SINGAPORE, Dec 28 — Singaporean households are bracing for a consumption tax hike that comes into effect in the new year, as the government shores up coffers to prepare for a surge in social spending expected in the rapidly aging city-state over the next few years. ing.
The goods and services tax, which is levied on everything from groceries to diamond rings, will rise by 1 percentage point to 9% on Monday, the second stage of a two-stage tax hike. This year, the consumption tax was raised from 7% to 8%, which has remained unchanged for 15 years.
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Opposition MPs are calling for the increase to be postponed, as it comes on top of the already rising cost of living. Singapore’s core inflation rate slowed to 3.2% in November from a peak of 5.5% in January and February, but remains stubbornly high, with the central bank expecting it to average between 2.5% and 3.5% in 2024. It’s on par.
The government argues that the tax hike was necessary to shore up the country’s finances in preparation for Singapore’s rapidly aging population and soaring medical costs. It is estimated that by 2030 a quarter of the population will be over 65 years old.
“Delaying the GST hike will only create more problems for the future and leave us with fewer resources to meet growing fiscal demands,” Deputy Prime Minister Lawrence Wong said in a parliamentary statement in August.
The government has provided financial support to households in a “guarantee package” of more than S$10 billion (US$7.55 billion), including between S$200 and S$800, which will be paid to every adult Singaporean this month.
Some retailers have pledged not to pass on the tax increase for now. Home furnishings brand Ikea said it would absorb a 1% price increase but did not say when it would end the initiative, while supermarket chain FairPrice Group said it would increase prices on 500 essential items such as rice and vegetables. announced that it would absorb the — Reuters