Singapore's Lee Confirms GST Increase

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

03 January 2007

In his New Year message to Singapore's people, Prime Minister Lee Hsien Loong said that the country's economy grew 7.7% in 2006, but would slow to 4% - 6% growth in 2007. He confirmed an increase in the Goods and Services tax from 5% to 7%.

The Prime Minister said that the increase, together with a constitutional amendment to allow the drawing of more net investment income from past reserves would allow extra resources to tackle income disparities, including the launch of a Workfare programme. However he added: "We will strengthen our competitiveness by lowering direct taxes when the need arises, particularly on companies."

Mr Lee noted that in the last five years, real per-capita GDP had grown on average by 4.3% per annum, but that real average wages (after adjusting for inflation) grew at only half this rate – 2.1%. 'Higher-end wages have risen by more than this. But at the lower-end wages have increased by much less, and some have even stagnated', he said.

Generall, the Prime Minister was bullish about the economy. 'The strong economy created more than 124,000 jobs in the first three quarters alone, the highest number ever. About half of these jobs were taken up by residents. Unemployment was down to 2.7%. Companies are reporting better performance, and workers are enjoying good wage increases and higher bonuses.'

The economic outlook is positive," added Mr Lee. "There are some downside risks, including a slowing US economy, weaker global electronics demand, and high oil prices. Nevertheless, the global climate remains favorable.'

Recommended