More than 60% of net GST borne by high earners, foreigners

A view of the Marina Bay Sands on Feb 2, 2020.
A view of the Marina Bay Sands on Feb 2, 2020.ST PHOTO: ARIFFIN JAMAR

A significant part of the net goods and services tax (GST) is borne by foreigners and higher-income households, Deputy Prime Minister Heng Swee Keat said yesterday.

Net GST is the amount of GST each household pays after accounting for GST Vouchers they receive.

Responding to Mr Liang Eng Hwa (Holland-Bukit Timah GRC), Mr Heng said foreigners residing in Singapore, tourists and the top 20 per cent of resident households are estimated to account for more than 60 per cent of the net GST borne by all households and individuals.

This is after taking into account GST refunded under the Tourist Refund Scheme for goods bought here for consumption abroad.

"This is partly because foreigners do not benefit from the GST voucher and offsets, which are available only to Singaporean households," he said.

Conversely, the bottom 40 per cent of resident households are estimated to account for less than 10 per cent of the net GST borne by all households and individuals with the GST Voucher, he said.

The GST is only one part of Singapore's fiscal system, added Mr Heng, who is also Finance Minister.

The overall system of taxes and benefits is a progressive one, which sees those who are better off contributing more, and lower-and middle-income households receiving proportionately more benefits than the taxes they pay, he said.

The top 10 per cent of taxpayers pay about 80 per cent of Singapore's personal income tax revenue, he added.

 
 
 

Mr Heng highlighted a chart showing that lower-and middle-income households get proportionately more benefits than the taxes they pay, whereas higher-income groups contribute a far higher share of taxes than the share of benefits they receive.

The top 20 per cent of households by income pay 55 per cent of the taxes and get 12 per cent of the benefits, he said. The bottom 20 per cent pay 9 per cent of the taxes and get 28 per cent of the benefits.

"In designing our fiscal system, we have always sought to achieve a fair and progressive balance, where the better-off contribute more, and the lower-income receive more support," said Mr Heng.

"This overall philosophy is a key consideration in how we design the GST, and how we will implement the GST hike."

The GST is due to rise from 7 per cent to 9 per cent some time between 2022 and 2025.

Yuen Sin

A version of this article appeared in the print edition of The Straits Times on February 29, 2020, with the headline 'More than 60% of net GST borne by high earners, foreigners'. Print Edition | Subscribe