Singapore has increased its goods and services tax (GST) by one percent in the new year to 9 percent, despite the Southeast Asian nation’s consumers facing increasing economic challenges with the rising cost of living.
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In 2022, Singapore’s Minister for Finance announced that the GST rate will be raised in two steps, from 7 percent to 8 percent on January 1, 2023, and from 8 percent to 9 percent on January 1, 2024.
The minister said the revenue from the increase in GST will go towards meeting the government’s medium-term needs including supporting its healthcare expenditure, and to take care of its senior citizens amid an ageing population.
The government designated an estimated USD 12 billion for healthcare in the 2023 budget, triple of what was allocated 10 years ago. Furthermore, Singapore is expected to spend SGD 59 billion (USD 44.7 billion) on healthcare by 2030.
The increase in GST comes three months after the Singapore government unveiled a new cost-of-living package in September, to provide relief for Singaporean households, especially lower- to middle-income families.
The support package introduced a range of cash payments, vouchers, and subsidy schemes. Dubbed the ‘Assurance Package’, it was first introduced in 2020 to support struggling citizens from the impact of the GST hike at the time.
Under the AP, all Singaporean citizens aged 21 and above are eligible for yearly cash payments between SGD 700 and SGD 2,200, paid over the years from 2022 to 2026. The amount each citizen receives depends on their assessable income and property ownership.
In light of the 2024 tax hike, eligible Singaporean citizens aged 21 and above will receive an additional cash payment of either SGD 150 or SGD 200, depending on assessable income and property ownership.
Another enhancement to the AP is an SGD 200 increase in the value of the Community Development Council (CDC) vouchers available for Singaporean households in 2024.
Core inflation in Singapore has moderated to 3.2 percent in November from a peak of 5.5 percent in January and February, but remains persistent with the central bank expecting it to average 2.5–3.5 percent in 2024, according to a Reuters report.
Some retailers, including furniture giant Ikea, have pledged to absorb the 1 percent GST hike into their prices.