GST hike looms as Singapore's funding needs grow

Published: 21.11.2017 Related countries:  Singapore Singapore

The Singapore government is unlikely to raise personal or corporate taxes, but could consider taxing e-commerce spending .

The Goods and Services Tax (GST) is likely to go up within the next few years, with an announcement expected as soon as Budget 2018, economists and tax experts say.

Their predictions follow comments by Prime Minister Lee Hsien Loong, who told the People's Action Party (PAP) convention on Sunday that Singapore will be raising its taxes as government spending grows.

Besides a GST hike, the government could be exploring alternative avenues for raising revenue, including taxes on e-commerce spending, experts say.

Finance Minister Heng Swee Keat had hinted at upcoming tax hikes in his Budget speech in February, saying that Singapore's expenditure needs are expected to rise rapidly in the years to come, particularly in healthcare and infrastructure.

The government's expenditure already far outstrips revenue - it expects a primary deficit of S$5.62 billion for financial year 2017.

Experts say higher tax revenues are unlikely to come from raising corporate tax rates, given the need for Singapore's economy to stay competitive; broad-based hikes in personal income tax rates are also unlikely, because the government plans to keep taxes progressive. This makes GST the top candidate.

The GST was implemented at a single rate of 3 per cent on April 1, 1994. It was raised to 4 per cent in 2003 and to 5 per cent the following year. The last hike to 7 per cent came in 2007.

Each increase was accompanied by an offset package to help households cope with the higher costs of living.