Singapore To Offer Tax Rebates To Compensate For GST Hike

by Mary Swire, Tax-News.com, Hong Kong

02 May 2002

It is expected that the Singapore government will soon announce several measures to reduce the impact of proposed GST increases on the country's poorest citizens.

The budget, which is due on Friday, is thought to contain rebates on utility and rental charges for low income workers and the unemployed, in order to ease the transition from a 3% GST rate to a 5% charge.

The Singaporean government announced earlier this year that they intend to 'remake' the country's economy in order to increase its attractiveness to international businesses. In order to achieve this, top-rate corporate and personal income tax reductions of 4.5% and 6% respectively have been proposed.

However, the authorities need to protect the economy from any shortfall in state revenue which could result from these reductions, and have suggested that a GST increase is the most likely possibility.

Although the temporary targeted rebates may shelter the government from criticism to a certain extent, opponents of the measure have argued that the tax reforms still place an unfair portion of the tax burden on the shoulders of the country's least wealthy citizens.

Speaking to the South China Morning Post, the secretary-general of the opposition Singapore Democratic Party (SDP) argued that: 'The widening of income and wealth disparity and the increase in poverty levels must not be left unchecked as it will ultimately be the ruin of society'.

However, in his May Day address, Prime Minister Goh Chok Tong is reported to have countered that: 'To remain employable...in this more competitive [environment], we have to be prepared to change set patterns and habits.'

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