Increase in Singapore GST tax
There will be an imminent hike in the goods and services tax (GST). This was confirmed in a Budget that laid the ground for challenges ahead, even as the Singapore government pockets a surplus of $9.6 billion. GST is expected to be raised from 7% to 9%, between 2021 and 2025. However, the exact dates for the increase will depend on the state of the economy, growth in expenditure, and the buoyancy of existing taxes.
When people in Singapore started to spread rumours, the economist from DBS expected the government to increase GST by 2% and it would be staggered over the next two years. However, there is still no fixed date given by the government, and since the Singapore economy is still in the midst of recovery from the 2020 Covid19 crisis, no new information has been provided. It remains to be seen if the hike will happen anytime soon.
Goods and Services Tax (GST)
According to Finance Minister Heng Swee Keat, he announced the confirmation of consumer or end-user to absorb more taxes than before in his Budget speech on Monday (Feb 19). The simplest respond to why Singapore increase GST because the need more money to fund upcoming expenditure like social spending on healthcare, infrastructure and security. When the additional 2% implement, this means that GST will form around 0.7% of GDP every year. Mr Heng mentioned, the incremental was necessary as the gap still exist even after prudent spending, saving and borrowing for infrastructure.
Furthermore, the GST Voucher (GSTV) will be distributed to help Singaporeans cope with the hike, currently, for about $800 million of the GSTV has been disbursed every year. There will be an offset package during the initial phase of the hike for consumers to adapt and adjust to the change. For the lower and middle-income households, they will get more support from the reimbursement plan.
On top of that, he added a new e-tax which implemented on digital services from overseas purchases from 1 Jan 2020. E-tax will affect B2B services.
The parties included such as marketing and IT services, apps and video and music streaming will also be affected. The business will be taxed on the imported services thru a reverse charge mechanism, this will be required for the local GST-registered business to deal with the GST from imports goods. For overseas vendor who make more than $100,000 in sales will need to register with IRAS and collect GST on their services without having a physical stores in Singapore. Good news for the consumer and overseas supplier will not be affected yet.
The Finance Minister has also announced the implementation of carbon tax, initially the cost was price at $5 per tonne of greenhouse gas emissions from 2019 to 2023. However, this rate will be adjusted and could be increased to between $10 to $15 per tonne.
The first hit will always be household, but the expected impact will be minor to household, U-Save rebate provided a 3 years subsidiary to help HDB households, with eligible receiving $20 more per year from 2019 to 2021. As for petrol, diesel and natural gas, these will not be affected by the carbon tax as they had exercise duties before the announcement.
The government forecast the revenue will near to $1billion over the next five years. However, Mr Heng mentioned that the government will need to spend more than this amount to support worthwhile projects in emissions.
Nevertheless, the companies will enjoy grants in order to cope with the tax in the initial phase, such as Productivity Grant ( Energy Efficiency) and the Energy Efficiency Fund. For the companies who produce greater reduction in emissions will receive more support by Mr Heng.
What do the Experts Say?
According to a partner of GST in Ernst & Young, it seems like a good way to inform Singaporean about the impending hike as it “will strike off speculation of when the rate hike will happen, and give certainty to the people. Now, people’s lives go on knowing that the hike will happen from 2021.”
PwC Singapore’s Asia Pacific Indirect Tax Leader Mr Koh Soo How said from the earlier announcement “would provide sufficient time” for the Government .