Bad news not only for Singaporean citizens but also for tourists coming into the City-State. The government was looking in its budget 2018 to increase the GST by one point this year. Finally, the decision has been postponed to 2021…
Singapore is definitely not the cheapest city to visit in Southeast Asia- actually it is the most expensive one to anyone wishing to spend a few days in the financial metropolis. Unfortunately, it might even turn more expensive in the future, and not only because of normal inflation or rising cost of living. Singapore confirmed to look at increasing its GST. Experts thought earlier that the measure would be implemented from the next fiscal year, starting in April 2018. But finally, the Singapore government will rise the GST from 2021.
Last week, news agency Reuters asked economists to evaluate the possibility of a GST rise. Nine of the ten polled economists think authorities on Monday will unveil the first rise in the goods and services tax (GST) since 2007. Policymakers have flagged the need to increase revenue to meet future social spending needs of a rapidly ageing population.
Economists say Finance Minister Heng Swee Keat might also make tweaks to taxes on e-commerce retailers such as Amazon.com. Inc, wealth when he presents the budget, at 0730 GMT on Monday, for the year starting April 1.
Any tax measures would come after Singapore in 2017 had its fastest economic growth in three years, estimated at 3.5 percent. “Strong economic growth is a good pull factor supporting the tax hike,” said Francis Tan, an economist for Singapore’s United Overseas Bank.
Tan added that there’s an “urgent need” to shift more towards indirect taxes as the tax base for personal income tax could become smaller over the longer term given Singapore’s demographic challenge.
While the rate for Singapore’s consumption tax is one of the world’s lowest, GST is still the government’s second largest source of tax revenue, behind corporate tax.
Singapore introduced its GST in 1994, with a 3 percent rate. This was raised to 4 percent in 2003 and 5 percent in 2004, then to 7 percent in 2007.
Some economists including HSBC’s Jingyang Chen, who expects a 2 percentage point hike to be announced on Monday, said a higher GST could be accompanied by measures to ease the burden for lower-income families, such as cash transfers and vouchers.
Eight of the 10 economists polled expected the government to widen the net on e-commerce transactions subject to the GST.
Currently, Singapore consumers pay 7 percent GST on their purchases from Singapore-based online retailers. In contrast, they pay no GST on goods purchased from overseas suppliers if the value of the imported goods is below S$400 ($302.40).
Several economists also suggested there could additional taxes on wealth, such as an increase in annual property taxes, as well as higher rates on alcohol and tobacco products or even a new tax on sugar consumption.
Economists estimate a 2 percentage point rise in GST could boost Singapore’s headline inflation rate by 1.0-1.5 percentage points and core inflation – the measure closely watched by policymakers – by even more.
-Updated on 20/02/2018