GST Offset much lower now for lower-income?

December 31, 2012

I refer to the report “800,000 HDB households to receive S$90m worth of U-Save vouchers” (Channel NewsAsia, Dec 31).

$4b in 2007 for 5 years?

The GST rate increase from 5 to 7% in 2007 was accompanied by an offset package to help Singaporeans with the increase in GST, and which would cost the government $4 billion over five years. (“GST rate to rise to 7% from July 1“, Channel NewsAsia, Feb 15, 2007)

Now $3.6b for next 5 years?

Now five years later, the Government will be spending much less, at $3.6 billion over the next five years (2012 – 2016) under the new GST Voucher package.

Since the GST Offset Package was to help particularly lower-income families offset the GST increase, and considering that the population has increased and inflation has risen by about 19 per cent since 2007, and huge budget surpluses of about $10.5 billion over the last seven years, why are we spending less now?

More help for lower-income in 2007?

When the GST rate was raised from 5% to 7% in July 2007, a household in the bottom 20% had to pay additional GST of $370 per year, but received an offset package of $910 per year, in addition to permanent benefits of $1,000 per year. (“Budget debate round-up speech“, Mar 2, 2011)

Less help now?

So, let’s see how much less lower-income families will get now.

It’s GST Cash of $250 and GST U-Save Rebate of $260 (1 and 2-room HDB) and no Medisave top-up if there are no family members below age 65.

For example, family members age 65 – 74, 75 – 84 and 85 and above (staying in homes with annual value not more than $13,000) wiil get a Medisave top-up of $250, $350 and $450, respectively.

In any case, even if a lower-income family qualifies for a Medisave top-up, it can only be used for medical purposes, and is thus not cash that can effectively offset GST expenditure.

Also, in the past, Medisave top-ups were given to those age 55 and above. So, why is the age now increased to 65 and above?

So, are lower-income families effectively getting much less now under the GST Voucher scheme, compared to the previous GST Offset Package?

GST increase to help the poor?

Since the main reason given for increasing GST was to help the poor, why is it that lower-income families are now apparently getting less under the GST Voucher scheme?

Leong Sze Hian

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About the Author

Leong
Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.