Amidst public clamour, Budget 2020 says GST remains the same for 2021

In today’s Budget 2020 announcement, Finance Minister Heng Swee Keat informed that the “The GST hike by 2 per cent will not take effect next year”. As such, the GST will remain at 7% in 2021 said the Deputy Prime Minister.

He added, “After reviewing our revenue and expenditure projections, and considering the current state of the economy, I have decided that GST rate increase will not take effect in 2021.”

According to the Deputy Prime Minister when the GST is raised eventually, there will be a parallel of a S$6 billion Assurance Package for Singaporeans that will mitigate the impact of its implementation.

Under the Assurance Package, all Singaporean adults would receive cash pay outs between $700 and $1,600 throughout a period of 5 years. This amount would suffice to taper off at least five years’ worth of additional GST expenses.

For those living in a one room or three room flats, they would receive enough to offset the increase for a period of 10 years.

As an example, Mr Heng explained that a family of four with a total income of S$6,000, living in a four-room HDB flat would receive a sum of S$7,000 over five years. This includes cash sum of about S$4,000.

Albeit, he was ready to caution, “However, we will not be able to put off the increase indefinitely,”

Touching on the outbreak of COVID-19, Mr Heng said that the pandemic had, “reinforced the importance of continued investment in our healthcare system, including the capability to deal with outbreaks”.

Elaborating further, Mr Heng explained that in the medium term, recurrent sources of revenue will be required to fund the expenditures that is needed. In the long run, however, a raise in GST rate would be needed by 2025.

Meanwhile, Mr Heng reiterated that the Government will continue to absorb the GST on publicly-subsidized healthcare and education.

“We will assess carefully the appropriate time for the increase. But rest assured, we will provide Singaporeans sufficient lead time,” he said.

It is worth noting that on Saturday, (15 February), Leader of the Singapore Democratic Party (SDP) Chee Soon Juan, shared a Facebook video questioning the justification for a GST hike.

In his video, Mr Chee has questioned the rationality for the highly anticipated GST hike in budget 2020. Mr Chee suggested that raising GST, particularly during a critical period amidst the COVID-19 outbreak, tantamounts to imposing additional hardship on the people.

To him, the haste and inconsiderateness in raising the GST would only indicate that the government was not exercising financial prudence and has been profligate in spending.

He enumerated a number of instances where the government did not exercise due diligence in many of the programs and projects it had undertaken over the years that has resulted in cost overruns. This has contributed to the increase in government expenditure. This was pointed out by the Auditor General Office almost every year but corrective measures have not been instituted.

In conclusion, Mr Chee’s assessment was that any impending GST increase to meet public expenditure should not be burdened on the people as it is only the result of government oversight.