Singapore to increase GST – but not so soon
> Goods & Services Tax hike to 9% from 7% now to come ‘sometime’ between 2021 and 2025
SINGAPORE: Singapore said its Goods & Services Tax (GST) will rise to 9% from 7%, but the change will only come “sometime” between 2021 and 2025, making it likely that the increase would kick in after the city-state’s next general election, due to be held by January 2021.
Instead of getting a GST increase soon, Singaporeans aged 21 and above will get a hong bao, or Lunar New Year red packet, as Finance Minister Heng Swee Keat announced a “one-off” bonus in 2018 of up to S$300 (RM891), depending on their income.
The bonus comes after Singapore’s trade-reliant economy grew 3.6% in 2017, its best pace in three years.
Song Seng Wun, an economist for CIMB private banking, said the one-off hong bao bonus was a product of Singapore’s economy having a “better than expected outcome” in the last year.
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 7% 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,” Ng said.
After announcing the planned GST increase, 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, at 3%. This was raised to 4% in 2003 and 5% in 2004, then to 7% in 2007.
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 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.
Singapore’s government expects an overall budget deficit of 0.1% of gross domestic product (GDP) for the coming fiscal year, Heng said.
The overall budget deficit for the 2018/19 fiscal year starting on April 1 is expected to be S$600 million, Heng said.
For the 2017/18 fiscal year, the government expects an overall budget surplus of S$9.6 billion or 2.1% of GDP, larger than the forecast made a year earlier. – Reuters