Singapore‘s goods and services tax will be raised beginning next year, according to Finance Minister Lawrence Wong, who also unveiled a raft of tax hikes targeting at higher-income groups in his budget statement on Friday.
GST will increase to 8% in January of next year, then to 9% in 2024. It has now reached 7%.
The administration also intends to raise top marginal personal income tax rates for high earners, raise residential property taxes, and boost luxury automobile taxes.
The moves come as Singapore emerges from a pandemic-induced economic slowdown, but it must tread carefully in order to maintain its appeal as a global financial centre while avoiding expanding wealth inequality and rising living costs.
Wong said the government will spend roughly S$9 billion ($6.70 billion) on low-wage worker assistance over the next five years.
Wong said the government was keeping a careful eye on the possibility of rising inflation, which has been fueled by a rebound in global demand, supply chain disruptions, and, most notably, rising energy prices.
As part of his budget plans, he announced a S$500 million ($372 million) package to boost jobs and businesses, as well as a proposal to set aside S$560 million to help Singaporeans cope with growing living costs.
Singapore’s government has spent about S$100 billion in the last two years to protect its citizens, businesses, and economy against the COVID-19 epidemic.
The economy, which is heavily reliant on international trade, is predicted to continue to improve this year, with GDP expected to grow by 3-5 percent.
As the economic recovery gathered steam and prices soared, the Monetary Authority of Singapore tightened policy settings in January, marking the first out-of-cycle move in seven years. At its scheduled policy meeting in April, it is largely expected to tighten again.
Core inflation in the city-state is expected to be 2-3 percent in 2022, with headline inflation at 2.5–3.5 percent.