The increase in the Goods and Services Tax (GST) from 7% to 9% will be mitigated through the scaling down of tax relief received by travellers, said Finance Minister Heng Swee Keat.
Mr Heng, in delivering the Singapore Budget 2019 in Parliament on Monday (18 Feb), said that given “the rise in international travel” into and through Singapore, the Government will “tighten tax relief for travellers” with effect from Tuesday (19 Feb).
For travellers who spend fewer than 48 hours outside Singapore, the import relief limit will be reduced from S$150 to S$100, while for those who spend 48 hours or longer outside the country, the limit will be reduced from S$600 to S$500.
Travellers’ alcohol duty-free concessions will also be reduced from 3 litres to 2 litres starting 1 Apr.
He also assured that the Government will absorb the GST for public education and healthcare through an offset package, and that it will also increase the effectiveness of the permanent GST Voucher scheme when the raise comes into effect.
The voucher scheme was previously mentioned in last year’s Budget, stating that such a measure will be taken in order “to provide more help to lower-income households and seniors”.
The Government aims to supplement the GST Voucher fund by setting aside S$2bil by this year.
Currently, approximately S$800 million is disbursed annually under the voucher scheme.
Mr Heng said that despite the impending tax increase and the need to raise revenues in the future, the Government remains committed in keeping “the overall tax burden low”.
He suggested that in comparison to the OECD average of 19% and the norm for many Asia-Pacific countries to have GST rates above 9%, Singapore’s GST rate will remain comparatively low despite the increase from 7%.
Mr Heng added that a “competitive tax regime” such as Singapore’s own will be the driving factor in roping in investment and the retention of talents, and will subsequently give Singaporeans a competitive edge in the job market.
Notwithstanding the upcoming GST increase of 2%, Mr Heng assured that the Government will take measures to provide greater tax incentives, and to make adjustments to the current tax system in Singapore in order to boost the Republic’s economic strength as a whole.
Mr Heng, in delivering Budget 2018 in Parliament on 19 Feb last year, announced that the new GST rate of 9% will be implemented some time between 2021 and 2025.