher than expected inflation, Deputy Prime Minister Lawrence Wong said on Friday.
Details will be provided in Budget 2023, he added at a press conference where he announced additional measures to help Singaporeans cope with rising prices.
Mr Wong said the Government is fully committed to cushioning the impact of the GST increase which will take effect in two stages from Jan 1, 2023, and that proceeding with the hike to secure revenue needed for growing expenditure is the "more responsible approach".
Noting that the Assurance Package is meant to offset the impact of the GST increase for the majority of Singaporean households for at least five years, and for lower-income households for about 10 years, he said the Government will "review the sizing and components" of the package to keep to that commitment.
The GST will increase by one percentage point from 7 to 8 per cent on Jan 1, 2023, and another percentage point to 9 per cent on Jan 1, 2024.
The package currently includes cash payouts for all adult Singaporeans, GST voucher cash payouts for lower-income seniors, as well as additional GST voucher U-Save rebates for about 950,000 Singaporean households.
Mr Wong, who is also Finance Minister, said he understood the concerns people have about raising the GST rate at a time when inflation is high, and that they may want to defer the increase till a time when inflation eases.
But while inflation is expected to ease somewhat by the second half of next year, it will not return to the very low rates that people were used to over the past decade, he added.
"Going forward, the new normal will be a much higher rate of inflation than we were used to in the past," he said.
The inflation outlook also remains very uncertain, he noted. "So even if it eases to a new level of inflation next year as we have projected, there may well be uncertainties down the road."
The Russia-Ukraine war may be more protracted or there may be new disruptions to food and energy supplies, which could lead to higher inflation persisting for a much longer duration of time, he said.
"While we have this uncertain inflation outlook, our spending needs are very certain. They are just going up year by year. It is going to be very hard for us to time our revenue raising measures with the uncertain inflation outlook," said Mr Wong.
Hence the Government will proceed with the GST increase, but ensure that it offsets or cushions the impact on Singaporeans, in particular for the lower- and middle-income households, he added.
In doing so, higher-income Singaporeans as well as foreigners and tourists who are here will be paying the additional GST increase and providing the revenue the government needs to fund the health and social expenditure, he said.
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