Second Minister for Finance Chee Hong Tat has said raising Singapore’s Goods and Services Tax (GST) from 7 per cent to 9 per cent was a “very difficult decision,” but a necessary one to secure the nation’s future.
Speaking in a video posted on Facebook on 26 April 2025, Chee explained the rationale behind the increase, emphasising the need to support an ageing population and a volatile global economy.
“We studied all the options, and without the GST increase, we would not be able to fulfil our promise to take care of our seniors,” said Chee.
He added that without the additional revenue, the government would lack resources to support companies and workers facing global uncertainty.
The GST was raised from 7 per cent to 8 per cent on 1 January 2023, and further to 9 per cent on 1 January 2024.
Several opposition parties have campaigned to revert the GST to 7 per cent, especially amid voter concerns about rising living costs.
Some parties have also advocated for exempting essential items like groceries and utilities from GST to ease the burden on households.
Addressing these concerns, Chee, a member of the ruling People’s Action Party (PAP), pointed out that with permanent GST vouchers and the government’s absorption of GST for healthcare and education, the effective tax rate borne by lower- and middle-income households is significantly lower than 9 per cent.
“It is tourists, foreigners, and the better-off who contribute most of the GST revenue,” he said.
He also highlighted the Assurance Package, noting that it effectively delays the GST impact for most Singaporean households by at least five years, and over 10 years for lower-income families.
Chee said that without the GST increase, Singapore would lose crucial revenue needed for healthcare, education, housing, and public transport improvements.
He added that reducing GST now would mean forgoing collections from groups like tourists and higher-income individuals, thus limiting support available for Singaporeans.
Earlier this month, Singapore downgraded its GDP growth forecast for 2025 to between 0 and 2 per cent, citing slowing global trade and rising economic uncertainty, exacerbated by escalating trade tensions between China and the United States.
Prime Minister Lawrence Wong had warned during a political broadcast on 25 April that global uncertainties were already weighing on the economy.
However, it was recently announced that Singapore’s fiscal position has improved substantially.
The Ministry of Finance (MOF) reported that stronger-than-expected revenue turned a deficit of S$2.6 billion in FY2023 into a surplus of S$6.4 billion in FY2024, equivalent to 0.9 per cent of GDP.
Corporate income tax collections rose by 6.5 per cent year on year to S$30.9 billion, surpassing earlier estimates.
Goods and services tax revenue also surged by 23.8 per cent year on year to S$20.6 billion, driven by strong private consumption.
Personal income tax collections increased by 8.3 per cent to S$19 billion, reflecting robust nominal wage growth.
Despite these stronger fiscal results, Chee maintained that the GST hike was necessary for Singapore’s long-term resilience.
“This is why PM was able to commit that there will be no further GST increases until 2030,” he said.
Planning ahead to meet future needs is the mark of a responsible government, Chee stressed.
“Our commitment to Singaporeans is this: We don’t raise taxes unless we really need to. But we will do so to look after the needs of Singaporeans — both the current and future generations,” he concluded.
Rejection that GST hike “turbocharged” inflation
In 2022, Finance Minister and then DPM Lawrence Wong had rebutted opposition suggestions to seek alternative revenue sources, warning that alternatives could be unsustainable and harm future generations.
And more recently, during the Budget 2025, Wong rejected opposition leader Pritam Singh’s claim that the Goods and Services Tax (GST) hike “turbocharged” inflation, but his response appeared to sidestep the key issue Singh was highlighting—the GST hike’s direct contribution to inflation.
Speaking in Parliament on 28 February during the budget debate, Wong insisted that external factors, such as global supply chain disruptions and rising energy costs, were the main drivers of inflation.
He pointed to the Consumer Price Index (CPI), which showed inflation falling from 6.1% in 2022 to 4.8% in 2023 and further to 2.4% in 2024, even after the GST increase.
“Where is the turbocharging?” Wong asked. “Look, I know elections are approaching, but this chamber is not an election rally. Let’s not get carried away by hyperbole and have a debate based on facts.”
However, Singh never claimed that GST was the sole or even primary cause of inflation—only that it had significantly worsened the situation.
In his clarification, Singh pointed to the government’s own data, which estimated that the GST increase contributed “slightly less than one percentage point” to core inflation.
He noted that, based on the Monetary Authority of Singapore’s (MAS) 2024 core inflation projection of 2.5% to 3.5%, this meant the GST hike was responsible for around 40% of core inflation at the lower end of the estimate.
For 2024 as a whole, MAS Core Inflation is expected to average 2.5–3.5%. Excluding the impact of the increases in the GST rate, core inflation is forecast at 1.5–2.5%.MAS Monetary Policy Statement – July 2024
Rather than disputing this specific point, Wong countered with a theoretical argument: “If I take that view, then I really should be raising GST at a time of very high inflation. Then the proportionate impact would be quite small.”
He then suggested that if the Workers’ Party truly believed their own argument, they should not have objected to the timing of the GST hike.
This response, however, did not directly address Singh’s argument. Singh was not making the case that the GST should have been raised during high inflation to “shrink” its proportional impact.
Instead, he was pointing out that the GST hike had a measurable and significant impact on inflation, something the government itself had acknowledged in its projections.
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