Young Singaporeans rush to beat GST hike, but will continue ‘YOLO’ spending habits
- Observers say the GST hike is unlikely to dampen spending for a generation of Singaporeans for whom job security is less of a concern than others
- The government is issuing handouts to Singaporeans and offering support for lower-income households ahead of the staggered tax hike
Small-business owner Ng Yi Yang has four holidays planned for 2023, booking his fourth trip earlier than usual to beat Singapore’s higher goods and services tax (GST) on January 1, 2023.
“I have been monitoring the prices for a bit to see if they drop. With the GST hike, I knew it wasn’t going to drop so I pulled the plug and booked it,” the 26-year-old said. So far, his trips include one to Berlin in May.
Ng is one of many young, working-class Singaporeans seeking to lock in big-ticket items like watches, furniture and home appliances before the tax hike, even as observers say the move is unlikely to dampen spending for a generation for whom job security is less of a concern than others.
“They are less worried about job security because they are able to find jobs far easier because of their skill sets compared to their parents,” said Song Seng Wun, an economist at CIMB Private Banking. “They are more willing to take risks and spend more as well. They may take the higher GST in their stride far more quickly than their parents.”
One difference between the impending GST hike and the last one in 2007 was that the younger generations are now increasingly adopting the you-only-live-once (YOLO) mentality – and this could be good for the economy, he said.
Amanda Woon, 26, is rushing to bring forward the payment of her March 2023 wedding banquet to beat the GST hike.
“Technically it wouldn’t make sense for us to pay everything upfront. The GST hike’s the only factor in pushing forward the payment,” she said of her banquet, which would involve over 100 guests and totalled S$16,000 (US$11,900).
“As a young couple, we have so many things to pay for. Our house, our [home] renovations, our furniture. If we have to pay 1 per cent more on so many things and the amounts are huge, they add up.”
Singapore’s looming tax hike, which comes amid rising inflation and growing signs of a global recession, has been a topic of debate in the city state in past months.
Opposition politicians have opposed the move, saying it was unwise to raise consumption-based tax in the midst of inflation concerns. Workers’ Party, the country’s main opposition, has proposed alternative forms of revenue generation such as wealth taxes.
Singapore’s core inflation rose by 5.1 per cent in November compared to a year earlier – the same pace as in October – with prices of food items on the rise.
Lawrence Wong, finance minister and deputy prime minister, earlier reasoned that the tax hike was a “responsible approach” given the country’s growing spending needs such as healthcare and its elderly population.
The government, which is issuing handouts to Singaporeans and offering support for lower-income households, said the tax hike would be a staggered one – first to 8 per cent next year then to 9 per cent in 2024.
Song expects an initial dent on consumption as Singaporeans adapt to the higher GST next year. But as long as market conditions remain supportive and unemployment stays low, people would be able to adjust to the higher cost of living.
Some retailers would be more concerned that the risk of recession could affect consumption acutely. Song expects some businesses to absorb the higher GST costs, to keep spending high.
E-commerce firm Lazada, for example, will introduce a flat delivery fee for purchases made from local sellers to help Singapore households “cushion the GST increase”, according to a spokesperson. The platform saw an uptick in demand not only for things like smartphones and television sets but also grocery and beauty products this year-end.
“If you’ve money in your pocket, if you still have a job and are expected a fairly OK bonus, you will take things in your stride,” Song said.
Supermarket chain NTUC Fairprice will be offering a 1 per cent discount for 500 essential items for six months, starting from January 1.
It will also extend ongoing discount schemes for senior citizens and low-income households until December 31, 2023.