Offsetting the GST Increase

1.54 For Singaporeans who pay income tax, the reduction in income tax will offset, fully or partially, their increase in GST. However many Singaporeans pay no income tax at all, so the higher GST will increase their tax burden unless we do something. In the longer term, they too will benefit from the tax changes, because the changes will promote economic growth, create more jobs, and raise incomes across the board. If we do not bring down income taxes and raise the GST, our economy may stagnate, unemployment may rise, and the lower-income groups will be the hardest hit.

1.55 But it will take time for the restructuring to create growth and prosperity. Meanwhile, the Government will implement a comprehensive offset package that will ensure that most households - of all income groups - are no worse off during a 5-year transition period. In other words, the package will offset completely at least 5 years' worth of additional tax payable by most households. Indeed, we will go further to promise that all lower-income households will receive at least 5 years' worth of offsets. No lower-income household will be left out.

1.56 I will announce the details of this year's corporate and personal income tax cuts, next year's GST increase, and the offset package later in Part IV of my speech, when I set out the Economic Restructuring Package.