It was at Budget 2021 when the much-expected Products or services Tax (GST) rate increase was officially announced. The government would raise the GST in the current 7% to 9% somewhere between 2021 to 2025.
The government claims the exact time to introduce the GST hike would depend on the state from the economy, just how much expenditure grows, and some additional factors.
A Brief History Of GST Rates
The GST was initially implemented in Singapore in 1994 and is intended to be a tax on domestic consumption, including imports. Listed here are the GST rates over the years:
1994: GST introduced with rate of 3%
2003: GST rate revised to 4%
2004: GST rate revised to 5%
2007: GST rate revised to 7%
Thus, even if the GST hike was introduced in the earliest possible time (in 2021), this means that GST rates were kept steady for 14 years.
How Much Revenue Is Collected From GST?
Here's an overview of the proportion of overall government revenue that GST provides (when compared with other kinds of taxes) in FY2021:
Source: Singapore Budget
At 15.3%, GST is an important supply of revenue that includes up to personal tax (15.9%) to Singapore's coffers.
Here's just how much GST is collected in dollar terms over the years:
Source: Singapore Budget
As you can see, about $11.29 billion was collected from GST revenues in 2021, with $11.69 expected to be collected from GST in 2021.
For reference, listed here are the GST revenues over the past 10 years, based on data from SingStat:
|Year||Revenue from GST (7%)|
How Much More Revenue Will Raising GST To 9% Bring?
Obviously, we are able to only make a guess, since GST salary is determined by just how much products or services are consumed over a given year, though, barring any economic slowdowns, we ought to expect it to develop gradually year-on-year.
Based around the projected revenues for FY2021, $11.69 billion is expected to become collected from the GST rate of 7%. At a rate of 9%, $15.03 billion in GST could have been collected. Herein lies the significance of announcing the planned hike early and becoming buy-in from citizens around the necessity of this important move.
The inclusion of more than $3 billion annually can go towards increased spending to enhance infrastructure and support schemes for the ageing population, in addition to make long-term investments to keep Singapore competitive in a changing rapidly global economy.
Other tweaks to GST, such as tightening GST tax reliefs for travellers returning from overseas also needs to add to GST revenues, though probably to some lesser degree.
How A lot more In GST Will The Average Singapore Household Pay?
Since GST is a consumption tax on all goods and services, the typical Singapore household should expect to pay more once the hike is effected. But exactly how a lot more?
According to the latest Household Expenditure Survey 2021/18 from SingStat, this is how much the typical Singapore household spends each month:
Source: Household Expenditure Survey 2021/18
As you can observe, the average household in Singapore spends about $4,156 per month, not including imputed rental of owner-occupied accommodation. Since average household size is 3.01, it really works to around $1,380 of expenditure per person each month.
At 7% GST, Singaporeans could be paying $96.60 in total GST a month typically from the goods and services they spent on. Obviously, this is an average figure, so a large portion of Singaporeans could possibly be paying less, while an inferior number of Singaporeans who purchase more and higher value products or services are paying much more.
At 9% GST, Singaporeans could be paying $124.20 in total GST typically a month, addressing a $27.60 increase a month, along with a $331.20 increase over a whole year.
If you want to find out how much (more) GST you will be paying because of the speed hike, you are able to track your expenses over a month.
What Can We Do About The Incoming GST Rate Hike?
Obviously, the lesser we spend, the less in GST i will be paying. However, it is worth taking into consideration there are two kinds of expenses: fixed and variable.
Fixed expenses include what we should spend on food, transport, utilities, along with other essentials for everyday life. If we think the GST hike is a problem, we are able to try to look for lower-cost alternatives if they're available, or reduce our usage of these products or services. The government has also promised a GST support package to help people who is going to be hardest hit by the GST increase.
Variable expenses include discretionary spending on things like entertainment, luxury goods, along with other non-essentials. You will see those in our midst who're price insensitive and will still spend exactly the same way they accustomed to, while others may reduce their spending, which might ironically, affect GST collections, as well as have a dampening impact on the economy.
The GST increase may well be a bitter pill to swallow, but probably the knowledge that people would ultimately function as the beneficiaries from the GST revenues collected, is needed soothe the discomfort.