The planned increase in goods and services tax (GST) cannot be put off indefinitely and will have to be done by 2025. However, money has been set aside to cushion the impact of the tax hike for Singaporeans, said Deputy Prime Minister and Finance Minister Heng Swee Keat.
The Government has committed $6 billion to offset at least five years' worth of additional GST expenses for the majority of households, and more for lower-income families, he added.
It will also continue to absorb GST on publicly funded healthcare and education.
Mr Heng raised the issue of GST while speaking about the need for fiscal sustainability, and he outlined how Singapore would achieve it during the debate on the Fortitude Budget. "The crisis has underscored the importance of upholding the prudence and discipline of our forefathers to spend responsibly, and prepare for the future.
"This is why, even as we devote considerable resources to overcome the immediate challenges posed by Covid-19, we must continue to plan ahead to secure a fiscally sustainable future," he said.
When the Government announced in 2018 plans to hike GST from 7 per cent to 9 per cent, it said the move was necessary given the growing spending to support an ageing population, and to ensure that Singapore remains a liveable city, among other things.
It said the increase would take place sometime between 2021 and 2025, but 2021 was ruled out as a start date earlier this year after taking into account revenue and expenditure projections and the state of the economy.
Yesterday, Mr Heng said Singapore needed to continue to spend on healthcare, education, training and infrastructure in the medium-to long-term, and this would require significant fiscal outlay.
He added that while these needs were known before the Covid-19 outbreak, the pandemic had increased the urgency for some of these investments, such as developing advanced medical research and production capabilities, and boosting training capacity for workers.
Even with the projected increase in spending and unprecedented relief measures amid the coronavirus pandemic, Singapore must continue to hold tight to the principles of prudence and discipline to ensure a sustainable future, said Mr Heng.
The Government will do this by borrowing to finance spending on major long-term infrastructure projects, which typically involve hefty upfront investment but will benefit people for years to come.
This will allow current and future generations of Singaporeans to bear the cost fairly, he said.
Spending that mainly benefits the current generation of Singaporeans would be met with current revenues, so that everyone can chip in and do their part, he added.
Said Mr Heng: "With this differentiated and principled fiscal strategy, each generation rightly pays for the benefits that they enjoy, and we do not saddle future generations with our bills. This is an equitable approach, and will continue to be the cornerstone of fiscal sustainability for Singapore."