Budget 2023: One-time bonus, GST and CDC vouchers among measures to cope with inflation and GST increase
SINGAPORE - Singaporeans will get more help to cope with inflation and cushion the impact of the higher goods and services tax (GST) rate.
The amount to be given out under the GST Voucher scheme - which helps to permanently defray GST expenses for lower to middle income Singaporeans - will go up from $500 to $700 in 2023 for those residing in homes with annual values of $13,000 and below. This will be raised to $850 from 2024 onwards.
Those with homes with annual values of above $13,000 and up to $21,000, will receive $350 in 2023 - $100 more than before. The amount will be further increased to $450 from 2024 onwards.
This extra support will come in at $530 million a year, which means the GSTV scheme will cost the Government $1.7 billion annually from 2024.
Separately, the Assurance Package (AP) - first introduced in 2020 - will be topped up by $3 billion. This will bring the total amount to be eventually disbursed to $9.6 billion, from the $6.6 billion earlier announced.
The cash component will be increased by between $300 and $650 for eligible Singaporeans, bringing the total amount received by each adult Singaporean to between $700 and $2,250 over five years.
The Assurance Package - to offset at least five years of additional GST expenses for most households, and about 10 years’ worth for lower-income households - will benefit about 2.9 million adult Singaporeans.
The Community Development Council (CDC) vouchers will also be raised by $100 in 2024. This means Singaporean households will receive $300 of the vouchers in January 2024.
Deputy Prime Minister and Finance Minister Lawrence Wong, who delivered the Budget on Tuesday, also announced other one-off support measures under the AP scheme. These include:
- A Cost-of-Living special payment of between $200 and $400 for each eligible adult Singaporean aged 21 years old and above in 2023. This will benefit about 2.5 million adult Singaporeans.
- A Cost-of-Living Seniors’ Bonus of between $200 and $300 for eligible seniors aged 55 and above. This benefits about 850,000 senior Singapore citizens.
- U-Save rebates provided to households over the next three tranches of disbursements this year will be doubled. Eligible households will receive up to $760 in U-Save rebates this year.
- Each child aged six and below will get a top-up of $400 to his or her child development account. Older children will receive a $300 top-up to their Edusave or post-secondary education accounts.
DPM Wong said: “These enhancements to the AP will enable us to maintain the commitments we had set out earlier, which is to offset additional GST expenses for at least five years for the majority of Singaporean households, and for about 10 years for lower-income households.”
The enhancements to the permanent GSTV scheme will also ensure that most retirees as well as lower-income households will not be impacted by the GST rate increase, he added.
Under the GST system - which is the GST and GSTV combined - the more well-off consumers, as well as foreigners and tourists, will bear higher effective GST rates than lower-income Singaporeans, he said. This ensures that those with greater means contribute their fair share of taxes, and will effectively lower the burden of taxes on lower and middle income Singaporeans.
The GST rose to 8 per cent on Jan 1, and will hit 9 per cent at the start of 2024.
With all the enhancements announced, DPM Wong said that the government has provided comprehensive help for the majority of Singaporean households this year.
For example, a lower-income family with two young children will receive about $5,500 in benefits including cash, government top-ups to the child development accounts for the children, Medisave top-ups, U-Save and Service & Conservancy Charges rebates, and CDC vouchers.
Larger households, particularly those with seniors and children staying together, will receive more support. For example, a six-person middle-income household with two seniors and two school-going children will get about $8,400 in benefits.
DPM Wong said that the updates to the AP reflect the government’s commitment to help Singaporeans through the challenging period of higher prices.
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He, however, cautioned that Singaporeans should understand that it is not fiscally sustainable to rely so heavily on government support year after year to cope with inflation.
“The reality is that even after the current inflation surge moderates, inflation may stabilise at a higher trend level globally, and in Singapore, higher than what we were used to in the last decades. The era of untrammelled globalisation that kept goods at highly competitive prices all over the world is over,” he said.
Countries are now relooking and adjusting their supply chains, he added. Instead of buying from the cheapest, they are prepared to accept lower efficiency and higher costs to prioritise diversification and strategic resilience. These trends are pushing up inflation everywhere and in Singapore.
Singapore’s best strategy to cope with inflation is to be more productive and competitive so that its workers can earn more, and the increase in earnings can then make up for the higher prices, said DPM Wong.
This happened last year, when real incomes grew by 2 per cent for the median worker in 2022, and by a higher 4.7 per cent for a worker in the 20th percentile, based on Ministry of Manpower’s Labour Force in Singapore 2022 report.
He said: “We must therefore press on with economic restructuring and transformation, help businesses raise their productivity, and help workers upgrade their skills at every opportunity.”
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