Singapore explores how to extend wealth tax system as it rethinks its tax strategies: Lawrence Wong

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MITIGATING THE IMPACT OF TAX HIKING

Singapore also has a progressive tax and transfer system, the minister said, stressing that the country has always maintained a “high level of transfers” to the poorest households.

Households in the bottom 20 percent income bracket receive about S $ 4 in benefits for every dollar of tax paid, he said in his speech.

The ratio is around 1: 2 for middle-income households, while households in the richest 20 percent receive S $ 0.30 in benefits for every dollar of tax paid.

“Our tax and transfer system today is progressive, and we will keep it that way,” Wong said.

“For middle income earners, we keep the tax burden low so that they can enjoy the rewards of their hard work and have the freedom to choose their spending. “

Mr Wong added that unlike many European countries which impose heavy income taxes to support their social protection systems, Singapore has kept its “light but efficient public spending”.

This is why half of the country’s workforce does not have to pay personal income tax, while the goods and services tax (GST) rates ‘are where they are today’. hui, ”he said.

“Going forward, we will need to increase revenue to fund our additional spending. But we will also move cautiously to ensure that overall government spending remains efficient and taxes remain as low as possible for the middle class,” said The Minister. .

The government first announced plans to increase the GST rate from 7% to 9% in Budget 2018. Earlier this year in Budget 2021, Deputy Prime Minister Heng Swee Keat said the hike would take place between next year and 2025, and “sooner rather than later” depending on the economic outlook.

Examining why the government is seeking to raise the GST, Wong explained that Singapore’s health needs alone would require an additional 3% of gross domestic product to be spent over the next 10 years.

Including the need to invest in reducing emissions, providing quality education and maintaining security, the country’s needs “are great and growing”.

“Some of them may be supported by income tax. But with rapid aging, this will not be sustainable and will make it difficult for our workforce, ”Wong said, adding that raising tax revenues is the“ sustainable and responsible way ”of financing recurrent spending.

“(The GST) is a tax on final consumption, and it helps smooth the tax burden on the whole population, young and old, including tourists and foreigners when they spend money here. “

Mr Wong added that Singapore is not alone, with many other jurisdictions having much higher GST or value added tax (VAT) rates than Singapore.

Asked about the influence of soaring global inflation on the timing of the GST hike, the minister replied that the government “will review the overall economic outlook, including the inflation outlook”, when he will make his decision.

But he stressed that the planned GST hike “should not be viewed in isolation,” given the government previously announced the rollout of a S $ 6 billion insurance package.

“We have already put money aside for this insurance package. The money is there, so when the GST is introduced it will come with the insurance package that will effectively delay the increase in the GST by about five years for the majority of Singaporeans, ”the minister said in a statement. dialogue session moderated by Straits Times Deputy Editor-in-Chief Vikram Khanna. .

“And for low-income Singaporeans, it will effectively delay the GST increase for 10 years.”

Adding that GST’s permanent voucher system will also be improved, Mr Wong said, “So look at it holistically, GST in Singapore is quite unique compared to almost every other country.”


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