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GST hike cannot be put off forever but impact will be delayed for Singaporeans

The impact of the Goods and Services Tax (GST) hike will be delayed for the majority of households in Singapore, and the date the rise takes place is not when Singaporeans will feel its impact, Second Minister for Finance Indranee Rajah told Parliament on Tuesday (Jan 11).

Amid global inflationary pressures, the Government has been shielding Singaporeans from the full impact of rising prices and will continue to do so, she added.

And as it prepares for the upcoming Budget, priority will be given to help Singaporeans cope with the cost of living. The scope of household support measures is also being reviewed, she said.

The minister was responding to questions from several MPs on rising costs and the impending GST hike of 2 percentage points, from 7 per cent to 9 per cent.

Rising inflation around the world has pushed up the cost of groceries and utilities bills, and Mr Liang Eng Hwa (Bukit Panjang) asked if the expected GST hike can be delayed in light of inflation.

Ms Indranee said the increase in GST is not something that can be put off forever.

First announced in 2018, the rise is meant to help Singapore meet rising recurrent spending needs, especially in healthcare and social support.

"In deciding the timing for the GST hike, we are carefully considering the overall economic conditions. The economy is recovering steadily, and barring fresh disruptions, it should grow in step with global economic recovery," said the minister, adding that Gross Domestic Product is expected to grow by 3 to 5 per cent this year.

But Ms Indranee pointed out that the date the GST hike takes effect is not the same as the date that the impact of the hike will be felt.

Irrespective of when the GST goes up, the Government will be able to delay its imapct on Singaporeans through the Assurance Package, she added.

The $6 billion Assurance Package, which has already been set aside, will stave off the impact of the hike by five years for the majority of Singaporeans, and by 10 years for the lower-income groups, said Ms Indranee.

"Essentially, whatever the increase to their expenditure as a result of GST, the Assurance Package is designed to buffer them for that increase. The Government is directly supplementing them so that they won't feel the impact," she added.

The Government will continue to look out for low-income households and the majority of middle-income households, she said.

Ms Indranee said the GST, together with income and wealth taxes, are important revenue sources for the Government, which will ensure the overall system of taxes and transfers remains fair and progressive.

"We need sound fiscal foundations, not just to provide support to households and businesses when needed, but also to meet our collective aspirations - affordable healthcare, quality education, and a safe and secure home - in a responsible and sustainable way," she added.

On the impact of inflation on costs of living, Ms Indranee said "the Government understands the concerns of Singaporeans about these cost increases and empathises with the very real pressures felt by individuals and households", and has been working hard to help people cope in a number of ways.

She noted that the two key drivers of core inflation are higher global fuel costs and food prices, leading to higher prices for utilities and groceries.

The majority of Singaporeans have been directly shielded from the full impact of this, through various schemes such as the GST Voucher U-Save rebates to help with the costs of utilities for those living in Housing Board flats, as well as Community Development Council Vouchers to defray food costs and Public Transport Vouchers to help those in lower-income groups cope with fare adjustments.

Ms Indranee also said that while the inflation rate of 3.8 per cent reported in November is high, a significant part of it is accounted for by accommodation and private transport costs.

But since most Singaporeans live in owner-occupied homes and use public transport, the Monetary Authority of Singapore's core inflation measure of 1.6 per cent, which excludes accommodation and private transport, would more accurately reflect the actual inflation experienced by most Singaporeans, she explained.

She noted that a significant share of the recent rise in prices is driven by global factors - higher energy prices have had an impact on utilities bills, while global food prices and supply chain disruptions have affected prices of non-cooked food locally.

Ms Indranee said the sharp rise in global energy and food prices is expected to be temporary and should subside as bottlenecks are resolved and supply improves to better meet demand.

She also said the Government will continue to monitor economic conditions closely to ensure that businesses are adequately supported, especially in more adversely affected sectors, and to balance tapering off of relief with support for transformation and restructuring.

SINGAPORE PARLIAMENTIndranee RajahGST