Singapore Raises Sales Tax To Support Aging Population

Singapore households are bracing for a sales tax hike that takes effect in the new year as the government shores up coffers ahead of an expected surge in social spending in the rapidly aging city-state in the years ahead, reported Xinghui Kok for Reuters.

The government has said the tax increment was necessary to bolster state finances as it prepares for a surge in Singapore's aging population and rising healthcare costs. I Photo: Care Corner Singapore

The goods and services tax (GST), levied on everything from groceries to diamond rings, will be increased by one percentage point to 9% on Monday, marking the second phase of a two-stage rate hike.

This year, the sales tax was raised to 8% from the previous 7%, which had been unchanged for 15 years.

The hikes come on top of already rising living costs, prompting opposition lawmakers to call for a delay in the rise.

Core inflation in Singapore has moderated to 3.2% in November from a peak of 5.5% in January and February but remains stubborn, with the central bank expecting it to average between 2.5% and 3.5% in 2024.

The government has said the tax increment was necessary to bolster state finances as it prepares for a surge in Singapore's aging population and rising healthcare costs. It is estimated that a quarter of the population will be 65 and older by 2030.

In August, Deputy Prime Minister Lawrence Wong wrote in a parliamentary response that "deferring the GST increase will only store up more problems for the future, leaving us with fewer resources to take care of our growing fiscal needs."

The government has handed out fiscal relief to households in an "assurance package" worth more than S$10 billion ($7.55 billion), including S$200 to S$800 paid out to all adult Singaporeans this month.

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