The Impending GST Hike

On 1 January 2023, the GST rate will be increased from 7% to 8%. One year after that, on 1 January 2024, the GST rate will be increased from 8%.

The impending GST increase has been the bugbear of many Singaporeans who may already be struggling with inflation and the increasing cost of living.

In Parliament, members of the Workers’ Party have relentlessly interrogated the necessity of raising GST.

In addition to arguing that there is no need to raise GST at present to raise revenue, the Workers’ Party has spent considerable time, both within Parliament and outside of it, to raise awareness on alternatives to raising GST.

Irresponsible not to raise GST?

During his Chinese speech at National Day Rally 2022, Prime Minister Lee Hsien Loong argued that not raising GST would be “irresponsible” in light of, inter alia, an ageing population and increasing healthcare and social spending.

Beyond these support packages, some have asked: Why not just postpone, or even scrap the GST increase? I understand these sentiments. Not raising the GST would be a politically expedient move. However, it would be irresponsible.

This line of argument, that not increasing GST would be irresponsible, was also employed by the Minister of Finance Lawrence Wong in July 2022 when he stated that delaying the GST hike would be “highly irresponsible“.

PAP MP files Parliamentary Question on deferring GST increase

Despite the Prime Minister and Finance Minister’s remarks, Ms Foo Mee Har, the PAP member of Parliament for Ayer Rajah-Gek Poh, filed a question for the September 2022 sitting of Parliament on the possibility of deferring the GST hike.

In her question, which was addressed to the Deputy Prime Minister Lawrence Wong, Ms Foo made reference to the “$60.7 billion tax revenue collected in FY2021/2022” and the “22.4% increase in total tax collection” and asked if the increased tax revenue can help defer the GST hike.

Ms Foo Mee Har: To ask the Deputy Prime Minister and Minister for Finance in light of the $60.7 billion tax revenue collected in FY2021/2022, whether the 22.4% increase in total tax collection can help defer the GST rises planned for 2023 and 2024.

Back in 2020, Ms Foo also asked about the introduction of wealth taxes and reinstatement of estate duty.

Workers Party MP Jamus Lim files questions on the need to raise GST

Workers’ Party MP Jamus Lim, who has continuously questioned the need to raise GST, also filed a question on the need to raise GST.

Like Ms Foo, Mr Lim also made reference to the “sharp increase in tax receipts”. In addition to asking about postponing the need to raise GST, Mr Lim also asked if the GST voucher amounts issued to lower-income households could be adjusted.

To ask the Deputy Prime Minister and Minister for Finance in light of the recent study by DBS which found that income growth has not kept pace with inflation, and the sharp increase in tax receipts for the past financial year, whether the Ministry has considered (i) postponing the need to raise GST at the start of 2023 and (ii) adjusting the GST voucher amounts issued to lower-income household quintiles.

This is the latest in a long line of questions filed by WP MPs on the impending GST hike.

DPM Wong’s response

In Parliament on Monday, 12 September 2022, DPM Wong addressed both questions.

He explained that the increased tax revenue was in part due to an increase in collection from stamp duty, which fluctuates heavily from year to year and would not be a reliable source of revenue.

DPM Wong re-iterated the Government’s assurance made during Budget 2022 that, due to measures taken by the Government, most Singaporean households would not feel the impact of the GST hike for at least 5 years, while lower-income households will not feel the impact of GST hike for about 10 years.

Mr Wong added that the increased tax revenue went to the Progressive Wage Credit Scheme which assists with compulsory wage increases for lower-wage workers and provided short-term relief for many businesses and families through various Covid-19 support packages.

Mr Wong stated that there was no sure way to predict tax revenue as asset prices are often volatile, one such example was the property market which recovered stronger than any other industry during the pandemic. Singapore’s economy is also small and open which leaves it susceptible to external demand fluctuations.

The Minister for Finance noted that Singaporean workers have experienced real wage growth as wages have exceeded inflation. On the impact of inflation on real wage growth in different sectors of society, DPM Wong assured that the government was closely monitoring the situation while taking into consideration the various government support packages already in place, adding that the packages were already heavily catered to lower-income households, such as the $1.5 billion support package announced in June.

Although the Minister noted that the GST hike will go ahead as planned, he said that the Government is ready to step in to do more if necessary, such as bolstering the $6.6 billion package, which was designed to offset additional GST expenses.

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