When is it the right time to raise GST?
KPMG Singapore expects the tax hike to be implemented in one go.
The government is expected to raise the goods and services tax (GST) from 7% up to 9% from 2022 to 2025, but is it the right time?
In a report, KPMG Singapore said that the timing of the rate hike should happen during a time of economic growth.
"Singapore’s [gross domestic product] is expected to grow 3% to 5% in 2022. Considering that an impending rate hike had already been announced during the 2018 Budget to happen between 2021 to 2025, the timing of the rate hike should not be too much of a surprise," KPMG said.
The rate hike will likely be raised directly to 9% instead of staggered, between the abovementioned years, the group added. This is unlike the staggered implementation of the GST hike which happened in 2003 and 2004.
"One must note the inconvenience caused to GST-registered businesses as they had to tweak enterprise resource planning systems, price displays and more to comply with the rate hike. As such, we anticipate the GST hike to be raised directly to 9 per cent instead of a staggered one," KPMG said.
Because the GST taxes are implemented on essential goods, excluding exported goods and services, residential properties and certain financial services, it is unlikely that it would affect the decisions of multinational corporations (MNCs) to invest in Singapore.
"The GST incurred by MNCs on their business operations can be recovered in full. An exception is financial institutions such as banks that are not able to claim input tax in full, in view of their business activities," KPMG said.
However, it noted that the government is set to impose GST on imported remote services and low-value goods starting 1 January 2023.