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Questions on overall need to increase GST |
| Q1: | Is it necessary to increase GST? Can't the Government cut back its spending or find other sources of funds? |
| Q2: | Why must the Government increase GST now when our spending needs are only in the future? |
| Q3: | When will the GST rate change take effect? |
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Questions by Individuals |
| Q4: | How will the Government ensure that the GST increase actually benefits low-income Singaporeans? |
| Q5: | Will the offset package help low-income Singaporeans cope with the GST increase in the long term? |
| Q6: | Will the offset package help "sandwiched" middle-income Singaporeans who face similar financial pressures as the lower-income but pay higher taxes? |
| Q7: | It is unclear as to why the Government has to "tax the poor to help the poor"? If it is indeed the Government' s aim to help the lower-income, why not exempt basic goods and services and impose a higher rate of GST for luxury items? |
| Q8: | Can't GST be waived for medical treatment? |
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Questions by Businesses |
| Q9: | Will businesses have sufficient time to prepare for the change? |
| Q10: | Will the Government be lowering corporate tax alongside the increase in GST? |
| Q11: | Will the increase in GST hurt small businesses more than the big ones? |
| Q12: | Will the 2% increase be staggered? |
| Q13: | How is the government guarding against GST profiteering and inflation arising from the increase in GST? |
| Q14: | Where can I get information about the Goods and Services Tax? |
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Feedback Channels |
| Q15: | What are the feedback channels for me to express my views and ideas relating to Budget 2007 or the GST increase? |
| Answers on overall need to increase GST |
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Q1: |
Is it necessary to increase GST? Can't the Government cut back its spending or find
other sources of funds? |
| A1: | There is very little scope to cut back further on government spending. Indeed, we have already reduced government spending from about 18% of GDP in 2001 to about 14-15% of GDP currently. At this level, we are already operating one of the leanest governments in the world. If anything, we will need to spend more going forward to help the lower-income and to prepare for an ageing population, while continuing to invest for our future. Government spending over the next 5 to 10 years will have to go up by at least 1% of GDP. At the same time, the scope for increasing revenues is limited. Our largest sources of revenue are personal and corporate income taxes, which we cannot afford to increase further because it would affect our ability to attract talents and investments in a keenly competitive global environment.
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Q2: |
Why must the Government increase GST now when our spending needs are only in the
future? |
| A2: | To invest for the future, we would need to start spending now. We are using the GST money to invest in the future, so that all Singaporeans enjoy better growth and will be better off because of the investments we make now. We are not increasing GST now simply to give it all back, redistributed.
There are immediate needs to invest in education, R&D, infrastructure for a leading global city, and first class living environment. Programmes to provide more for the lower-income and the elderly are also pressing.
There is never a good time to increase taxes. But it is better to increase the GST now when the economy is doing well and job prospects are good. It will also allow the Government to ease the transition to a higher GST rate for our citizens by providing an offset package. If we wait till the bulk of our spending needs are upon us before raising GST, the budget will be too tight and we will not be able to provide any assistance to help Singaporeans transit to a higher GST rate.
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Q3: |
When will the GST rate change take effect? |
| A3: | The Government is still assessing the economic situation and working out an appropriate time to implement the GST increase. The implementation date will be announced during Budget Speech 2007 on 15 February 2007.
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| Individuals |
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Q4: |
How will the Government ensure that the GST increase actually benefits low-income
Singaporeans? |
| A4: | There will be a comprehensive offset package and it will be tilted towards low-income Singaporeans so that they will receive more than the extra GST they have to pay. In other words, low-income Singaporeans will be better off with the GST increase and offset package taken together. The Government is still gathering feedback from the ground, unionists, grassroot leaders, economists, businesses and academics. We will take all the feedback into consideration in working out the GST increase and accompanying offset package. |
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Q5: |
Will the offset package help low-income Singaporeans cope with the GST increase
in the long term? |
| A5: | The offset package will include both once-off and permanent measures. The Government is considering feedback from all sources when working out the GST offset package. The Government is still working out the details of the GST offset package and will announce them during Budget 2007. |
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Q6: |
Will the offset package help "sandwiched" middle-income Singaporeans who face similar
financial pressures as the lower-income but pay higher taxes? |
| A6: | The Government is aware of the middle-income squeeze. In working out the offset package, the Government will ensure that a significant portion of the middle-income group also enjoy a substantial offset. |
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Q7: |
It is unclear as to why the Government has to "tax the poor to help the poor"? If
it is indeed the Government' s aim to help the lower-income, why not exempt basic
goods and services and impose a higher rate of GST for luxury items? |
| A7: | Exempting basic necessities like rice from GST is not the best way to help poorer Singaporeans. GST exemption on basic necessities will benefit higher-income households more than the middle- and lower-income groups, as the higher-income consume more of everything in absolute terms. It is preferable that we keep the tax flat so that its rate can be kept low and the system simple to administer. With a flat tax on all goods and services, the Government will be able to harness the additional revenue to help the lower-income to the extent that they will be better off than without the GST increase.
