Singapore – In his New Year’s message on Friday (Dec 31), Prime Minister Lee Hsiang Loong said that the government will have to start moving on the planned Goods and Services Tax (GST) hike given the need for a “vibrant economy to generate resources.”
The government must have reliable and adequate revenues to carry out its social programmes, said Mr Lee, noting the need to raise additional revenues to fund the expansion of the healthcare systems and support schemes for older Singaporeans.
“This is the rationale for raising a broad-based tax like the GST, coupled with a comprehensive scheme of offsets to cushion the impact on lower-income households,” said Mr Lee.
He explained that the GST forms an essential component of the country’s system of taxes and transfers, which also includes income and wealth taxes.
Those better off should contribute a larger share, but everyone needs to shoulder at least a small part of the burden.
“Overall, our system will remain progressive and fair,” he added.
Mr Lee said that the GST hike was seen as a need coming for some years.
“Now that our economy is emerging from Covid-19, we have to start moving on this.”
The Budget 2022, unveiled by Finance Minister Lawrence Wong on Feb 18, 2022, will lay the basis for sound and sustainable government finances for the next stage of Singapore’s development.
The plan to raise the GST by two percentage points to 9 per cent from 7 per cent was announced in 2018 during then-Finance Minister Heng Swee Keat’s Budget speech.
Mr Heng highlighted the need to increase the tax to strengthen Singapore’s revenues amid recurrent increases in security, healthcare, and other social expenditures.
“The responsible way to pay for them is through taxation so that every generation pays its share,” said Mr Heng during his speech.
“We should not borrow for recurrent spending because that will put the burden of recurrent spending on future generations,” he explained.
The increase of two percentage points would result in revenue of almost 0.7 per cent of GDP per year, said Mr Heng.
Although initially scheduled to be implemented between 2021 to 2025, the government postponed the increase in 2021 due to the impact of the Covid-19 pandemic.
However, Mr Heng reiterated that the hike would come “sooner rather than later,” sometime between 2022 and 2025.
“Throughout this pandemic, we have stood together, supported difficult decisions, made many sacrifices, and come through safely,” said Mr Lee.
We can confidently say that we have measured up as one people, he noted.
“In a crisis, everyone saw the need to make tough choices and accepted hard policies for the common good,” said Mr Lee, encouraging the public to maintain the same unity of purpose to keep on progressing together./TISG
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