Singapore to move on GST hike in Budget 2022

SINGAPORE: When Finance Minister Heng Swee Keat announced the Goods and Services Tax hike in 2018, he said it was necessary to strengthen Singapore s revenues because of the increases in spending on healthcare, security and other social needs.

He said that the GST would be raised from 7 per cent to 9 per cent sometime between 2021 and 2025, depending on the state of the economy and public finances, and likely earlier in the period.

The GST hike was stopped last year as Singapore grappled with the economic fallout of COVID - 19. In his recent New Year message, Prime Minister Lee Hsien Loong stated that the Government will have to start moving on the hike in Budget 2022 as Singapore emerges from the Pandemic.

There are a number of questions that come to mind. What is the cause of the increase in public expenditure that necessitates higher GST? Can Singapore tap other revenue streams instead of raising the GST? What will be the impact of a higher GST on the poor-income Singaporeans, especially as inflation picks up?

Public expenditure has grown significantly since the GST was raised in 2007 and even before the epidemic. Between 2007 and 2019 government spending increased from S $33 billion to S $75 billion a year.

Social spending almost tripled over the past three months. The government's healthcare expenditure went from S $2.2 billion to S $11.3 billion.

Singapore's demographic transition has caused a surge in healthcare spending, which is no surprise. Singapore is ageing faster than any other country except South Korea in terms of the projected increase in senior population share between now and 2050, according to some estimates. Nearly one in four citizens in this country will be 65 and above by 2030, up from about one in eight in 2015, according to a report by the International Monetary Fund.