SINGAPORE, Oct 15 — While a hike in Goods and Services Tax (GST) cannot be deferred indefinitely as it is necessary to support future needs such as pre-school education and healthcare, the Government will continue to study the timing of the increase in GST rate carefully.
In doing so, the Government will take into account the pace of Singapore’s economic recovery, its revenue outlook and how much spending can be deferred without jeopardising the country’s long-term needs, said Deputy Prime Minister Heng Swee Keat today as he wrapped up the parliamentary debate on the latest supplementary budget rolled out this year.
Heng was responding to questions posed by several Members of Parliament during the debate about the timing of the GST rate increase, given the protracted impact of the Covid-19 crisis on Singaporeans’ livelihoods.
Heng, who is also the Finance Minister, announced in February this year that GST rates will remain at 7 per cent in 2021 instead of going up to 9 per cent as originally planned, given Singapore’s weaker economic conditions amidst the Covid-19 outbreak.
GST collections this year, he said, are projected to drop by 14 per cent from its original estimate before the start of the year.
This was mainly due to travel disruptions and the impact of the circuit breaker.
“We expect collections to continue to be lower than usual until international travel recovers fully, which we expect to be at least a couple of years away.”
He made the assurance that the Government remains committed to helping Singaporeans manage the impact of the GST rate increase.
For example, S$6 billion (RM18.3 billion) was set aside in the Assurance Package announced in February to cushion the increase for Singaporeans when the GST rate is eventually raised.
Responding to Non-Constituency Member of Parliament Leong Mun Wai’s suggestion to shelf the GST hike indefinitely, Heng pointed out that over 60 per cent of the net GST borne by all individuals and households is from foreigners residing in Singapore, tourists and the top 20 per cent of households in Singapore.
“Mr Leong’s suggestion to shelf the GST rate increase indefinitely means that we will lose the additional revenues from these groups which we can use to improve the lives of Singaporeans,” said Heng.
Turning to the issue of securing Singapore’s financial security, Heng said that the Government will adopt a “principled and prudent” approach to borrowing for major long-term infrastructure.
“We will borrow only for infrastructure that benefit multiple generations, and ensure that our debt level and future repayments are sustainable,” said Heng, who added that doing so will help to spread out the hefty upfront costs across current and future generations equitably.
“We will not borrow just to make up for revenue shortfalls or be opportunistic in timing the market.”
For recurrent spending that benefits the current generation, such as healthcare and education, Heng said that the “responsible way” is to pay for them through recurrent revenues like taxes.
“This discipline ensures that every generation earns and pays its share.” — TODAY
