Singapore — The planned increase in the Goods and Services Tax (GST) is set to happen by 2025, as it cannot be put off indefinitely, said Deputy Prime Minister and Finance Minister Heng Swee Keat in Parliament on Friday (June 5).
Mr Heng highlighted the GST issue during the Fortitude Budget debate, stating the need for fiscal sustainability and the process of achieving such goals.
“The (Covid-19) crisis has underscored the importance of upholding the prudence and discipline of our forefathers to spend responsibly, and prepare for the future,” said Mr Heng according to straitstimes.com.
“This is why, even as we devote considerable resources to overcome the immediate challenges posed by Covid-19, we must continue to plan ahead to secure a fiscally sustainable future,” he added.
Mr Heng noted that the Government committed S$6 billion to lessen the impact of the GST increase for Singaporeans. The DPM added that the allocated amount is expected to make up for at least five years’ worth of additional GST expenses for the majority of households, and more for those with lower-income.
The Government will also continue to shoulder GST on publicly-funded healthcare and education, he said.
The GST hike from 7 per cent to 9 per cent was first announced in 2018; a move deemed essential as expenditures on the support of an ageing population continue to increase. The need to ensure that Singapore remains a liveable city, among other concerns, serve as a prerequisite for the tax hike.
While no specified date has been provided, 2021 was ruled out given the effects of the Covid-19 crisis on the economy. However, Mr Heng mentioned that the country needed to continue spending on healthcare, training, infrastructure and education in the medium to long term which would equate to substantial additional costs. Thus, the focus on the tax hike pushing through before 2025.
Mr Heng said that the pandemic had increased the urgency of certain investments in these sectors such as advanced medical research development, production capabilities and improvement on training capacity for workers.
“Singapore must continue to hold tight to the principles of prudence and discipline to ensure a sustainable future amid the increase in spending and unprecedented relief measures due to the crisis,” said Mr Heng.
To allow for Singaporeans to bear the cost reasonably, the Government plans to borrow for major long-term infrastructure projects. Such ventures involve a hefty price paid upfront yet would benefit the people in the long run.
“With this differentiated and principled fiscal strategy, each generation rightly pays for the benefits that they enjoy, and we do not saddle future generations with our bills,” he said. “This is an equitable approach, and will continue to be the cornerstone of fiscal sustainability for Singapore.” /TISG
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