SINGAPORE - To further blunt the impact of the goods and services tax (GST) hike, the earlier announced $6 billion Assurance Package will be topped up by $640 million, and complemented by a beefed-up permanent GST Voucher scheme.
Payouts under both schemes will start before the GST goes up, so that households here will feel less of a pinch from the tax hike.
The GST rate will increase from 7 per cent to 9 per cent in two stages - 1 percentage point each time on Jan 1, 2023 and Jan 1, 2024.
Announcing the details in his maiden Budget speech on Friday (Feb 18), Finance Minister Lawrence Wong stressed that lower-income households in particular will be well looked after, with significant financial support on a continuing basis.
"For them, the impact of the increase in GST will be neutralised," he said.
Under the Assurance Package - first announced by then Finance Minister Heng Swee Keat in 2020 - every adult Singaporean will get cash payouts ranging from $700 to $1,600. These will be spread over five years, with the first payout made in December.
In addition, about 850,000 lower-income seniors will now get GST Voucher cash payouts, ranging from $600 to $900 over the next three years.
Around 950,000 Singaporean households will also get additional GST voucher U-Save rebates of $330 to $570 in the next four years to offset the cost of utilities.
On top of that, all Singaporean children and seniors will get a total of $450 in MediSave top-ups, benefitting about two million people.
Lastly, all Singaporean households will get another two rounds of Community Development Council (CDC) vouchers. The $200 in vouchers can be used at heartland stores as well as major supermarkets.
Mr Wong reiterated his predecessor's promise that the $6.6 billion Assurance Package will offset at least five years of additional GST expenses for most Singaporean households.
For lower-income households, the offsets will amount to around 10 years of such expenses, while seniors will get even more support, he said.
For instance, an elderly couple living in a three-room HDB flat can receive about $6,800 over five years, or more than 10 times the additional GST they are likely to incur each year.
When payouts from the Assurance Package end in 2026, the beefed-up permanent GST Voucher scheme will continue to cushion the impact of GST for the majority of households.
First, GST Voucher cash payouts will go up starting this year to either $250 or $500, with the amount depending on the value of one's home. The current payout is either $150 or $300, and is distributed to Singaporeans with annual income of $28,000 and below.
From August, the assessable income threshold will go up from $28,000 to $34,000, so that more Singaporeans qualify for the scheme.
Finally, the service and conservancy charges (S&CC) rebate will be made a permanent component of the scheme from this year. This will provide some 950,000 Singaporean households rebates to offset between 1.5 and 3.5 months of S&CC charges.
With these changes, total GST expenses incurred by retiree households living in one- to four-room HDB flats will be fully covered, while many in bigger flats will also see significant offsets in what they have to pay, Mr Wong said.
For low-income households without elderly family members, these vouchers will offset about half their total GST expenses every year.
To help vulnerable households who may need further support , the Citizens' Consultative Committees ComCare Fund will get a $5 million top-up over five years, while the four self-help groups will get a total of $12 million over four years.
Nearly $40 million will also be set aside under the Productivity Solutions Grant for businesses to apply for subsidised accounting and point-of-sale solutions as they adjust to the GST increase.
The Government will always ensure that Singapore maintains a fair and progressive tax system, pledged Mr Wong.
This means those with more will contribute more in taxes than the benefits they receive, while those with less will still contribute, "but a lesser amount, and they will receive more benefits in return".
"This reflects our values and who we are as a society," he said. "This is how we strengthen our social compact."
Clarification note: An earlier version of this story cited an example of an elderly couple living in a three-room HDB flat who can receive about $6,800 over five years, or more than 30 times the additional GST they are likely to incur each year. The Ministry of Finance has clarified that it should be more than 10 times.