SINGAPORE (Feb 19): Singapore will raise its good and services tax (GST) by 2 percentage points to 9% sometime between 2021 and 2025, according to Finance Minister Heng Swee Keat in his 2018 Budget statement on Monday.

"But I expect that we will need to do so earlier rather than later in the period,” he adds.

According to Heng, the exact timing of the tax increase will depend on the state of the economy, how much expenditures grow, and how buoyant existing taxes are.

"This GST increase is necessary because even after exploring various options to manage our future expenditures through prudent spending, saving and borrowing for infrastructure, there is still a gap," says Heng.

He adds that the GST hike will support recurrent spending to benefit Singaporeans.

To help Singaporeans cope with the GST hike, Singapore will implement the increase in a progressive manner.

The government will continue to absorb GST on publicly subsidised education and healthcare.

When GST is increased, it will also enhance the permanent GST Voucher (GSTV) scheme.

To support these payments, the government will make a $2 billion top-up to the GSTV Fund. Some $800 million per year is currently disbursed from this fund.

In addition, Heng says an offset package will be implemented to help Singaporeans adjust to the GST increase, with lower- and middle-income households to receive more support.

With effect from Jan 1, 2020, GST will also be introduced on imported services.

Heng says this is to ensure that Singapore’s tax system remains fair and resilient in a digital economy.

Heng adds that the government will also review international discussions on how GST can apply for the import of goods before deciding on the measure to take.