Singaporeans battling cost of living squeeze brace for GST hike

The goods and services tax, which is levied on everything from groceries to diamond rings, will be increased by one percentage point to 9 per cent next week

The government has defended the move, saying it needs to boost state finances to meet the needs of a rapidly ageing population

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Buyers browse merchandise at a shopping centre on Orchard Road in Singapore. Photo: Reuters

Published: 1:37pm, 28 Dec 2023

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 ageing city state in the years ahead.

The goods and services tax, which is levied on everything from groceries to diamond rings, will be increased by one percentage point to 9 per cent on Monday, the second phase of a two-stage rate hike. This year the sales tax was raised to 8 per cent from the previous 7 per cent, which had been unchanged for 15 years.

The hikes comes 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 per cent in November from a peak of 5.5 per cent in January and February, but remains stubborn with the central bank expecting it to average 2.5–3.5 per cent in 2024.

The government has said the tax increment was necessary to bolster state finances as it prepares for a surge in Singapore’s ageing 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 less resources to take care of our growing fiscal needs”.