SINGAPORE TO RAISE GST FROM 7pc TO 9pc

New rate will take effect ‘some time’ between 2021 and 2025

SINGAPORE said its sales tax will rise to nine per cent from seven per cent, but the change will only come “some time” between 2021 and 2025, making it likely that the increase would kick in after the city-state’s next general election.

Instead of getting a Goods and Services Tax (GST) hike soon, Singaporeans aged 21 and above will get a red packet, as Finance Minister Heng Swee Keat announced a “one-off” bonus this year of up to S$300 (RM890), depending on their income.

The bonus comes after Singapore’s trade-reliant economy grew 3.6 per cent last year, its best pace in three years.

Global economic growth, plus comments by policymakers on the importance of raising revenue to meet future spending needs for Singapore’s ageing population, led many analysts to expect that the GST, kept at seven per cent since 2007, would increase as early as the coming fiscal year.

“The surprise for us was that the planned increase was for a much later period,” said Jeff Ng, chief economist Asia for Continuum Economics.

“This eases the need for a future government or administration to announce the GST,” said Ng.

Singapore’s next general election is due to be held by January 2021. In the last one in 2015, the ruling People’s Action Party won 70 per cent of the vote, a strong improvement from the 60 per cent garnered in 2011.

After announcing the planned GST hike, the finance minister said “the exact timing will depend on the state of the economy, how much our expenditures grow, and how buoyant our existing taxes are. But I expect that we will need to do so earlier rather than later in the period.”

Singapore introduced a GST in 1994, with a three per cent rate. This was raised to four per cent in 2003 and five per cent in 2004, then to seven per cent in 2007.

The current rate is among the world’s lowest for a consumption tax.

Besides the plan for raising GST, Heng unveiled other tax measures.

These include increasing the top marginal buyer’s stamp duty on residential property worth more than S$1 million effective from today, raising the excise duty on tobacco products and introducing GST on imported services from 2020.

Coming in 2019 is a carbon tax, which will be S$5 per tonne of greenhouse gas emissions until 2023. The plan is to increase it to between S$10 and S$15 per tonne by 2030.

Heng said spending needs would rise across various sectors in coming years, including in healthcare, infrastructure and security.

Song Seng Wun, an economist for CIMB private banking, said the one-off bonus was a product of Singapore’s economy having a “better than expected outcome” in the last year.