Budget presented to complete second increase in GST in a year – rising from 8% to 9% January 2024
Singapore has drafted its 2023 Budget to include a 1% rise in its Goods & Services Tax (GST) from 8% to 9% on 1 January 2024. This is the second leg of a two-part rise – GST rose from 7% to 8% on 1 January 2024.
The rises are required to help meet the social service costs of an ageing population
Singapore is increasing its Goods and Services Tax rate for the first time in 15 years announced today in the 2022 Budget. This is over 12 months:
- January 2023 rise from current 7% to 8%; and
- January 2024 rise to 9%.
Singapore’s inflation is forecast to rise to 3.2% in 2022, a recent record. Economists are now concerned any general rise in taxes on consumption could undermine the delicate recover.
The rises still put Singapore near the lower end of its nearest competitors:
- Japan has a Consumption Tax rate of 10%;
- South Korea’s VAT rate is 10%;
- Vietnam has 10% VAT rate (2% temp discount);
- the Philippines has a VAT rate of 12%;
- China has a main VAT rate of 13%; and
- Thailand 7% rate
Rapidly againg population giving rise to spiralling healthcare spending
Singapore’s most recent total fertility rate of 1.14 is below replacement. 15% per cent of the country’s population in 2019 were aged 65 and above. This will increase to about 25 per cent by 2030. What this means is that we have a smaller proportion of the working population contributing for a population that is growing older. As the population ages, annual healthcare spending will rise exponentially; it is expected to rise from 2.1 per cent of GDP today to almost 3 percent of GDP over the next decade.
This rise would be in tandem with the extension of GST to low-value goods worth up to $400 as well as business-to-consumer imported non-digital services.
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