HELP’S AT HAND: TO COUNTER THE CRISIS
Singapore Budget 2020: GST hike to still take place by 2025, amid the need to invest in healthcare
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In a photo taken on Feb 10, 2020, laboratory technicians at the Agency for Science, Technology and Research’s Diagnostics Development Hub work on a diagnostic kit to test whether patients have the coronavirus.
ST PHOTO: KELVIN CHNG
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The coronavirus outbreak has reinforced the importance of continued investment in Singapore's healthcare system, said Deputy Prime Minister Heng Swee Keat yesterday.
This is why the planned goods and services tax (GST) hike will still take place by 2025, even though the Government has decided not to raise GST next year.
Mr Heng, who is also Finance Minister, added that the outbreak is a "stark reminder of the continued importance of maintaining a sound fiscal footing to deal with surprises and unexpected scenarios".
"In particular, we are able to mount a decisive response to support Singaporeans and workers through uncertain times only because of good long-term planning."
Mr Heng said the decision to keep GST unchanged at 7 per cent was made after reviewing revenue and expenditure projections, and considering the current state of the economy.
"However, we will not be able to put off the increase indefinitely," he told Parliament.
"In fact, this outbreak has reinforced the importance of continued investment in our healthcare system, including the capability to deal with outbreaks."
He added: "And we will still require recurrent sources of revenue to fund our recurrent spending needs in the medium term."
The planned GST hike from 7 per cent to 9 per cent was first announced in 2018.
The Government said then that it was necessary, given the needs in healthcare and other areas, and would take place some time between 2021 and 2025.
A $6 billion Assurance Package has been set aside to help cushion the impact on Singaporeans when the increase does take effect, Mr Heng said yesterday.
It means all adult Singaporeans will get cash payouts of between $700 and $1,600 over five years, so most households will get enough to offset at least five years' worth of additional GST expenses.
Those living in one-to three-room flats will get enough to offset about 10 years' worth.
This works out to about $7,000 in GST offsets over five years for a family of four in a four-room flat with a combined income of $6,000.
It includes cash of about $4,000.
Experts said it is unsurprising that the GST increase will not take place next year, given the state of the economy.
"Already before the coronavirus outbreak, the economic environment was already uncertain," said Mr Kor Bing Keong, GST leader at PwC Singapore.
And now with the virus outbreak and a general election on the horizon, raising GST at this time would not be "politically and economically prudent and astute", added Mr Lam Kok Shang, head of indirect tax at KPMG in Singapore.
When asked when he expected the GST hike to kick in, Mr Danny Koh, tax partner at Deloitte Singapore, noted that Japan saw slower growth after it increased its consumption tax from 8 to 10 per cent in October last year.
"Therefore, we would expect that the Government is unlikely to increase the GST rate until there are clear signs of a strong recovery in the economy," he said.
