Living up to the spirit of newness, Singapore is opting for a new goods and services tax rate from January 1, 2023. Earlier during the 2022 budget, the Minister of Finance announced that GST would be increased from 7% to 8% with effect from January 1, 2023. Eventually, the rates will be raised from 8% to 9% on January 1, 2024. It is said that the additional fund will be employed in the healthcare sector. Singapore-based businesses enjoying an annual turnover of more than 1 million Singaporean dollars must register for GST and charge GST on all taxable goods at the prevailing rate.
Singapore imposes GST on imported low-value goods:
Previously any imported item valued less than 400 USD were exempted from GST. However, under the new regulation, these items, although termed as imported low-value goods, will fall under the GST bracket. These items can be purchased from GST-registered sellers or online shopping platforms and imported by air or post.
This policy aligns with the taxes levied on items imported via land or sea, irrespective of their value. Additionally, GST will be charged on remote services availed from GST-registered sellers from January 1, 2023, on remote services such as telemedicine. It also includes digital services such as advertisement services over the internet, web-hosting services, server colocation services, and more.
No breather for the common man:
Experts see the hike in GST rates as an economic disadvantage for middle-income groups. Euston Quah, head of economics at the Nanyang Technological University, says that the lower-income groups can benefit from rebates and offsets. Similarly, higher-income individuals have fund sources and can maintain their lifestyles.
The Assurance Package will cushion the blow of GST rise as Singapore added 1.4 billion Singaporean dollars to a 6.6 billion Singaporean dollars fund extending its value to 8 billion Singaporean dollars. The package will be dispersed over five years starting from December 2022.
It is estimated that 2.9 million adult Singaporeans are entitled to the said cash payout. The residents can also check their eligibility on the Assurance Package website. For lower-income households, this package will cover GST expenses for ten years. Furthermore, in February 2023, lower-income senior Singaporeans will receive up to 300 dollars in cash under the GST Vouchers – Cash.
It is the middle-income Singaporeans. They are likely to struggle with raised tax rates. These groups do not have access to any kind of rebates or concessions. At the same time, they have lower savings and may not be able to afford higher prices. Property taxes are also set to rise in 2023, as declared in the 2022 budget. High-end properties or properties purchased through investment will face steeper hikes.
Singapore is one of the fastest-ageing countries with rising medical expenditures, which were further expedited by the Covid-19 pandemic. The country’s ministry of finance states that healthcare spending will increase from 11.3 billion Singaporean dollars in 2022 to 27 billion Singaporean dollars by 2030. Therefore, it is no surprise that the country chooses to increase tax revenue. However, experts believe that Singapore needs to find better and more sustainable ways to fund its social welfare and healthcare needs.