Queues in Singapore before raising sales tax
2022.12.28 00:28
Queues in Singapore before raising sales tax
Budrigannews.com – Four months before he can move in, Singaporean Soif Noor has already purchased appliances and furniture for his new home. Due to the fact that Singapore’s sales tax will increase for the first time in 15 years on January 1, he has been spending like many locals.
The sales tax on everything from diamond rings to groceries will increase to 8% beginning next year. It will then rise to 9% in 2024, assuming there isn’t a significant global economic downturn, as the city state of 5.6 million people raises revenue to support its aging population.
Economists believe that the one percentage point tax increase may have little effect overall, with consumer spending likely to rise before and fall after the increase. However, it serves as a significant trigger for residents like Soif.
The 28-year-old engineer told Reuters, “A 1% increase may be small, but any savings help in this inflationary environment.” Soif said he saved S$250 ($185) on his purchases, which are now stored at retailers’ facilities. He bought everything now before the hike.
“Propose now – if not it will be more expensive next year,” Soif said of some of his male colleagues who are rushing to purchase engagement rings.
Singapore’s new sales tax will be slightly higher than Thailand’s 7% but lower than Indonesia’s 11%. It will also be lower than Japan’s 10% and less than half the roughly 20% rate in many European nations.
Despite Thailand and Italy’s approval of consumption tax breaks to assist citizens in coping with the crisis caused by the rising cost of living, Singapore’s decision to proceed with the tax increase comes at the same time.
According to OCBC economist Selena Ling, the retail sector is benefiting from the current “positive bump” in big-ticket consumer purchases, but the impact on the economy as a whole is likely to be minimal. The tax does not apply to the sale or lease of residential property; however, the effect on car sales, with prices at all-time highs this year, is still unknown.
“Less consumer appetite for excessive spending in the near term until the uncertainties abate,” according to Ling, predicts that the economy will expand slowly in the first quarter of the coming year.
Smart retailers are taking advantage of residents’ “smart shopping” mode by running advertisements encouraging customers to “Beat the goods and services tax hike!”
Michael LeCaine, co-founder of the jewelry store LeCaine Gems in an upscale mall near Marina Bay, claimed that he has been persuading non-committal customers to make purchases by bringing up the tax increase so that they will “make a decision there and then.”
Sales increased 10.4% year-over-year in October after rising 11.2% in September compared to the previous month. The central bank reported that outstanding credit card balances increased by 16% year-over-year in the third quarter of 2021 in Singapore.
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When compared to the same month in 2021, LeCaine Gems saw sales rise by 15%, while SK Jewellery Group, a jewelry chain, saw sales rise by 25% year-over-year from September to November.
The population’s concern and some opposition to the tax increase contrast with the upbeat spending.
However, proponents of the move contend that Singapore must increase state revenue to meet the anticipated increase in its aging population. By 2030, the government projects that 25% of the population will be over the age of 65.
As part of an “assurance package” worth S$8 billion, the government has promised to provide nearly 3 million Singaporeans with at least S$700 in cash payments over five years to cushion the blow. It has also stated that, in the event of a significant global recession next year, it would reconsider the second step of the tax increase.
In the interim, engineer Soif’s rampant behavior will set him up to move into his new residence with his wife and provide him with peace of mind.
