Increased GST needed to support rising expenditures

Increased GST needed to support rising expenditures (15 Jul, Forum, Pg B8)

We thank Mr Marcus Aw Chen Feng for his views on Singapore's tax system (Drawbacks to raising GST, July 8).

The increase in the goods and services tax (GST) rate some time from 2021 to 2025 will help to support rising expenditures to care for an ageing population, to invest in early childhood education, and to keep Singapore safe from rising security threats like terrorism. The GST collected will support public spending that benefits Singaporeans, in the form of social support and security spending so that we can better care for, develop and protect our people.

To address the impact of GST, in particular on lower-income households, we will continue to fully absorb GST on subsidised education and subsidised healthcare. We will continue with and enhance the current GST Voucher scheme when the GST is raised, to defray costs for lower-income households and seniors.

We are focused on ensuring that Singapore's overall system of taxes and transfers, comprising subsidies and grants from the Government, remains equitable. Lower-income households receive more transfers from the Government than all the taxes they pay, while the better-off pay more taxes than the transfers they receive. Concurrently, we have been actively tapping progressive taxes, as suggested by Mr Aw.

We announced the increase in personal income tax rates for higher-income earners in 2015, and increased buyer's stamp duties for higher-value residential properties last year.

Mr Aw noted that high tax rates may adversely affect economic growth and investments. Like value-added taxes and goods and services taxes in most countries, GST is applied on domestic consumption. We allow businesses to claim GST incurred on their purchases. As such, GST does not discourage savings, work and investments. Our system of taxes and transfers strikes a balance to help Singapore maintain its competitiveness globally, and we will continue to review and refine it.

Lim Yuin Chien
Director, Corporate Communications
Ministry of Finance