New Delhi
Singapore is gearing up for an increase in sales tax in 2024 as the government takes measures to strengthen its financial position in anticipation of heightened social spending, driven by the city-state's rapidly ageing population.
The goods and services tax, affecting a range of items from groceries to luxury goods, will see a one-percentage-point hike to 9 per cent starting Monday, marking the second phase of a two-stage rate increase. This follows the increment earlier this year when the sales tax rose from 7 per cent to 8 per cent, after remaining unchanged for 15 years.
The upcoming tax hike is compounding concerns over the already escalating living costs, prompting opposition lawmakers to call for a delay in its implementation.
Core inflation in Singapore moderated to 3.2 per cent in November from its peak of 5.5 per cent in the early months of the year.
However, it remains stubborn, with the central bank projecting an average of 2.5–3.5 per cent in 2024.
With a quarter of the population predicted to be 65 or older by 2030, the government argues that the tax adjustment is essential to strengthen state finances in anticipation of the anticipated spike in healthcare expenses and population ageing.
Deputy Prime Minister Lawrence Wong has defended the decision, emphasising that deferring the GST increase would only lead to more significant challenges in the future, limiting resources to address growing fiscal needs.
In response to the potential burden on households, the government has rolled out an "assurance package" worth over S$10 billion ($7.55 billion). The package includes payouts ranging from S$200 to S$800 distributed to all adult Singaporeans this month.
While the tax hike raises concerns about its impact on citizens, the relief measures aim to alleviate the immediate financial strain.
Some retailers, like IKEA and FairPrice Group, have pledged to absorb the tax increases for the time being, with IKEA not specifying when it would conclude the initiative, and FairPrice Group committing to absorb the hike on essential items such as rice and vegetables.
(With inputs from Reuters)
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