No GST hike in 2021
With a weak global economy now hit by the coronavirus outbreak, the goods and services tax (GST) will remain at 7 per cent and will not be raised next year.
Instead, the planned two percentage point hike will kick in between 2022 and 2025.
But while announcing this decision during his Budget statement yesterday, Deputy Prime Minister and Finance Minister Heng Swee Keat said the GST hike was inevitable.
To cushion the blow when it is eventually raised, the Government will set aside $6 billion from this year's Budget for a future assurance package, which will include a cash payout of $700 to $1,600 over five years for every adult Singaporean.
In all, the offsets included in the package will help most households here cover at least five years' worth of additional GST expenses, when it is raised.
A family of four living in a four-room public flat with a combined monthly income of $6,000 will receive about $7,000 in GST offsets over five years, of which about $4,000 will be in cash.
Families living in one- to three-room public flats will receive much more in offsets, equivalent to about 10 years' worth of additional GST expenses, Mr Heng said.
"This is the Government's way of ensuring our system of taxes and transfers remains progressive," he added.
Mr Heng first announced in 2018 plans to raise the GST to 9 per cent, and this was originally slated for between 2021 and 2025.
During last year's Budget debate, Mr Heng defended the hike, which was opposed by the Workers' Party's MPs.
Mr Heng said the hike was expected to raise about 0.7 percentage points of gross domestic product in revenue.
This revenue was needed to support structural increases in spending on healthcare and other important needs like security, he had said then.
Yesterday, Mr Heng told Parliament: "In fact, this (Covid-19) outbreak has reinforced the importance of continued investment in our healthcare system, including the capability to deal with outbreaks."
Mr Heng said the Government will continue to absorb GST on publicly-subsidised healthcare and education.
"GST is paid by all in Singapore, including foreigners visiting and working here. But the (GST) Assurance Package will benefit Singaporeans," he added.