The Finance Minister also announced measures to further widen the GST tax base from 2023, following the first round of widening measures in 2020. Given that GST is a key instrument in funding Singapore's spending needs, it is unavoidable that Singapore will go beyond simply increasing the rate of tax, but also implementing measures to widen the tax base.
Singapore’s GST regime has been in the limelight in recent years. In 2018, Finance Minister Heng Sweet Keat first announced plans to increase the country's GST rate from 7% to 9%, with the hike occurring between 2021 and 2025. In line with announcements during the Unity Budget last year, the Finance Minister confirmed in this year's Budget that the GST rate would remain unchanged in 2021 but cautioned that Singapore "will not be able to put off the increase for too long".
The announcement comes at a time when the country is still addressing the economic challenges brought about by the coronavirus pandemic. Despite the fact that the GST hike will not take place in 2021, the Finance Minister reiterated that GST is a responsible way to pay for Singapore's major societal needs such as recurring healthcare spending, and that the GST hike will still be implemented by 2025. To ensure that the overall tax system remains progressive, Singapore will introduce a $6 billion Assurance Package to alleviate the impact of the GST increase on low-income households.
