Enhanced offsets ease GST concerns

With Singapore's inflation running at a 14-year high and expected to remain elevated, the $1.4 billion boost to the GST offset package announced by Deputy Prime Minister and Finance Minister Lawrence Wong on Nov 7 was welcome news.

The package expansion from $6.6 billion to $8 billion will enable the Government to meet its commitment to ensure that it would offset the impact of the GST increase for most Singaporean households for at least five years and for lower-income households for about 10 years.

The offsets, together with the GST Voucher Scheme, add significantly progressive elements.

Even after the GST increase from 7 per cent to 8 per cent from January 2023, the effective GST rate for households in the bottom-three income deciles will be below 3 per cent and most of the tax will be borne by high-income households, tourists and foreigners.

But GST continues to be a contentious issue as the recent parliamentary debate on the GST (Amendment) Bill attested.

While there is broad agreement that future spending will need to increase, particularly on healthcare, housing subsidies, skills upgrading, protection against climate risks and green initiatives, the debate centred on how to raise the necessary resources.

Opposition parties, which long opposed the GST hike, suggested alternatives, including raising direct taxes and property taxes as well as contributions from net investment returns.

The Straits Times


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