The government will spend S$1.4 billion more on the Assurance Package, which aims to offset additional GST expenses for most Singaporean households for at least five years, declared Deputy Prime Minister Lawrence Wong on Monday (7 Nov).
During the second reading of the Goods and Services Tax (Amendment Bill), Second Finance Minister Wong stated that after reviewing the elevated inflation rates around the world, an addition $1.4 billion will be added to the Assurance Package.
This brings the total sum to S$8 billion.
The whole point of the package is to negate the additional GST expenses for Singaporean households for at least five years, and to offset the costs for lower-income households for ten years.
Due to the higher inflation, household expenses and GST expenses are bound to increase, hence the size of the package needs to increase as well, if the government wants the Assurance Package to be effective.
When the GST hikes were first announced in 2020, S$6 billion was originally set aside for the Assurance package; another S$640 million was appended in the Budget 2022 speech, so this makes it the third adjustment to the Assurance Package.
In essence, what DPM Wong is trying to say is that the government can provide more support to mitigate the costs, but the GST increase will be happening as scheduled.
GST will increase from 7% to 8% from 1 Jan 2023, and from 8% to 9% on 1 Jan 2024.
What Is The Assurance Package?
There are a few components to the Assurance Package.
Please note that the details stated below were announced in the Budget 2022 speech, therefore, it does not reflect the final sum that will be disbursed.
The most straight-forward are the cash payouts. All Singaporeans aged 21 years and above will receive cash payouts amounting to between $700 and $1,600, based on their income and property ownership. It will be disbursed over five years.
Seniors will be receiving additional cash payouts of $600 to $900.
The next is GST Vouchers – U-Save rebates, which essentially grants rebates for household utilities expenses. They will be distributed based on the flat type—the bigger the unit the higher it will be—across the next five years.
The Community Development Council (CDC) vouchers will come back into play for 2023 and 2024. There will be one round of vouchers in each year that amounts to $200, which can be used at participating stores.
There will also be Medisave Top-Ups for Singaporeans aged 20 years and below, or 55 years and above. From 2023 to 2025, individuals in this category will get a Medi-save top-up of $450.
As for the lower income households, they will be placed on the enhanced and permanent GST Voucher scheme, where they will receive more financial assistance in the manners listed above.
Moreover, the government will continue to absorb the GST for publicly subsidised healthcare and education.
Based on the finance ministry’s calculations, the tier system of the GSTs will ensure that the households in the lowest tenth percentile will not be affected by the GST hike. In fact, they may not be impacted at all once the Assurance Package comes down.
Rather, it will be the higher-income households, tourists and foreigners who will have to bear the brunt of the extra tax.
Why Are The GST Hikes Necessary?
Although Singapore does not have free healthcare or pensions like the UK, the government still provides social safety nets.
Due to the ageing population and the pandemic, the government has been increasing its support in the fields of healthcare, social and ageing needs. It also wants to invest in skill upgrading, enhance social mobility and turn Singapore into a green economy and city.
All of these require consistent and structured government expenditure.
DPM Wong cites that the GST is an important revenue, apart from income and property tax, that provides the additional resources to meet the country’s growing healthcare expenditures and to better care for the rising number of seniors.
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Of course, as the global economy and inflationary outlook continues to change, the government will continue to review the parameters of the package to meet the government’s committed level of offsets, said DPM Wong.
More details about the enhancements will be announced in Budget 2023.
Besides the GST percentage increases, other amendments to the bill include the refinement of the rules application to avoid double taxation, provide tax certainty and ease compliance burden of businesses.
The amended bill will also have a section for criminal sanctions to combat Missing Trader Fraud schemes.
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