Singapore Raises Sales Tax Amid Worries of Increased Living Expenses and Demographic Changes

30 Dec, 2023

Singapore Raises Sales Tax Amid Worries of Increased Living Expenses and Demographic Changes

Singapore is bracing for a 2024 sales tax increase, part of a strategic move by the government to fortify its financial standing amid rising social expenditures linked to the city-state's rapidly ageing population.

The goods and services tax (GST), influencing various products from essentials to luxury items, will witness a one-percentage-point rise to 9%, marking the second phase of a two-step increment. This follows an earlier hike this year, elevating the sales tax from 7% to 8% after remaining static for 15 years.

The impending tax adjustment has intensified concerns about the already escalating cost of living, prompting opposition lawmakers to advocate for a delay in its execution. While Singapore's core inflation eased to 3.2% in November from its peak earlier in the year, it persists at a notable level, with the central bank projecting an average of 2.5–3.5% in 2024.

Anticipating a quarter of the population to be 65 or older by 2030, the government argues that the tax increase is imperative to fortify state finances in preparation for the expected surge in healthcare expenses and an ageing populace. Deputy Prime Minister Lawrence Wong has defended the decision, emphasizing that postponing the GST increase would pose more significant challenges in the future, limiting resources to address growing fiscal needs.

In response to potential household burdens, the government has introduced an "assurance package" exceeding S$10 billion ($7.55 billion). This 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 immediate financial strains.

Some retailers, such as IKEA and FairPrice Group, have committed to absorbing the tax increases for the time being. IKEA has not specified when it will conclude this initiative, and FairPrice Group is committed to absorbing the hike on essential items like rice and vegetables.