Singaporeans are preparing for an upcoming increase within the national sales tax rate, which is able to come into effect firstly of the brand new yr. The government is taking this move to strengthen the country’s financial stability within the face of an expected increase in social spending, especially in light of the country’s rapid population growth.
The increase includes Goods and Services Tax rates, which apply to a spread of things, from necessities to luxury goods resembling diamond jewelry. Next Monday, the tax rate shall be increased by one percentage point and can reach 9%. The move is an element of the second phase of the announced tax increase program, which has already seen the sales tax raised from 7% to eight% this yr, after 15 years of unchanged rates.
This increase is resulting from the ever-increasing cost of living, which has prompted opposition MPs to call for a delay in implementing the policy. Although Singapore’s core inflation rate fell to three.2% in November from a high of 5.5% in January and February, it stays a serious concern. This results from the central bank’s forecasts assuming average inflation of two.5-3.5% in 2024.
The government maintains that the tax hike is an inevitable step towards strengthening the country’s funds within the face of Singapore’s growing elderly population and rising healthcare costs. It is estimated that by 2030, roughly one quarter of Singapore’s total population shall be aged 65 and over.
In August, Deputy Prime Minister Lawrence Wong expressed his view in a parliamentary response that delaying the GST increase would only create more complicated problems in the long run, given the dwindling resources needed to satisfy ever-increasing fiscal demands.
The government has provided financial support to households in the shape of a A$10 billion ($7.55 billion) “safety package”, including money payments of A$200 to A$800 to all adult Singaporeans this month.
Several retailers have pledged to temporarily mitigate the impact of the tax hike. For example, furniture retailer IKEA has announced its intention to soak up a 1% increase, although the duration of this policy has not yet been determined. In turn, the FairPrice Group supermarket chain plans to soak up the tax increase on 500 basic products, resembling rice and vegetables.
Source: Reuters