The Government is still taking in feedback from the public in working out the structure of the GST increase and will announce the details during Budget 2007. |
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Q8: |
Can't GST be waived for medical treatment? |
| A8: | The increase in GST rate will not increase charges for subsidised healthcare services as the Government provides the hospitals and polyclinics direct grants to offset completely the GST they have to pay on all subsidised healthcare services.
The 3Ms framework - Medisave, MediShield and Medifund - is put in place to take care of people's medical needs, particularly in their old age. Patients who are not able to pay for their share of the medical bills can apply for assistance from Medifund, which is an endowment fund set up specially to help the poor and needy Singaporeans pay for their medical care. Patients can use their Medisave to pay for the balance of their hospital bills, and to take up Medishield to pay for treatment of catastrophic illnesses. Furthermore, recipients of Public Assistance receive free medical treatment in our public hospitals and polyclinics. |
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| Businesses |
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Q9: |
Will businesses have sufficient time to prepare for the change? |
| A9: | The Government will ensure that businesses have sufficient time to prepare for the change. Most businesses already have the experiences of preparing GST rate increases in 2003 and 2004, and should be equipped to handle another round of rate increase within a reasonable timeframe.
To help businesses prepare for the GST rate change, IRAS will publish guidelines on the GST treatment for transitional issues shortly after the Budget announcement. |
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Q10: |
Will the Government be lowering corporate tax alongside the increase in GST? |
| A10: | Currently, our corporate taxes are competitive at the headline rate of 20%. However, other countries such as Hong Kong and many countries in Central and Eastern Europe have even lower corporate taxes, and may further lower them in the future. The Government will monitor the situation and continually assess whether our tax regime is sufficiently competitive in drawing in investments. |
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Q11: |
Will the increase in GST hurt small businesses more than the big ones? |
| A11: | No. Small firms with turnovers of less than $1 million need not register for GST. While unregistered firms cannot claim back the GST on their purchases, they are not worse off than registered firms as they do not have to charge their customers GST on their products. This means that for the same value-add between the input supplies and the product, unregistered firms can afford to charge a lower price than registered firms. |
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Q12: |
Will the 2% increase be staggered? |
| A12: | We will learn from past GST increases to minimise implementation and compliance costs of businesses. The Government is still gathering feedback from the ground, unionists, grassroot leaders, economists, businesses and academics. We will take all the feedback into consideration in working out the GST implementation plans, which will be announced in Budget 2007. |
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Q13: |
How is the government guarding against GST profiteering and inflation arising from
the increase in GST? |
| A13: | As with past increases, the government will take steps to protect Singaporeans from businesses that take advantage of the increase to raise prices unjustifiably. The Government has appointed MOS for Trade and Industry Lee Yi Shyan as the chairman of the Committee Against Profiteering (CAP) with effect from 1 Jan 07. |
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Q14: |
Where can I get information about the Goods and Services Tax? |
| A14: | IRAS publishes comprehensive information on the IRAS website relating to our GST (or VAT) system, which you may find useful. You can access the IRAS website at www.iras.gov.sg to access information relating to GST. |
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| Feedback Channels |
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Q15: |
What are the feedback channels for me to express my views and ideas relating to
Budget 2007 or the GST increase? |
| A15: | Four main feedback channels are available: |
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Click here to fill in an online feedback form;
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Face-to-face dialogue sessions with businesses and groups of individuals co-organized with REACH (the former Feedback Unit). These are not specific to any budget issues. If you wish to offer your views online, please click here;
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SMS your feedback on Budget 2007 to REACH in the format REACH Your views/ideas/feedback to 9 SpeakUp (97732587). Users are encouraged to keep to a 160-character limit; and
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Write-in, call or fax. Your feedback can be directed to:
Mailing Address
Ministry of Finance
100 High Street
#10-01 The Treasury
Singapore 179434
Hotline
1800-226-0806 (toll-free)
Mondays to Fridays from 0800 - 1730 hrs
Fax
6332-7435
Members of public can continue to provide feedback to the CAP via its website (www.cap.org.sg) or email (feedback@cap.org.sg).
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