GST payments fully offset for bottom 20% of households in past 2 years

Rebates from the various GST offset schemes fully covered the goods and services tax (GST) that families in the lowest 20th percentile had to pay in the past two years, and provided a little more, Second Minister for Finance Lawrence Wong told Parliament yesterday.

He said Singapore's progressive system of taxes and transfers has worked to ensure lower-income families receive more benefits than the taxes they pay, and has helped to reduce inequality. Mr Wong was responding to a question from Mr Louis Chua (Sengkang GRC), who asked about the proportion of GST offset by the various GST voucher schemes for the poorest families.

He showed that for the bottom 20 per cent of Singaporean households, the permanent GST Voucher scheme offset an average of 84 per cent of the GST payable per household member per year, from 2018 to last year. In 2019 and last year, these families also received GST special payments, which offset 33 per cent of the annual GST payable per household member per year.

"In other words, in this extraordinary year, households in the bottom 20 per cent got more from both the permanent and one-off GST vouchers, than the amount of GST payable," added Mr Wong.

Mr Chua, noting that the Covid-19 pandemic has worsened inequality, asked how the permanent GST voucher scheme could help middle-income families. He said the qualifying income for the permanent GST Voucher scheme, at about $2,300 a month, is "significantly lower than the median monthly income from work of about $4,500" and could exclude many such families.

To this, Mr Wong said the Government tackles inequality through a range of social support measures, not just the GST Voucher scheme. He cited income supplement schemes such as Workfare and senior employment credits.

He said: "And you can see from the statistics, in fact, Gini coefficient in Singapore, post tax and transfers, has been coming down. So our measures are working."

The Gini coefficient, which measures income inequality, has come down from 0.41 in 2012 to 0.35 last year.

Mr Wong said the Government is looking at "enhancing the permanent layer GST Voucher scheme", something it promised to do when it announced the impending GST hike, and that more will be revealed when details are available.

The GST is set to go up from 7 to 9 per cent between next year and 2025, and a $6 billion Assurance Package has been set aside to cushion the blow. The Government has said that this would effectively delay the tax hike for most households for at least five years.

Correction note: An earlier version of this story said that the Gini coefficient measures wealth and income inequality. The Gini coefficient does not measure wealth. This has been corrected.