GST offsets for low-income households

It is surprising to learn that GST Vouchers offset on average only half of the GST that the lowest 20% of households earn. This was not the understanding and the impression that I had when the GST Voucher scheme was launched several years ago. I thought it was meant to fully offset the GST paid by the poor.

I asked the Minister for Finance this question in Parliament on 14 April 2014.

The permanent GST Voucher scheme was introduced in 2012 to help lower- and middle-income households with their expenses, in particular, what they pay in GST. It was an acknowledgement that the GST is an inherently regressive tax, because lower-income earners on average pay a far higher percentage of their incomes in GST than higher-income earners do.

It is surprising to learn that GST Vouchers offset on average only half of the GST that the lowest 20% of households earn. This was not the understanding and the impression that I had when the GST Voucher scheme was launched several years ago. I thought it was meant to fully offset the GST paid by the poor.

Mrs Josephine Teo, the Senior Minister of State for Finance, told me that the GST that lower-income households pay is “more than offset” by the other benefits they receive from the Government, like childcare subsidies, financial assistance for education, Workfare, housing grants and healthcare subsidies. I feel we should not be conflating the GST Voucher scheme with other government assistance schemes for low-income households, as those schemes should exist whether or not we have the GST.

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Mr Gerald Giam Yean Song asked the Deputy Prime Minister and Minister for Finance (a) on average, what percentage of GST paid by the lowest 20% of households (by income) is offset by all forms of GST Vouchers last year; and (b) whether the Government will consider fully offsetting the GST paid by all households in the lowest quintile even in years when there are no one-off Special Payments made.

Mrs Josephine Teo (for the Deputy Prime Minister and Minister for Finance): Mdm Speaker, in 2013, for the lowest 20% of households by income, on average about half of their GST paid would have been offset by the regular GST Voucher. If we include the one-off GST Voucher Special Payment announced in Budget 2013, the benefits from the GST Voucher would have covered over 90% of their GST paid.

However, the GST Voucher scheme is not the only offset for the GST paid by lower-income households. The GST Voucher is part of a progressive system of taxes and benefits, that ensures that lower-income households get back far more benefits than the taxes they pay, including GST. These include childcare subsidies and financial assistance from school to tertiary education, Workfare, special and additional housing grants, and healthcare subsidies. The GST that they pay is hence far more than offset by the benefits they receive.

Mr Gerald Giam Yean Song (Non-Constituency Member): Madam, I thank the Senior Minister of State for the reply. I would like to clarify: what is the Government’s philosophy behind the GST Voucher Scheme? Is it meant to offset the taxes that are paid by the lower- income through GST? Or is it meant to just partially offset it? I understand the Senior Minister of State’s point that there are other vouchers and other subsidy schemes that would help to offset the cost of living, but specifically for the GST, does the Government see it necessary to fully offset the GST paid by the lower- income, in recognition of the fact that it is a regressive tax? Because that was the understanding and the impression that I had when the GST Voucher Scheme was launched.

Mrs Josephine Teo: Mdm Speaker, I thank the Member for his question. The GST Voucher Scheme is a permanent scheme. When the scheme was introduced, the idea was to ensure that even for lower- income households where they paid GST, there would be some form of permanent support for these households. But it does exist as part of a broader set of benefits that are provided to different households. And it is within this context that the GST Voucher Scheme is designed. So we look at the benefits that are provided to households holistically and provide the support where it is most meaningful to them. If I could also share and remind the Members of the House, in every Budget, the support measures that are provided to lower- income households have been strengthened in many different regards. It could be in education; it could be in childcare; it could be in healthcare; it could also be in housing. So we have to look at all of these in totality.

Source: Singapore Parliament Reports (Hansard)

Author: Gerald Giam

Gerald Giam is the Member of Parliament for Aljunied GRC. He is a member of the Workers' Party of Singapore. The opinions expressed on this page are his alone.

2 thoughts on “GST offsets for low-income households”

  1. Hi Gerald, I think you hit the nail in the right spot. When they started GST, PAP promised that the rebates will more than offset for those in the lower income group. Now Josephine is twisting and turning and hopefully people forgot what they said. The poor being affected most and this is a fact but the government don’t think so, what they try to do is to justify what they have done.
    I think it is not good enough to have just reply from the government, if you don’t like it , I hope WP members can press further and don’t let them run away with such lame excuses because at the end people suffered, they don’t care,… I know we can’t do much but think about the lower income group, this is terrible policies. I think you could have dig out their promises and make them eat their words.

  2. How many percentage of low income Singaporean and the elderly benefited from the “childcare subsidies and financial assistance from school to tertiary education, Workfare, special and additional housing grants, and healthcare subsidies” ??
    Many of the poor Singaporean have grown up children that do not requires child care centre attention, Secondly; many of the low income Singaporean are self employed or the elderly who’re no longer working to enjoy the “workfare”.
    The high cost of living and the low value of the wages given made the GST; an oppressive tax upon the poor and elderly Singaporean.

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