SINGAPORE (Feb 26): In the end, speculation about a hike in the Goods and Services Tax (GST) turned out to be true — well, sort of. In his Budget speech on Feb 19, Finance Minister Heng Swee Keat said the government would increase the rate of GST from 7% to 9% between 2021 and 2025.

Why announce a tax increase years away from its implementation? One reason might be that stating the intention to raise the rate of GST when everyone is already expecting it, and clearly explaining why it will be necessary, could prevent the issue from becoming politicised. In his speech, Heng said the GST hike would be needed to fund expected increases in healthcare, security and social spending that will “directly benefit current generations”, despite the government’s “prudent spending, saving and borrowing for infrastructure”.

Another reason might be that the government is choosing to delay the GST rate hike until it is absolutely necessary. Indeed, Heng said in his Budget speech that the precise timing of the hike would depend on the state of the economy, growth of expenditures and how “buoyant” existing tax revenues happen to be.

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