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Parliamentary Replies

Supplementary Question Reply by Second Minister for Finance, Ms Indranee Rajah on Cost of Living and Inflation

11 Jan 2022
Supplementary Question (SQ) by Mr Liang Eng Hwa:

Sir, my question is for Second Minister for Finance. Yes, we know that it's never a good time to raise taxes. Indeed, the government has been helping Singaporeans to help mitigate the cost of living with the various support measures. But given the series of cost increases that we have seen in recent months, with perhaps more to come, and that we are still in this pandemic fighting mode, will the government consider delaying the GST increase so as to avoid adding on to the inflationary pressure? 

SQ Reply by Second Minister for Finance, Ms Indranee Rajah:

I thank Mr Liang for his question, which is, I think, a question on the minds of many Singaporeans. There actually two distinct aspects of that question. One is, can we delay the date that GST takes effect? But the second and the much more important question is, can we delay the impact of that increase on Singaporeans? 

So, for the first one, we had announced in Budget 2018, that we plan to raise the GST by two percentage points from 7% to 9%. And we said then, that it will be sometime from 2021 to 2025. We said the exact timing will depend on the state of the economy, and how much our expenditures grow, and how buoyant our existing taxes are. And we said all that before COVID-19. 

Then the pandemic came along. So we then said in 2020, that the GST rate increase would not take place in 2021. And that was in direct recognition of the hardship that was felt by people because of the pandemic. 

So it's not something we can put off forever, but the exact timing is something that we have to think about. In deciding the timing for the GST hike, we are carefully considering the overall economic conditions. The economy is recovering steadily, and barring fresh disruptions, it should grow in step with global economic recovery, and we expect GDP to grow by 3 to 5% in 2022. 

But this brings me to the second question, which is the more important one, which is: irrespective of whatever date we may say that GST takes effect. Can we delay the impact on Singaporeans? And the answer is that we have designed it such that yes, we can delay the impact on Singaporeans. 

Through the Assurance Package, for the majority of Singaporeans, we will delay the impact for them effectively by five years. And for the lower-income, the impact on them will be delayed effectively for 10 years. So, essentially, whatever the increase to the expenditure as a result of GST, the Assurance Package is designed to buffer them for that increase. The Government is directly supplementing them so that they won't feel the impact. So I just hope that members will bear this in mind, the date that it takes effect and the date that the impact is felt are two separate things, and we will continue to look out for the low-income households and the majority of middle-income households.