Singapore’s Government Plans Boost in Assistance to Ease Financial Strain from GST Rise
SINGAPORE: The Government has announced an additional S$1.4 billion to alleviate the financial burden of the Goods and Services Tax (GST) hike on most Singaporean households, with plans to extend this support for at least five years, Deputy Prime Minister Lawrence Wong revealed on Monday (Nov 7).
In a statement made during the second reading of the Goods and Services Tax (Amendment) Bill in Parliament, Mr Wong explained that this funding increase would bring the total value of the Assurance Package to S$8 billion, providing relief for the majority of households amid heightened inflation.
He reassured that the package would continue to offset extra GST costs for the next five years for most Singaporeans, while offering support for lower-income households for up to 10 years. He further highlighted that further details would be shared in next year’s Budget.
“For those asking to delay the GST increase, the Assurance Package effectively delays it for the majority of households,” Mr Wong explained. “The financial assistance provided will exceed the extra GST costs for most citizens over the next five years.”
Originally set at S$6 billion when first announced in 2020, the Assurance Package was augmented by an additional S$640 million in Budget 2022. Mr Wong, who also serves as Finance Minister, reaffirmed the Government’s commitment to ensuring that the impact of the GST increase would be mitigated, particularly for those with lower incomes.
“The Assurance Package ensures that households, especially lower-income ones, will not experience the financial strain of the GST hike for years to come,” Mr Wong stated. “This will remain a priority, even as inflation remains high.”
The GST increase, which will raise the rate from 7 per cent to 8 per cent on January 1, 2023, and from 8 per cent to 9 per cent on January 1, 2024, has sparked robust debate in Parliament. Mr Wong emphasised that the Government is committed to supporting all segments of the population, including through expanded healthcare, social, and ageing support.
To fund these initiatives, the Government has raised taxes, including income and property taxes, alongside GST and other vehicle-related fees, reflecting a long-term plan to meet Singapore’s evolving needs. The Deputy Prime Minister stressed that the revenue from the GST hike is essential for financing rising healthcare costs and supporting an ageing population.
Additionally, Mr Wong reaffirmed that Singaporeans would continue to receive GST Vouchers, which aim to reduce the impact of the GST increase. These vouchers include cash, MediSave contributions for seniors, rebates on utilities bills (USave), and service and conservancy charge rebates.
The Government will also continue absorbing GST for publicly subsidised healthcare and education services, ensuring that the most vulnerable households are shielded from significant increases in the cost of living.
“By combining the permanent GST Vouchers with our GST absorption policies, we ensure that the GST system remains fair, targeting consumption in a way that supports the less well-off,” Mr Wong added.
He also noted that the GST system is progressive, with lower-income households paying a much lower effective GST rate compared to wealthier ones. For example, after the permanent offsets, the bottom 10 per cent of households, including many retired individuals, effectively pay no GST at all. Even with the GST increase, households in the first three income deciles will face minimal changes in their effective GST rate, remaining under 3 per cent.
The Deputy Prime Minister concluded by affirming that the Government would continue monitoring the situation to ensure that the GST system remains equitable and effective, with higher-income individuals and tourists bearing the greatest burden of the increase.
