by Ernie B. Calucag
The government will introduce a permanent feature aimed at ensuring the Goods and Services Tax (GST) will not hurt the lower-income group.
Finance Minister Tharman Shanmugaratnam in his budget speech on Friday said the government will set aside S$3.6 billion this year to finance the GST voucher for the first five years.
The voucher will fully offset the seven per cent GST that the lower half of retiree households pay on their expenses.
For lower-income families who do not have elderly members, the vouchers will offset about half their total GST bills.
There will be three components to the GST Voucher – cash, top-ups to the national health savings scheme Medisave and U-Save, which are utility rebates.
The amount each Singaporean will get will be based on both their income and annual value of their homes.
The cash and medisave components of the GST Voucher will be available from August this year, while the U-Save rebates will be given out in January and July each year, starting this July.
“Introducing GST vouchers achieves two goals: firstly, it avoids the need to change our simple single rate GST system, thus keeping the GST compliance costs low for businesses. Secondly, it addresses the call to alleviate the GST burden for lower income families,” said Yeo Kai Eng, Partner, GST Services, Ernst & Young Solutions LLP.
Mr Tharman said the voucher plan will cost about $680.0 million in 2012.
Since this is a permanent feature of the tax system, a GST Voucher Fund will be set up from which the payouts will be made.
GST Waiver on Gold
Mr Tharman also announced that the investment-grade gold and other precious metals will be exempted from GST to facilitate the development of gold trading.
This, he said, can draw on Singapore’s strengths as an international financial centre and trading hub, to meet strong demand for investment-grade gold in Asia.
“This change brings our tax treatment of investment-grade gold and precious metals in line with the practices of many developed economies, like Australia, UK and Switzerland,” Mr Tharman said.
Analysts said that with such a plan, it will effectively make physical gold 7 per cent cheaper overnight.
“In one stroke, it has made the price of gold in Singapore comparable with other locations such as Hong Kong and Malaysia, which do not have a GST regime,” said Yip Yoke Har, Tax Partner at PwC Services LLP (Singapore).