When the government warns us that we're soon going to pay more for something, you can bet it'll happen. Recently, PM Lee said in no uncertain terms that raising taxes is inevitable as the government's spending needs increase.
Most people grudgingly accept that, given the aging population and the need to maintain and improve our current infrastructure, more tax money must be collected. But the big question is, where is this money is going to come from?
Are the rich going to bear the burden of the tax hike, or will middle income Singaporeans get squeezed even more?
There's been a lot of speculation about where the money is coming from. Here are our top guesses.
The hot favourite candidate for the impending tax hike is the GST, as it has not been raised since 2007. The current GST rate is 7 per cent.
While some might argue that the rich spend more money on GST-chargeable goods and services than the poor, a GST hike would actually affect lower and middle income earners more. That's because a low income earner is likely to spend a larger proportion of his income on GST-chargeable goods and services than a rich person.
The government's GST vouchers are meant to address this problem, but this isn't a perfect solution. GST voucher amounts are determined according to the annual value of your home. So if you are a low income earner who happens to be living in a property with an annual value above the limit (eg. because it is owned by your parent or guardian, or because you are renting a room in one), you could get nothing.
How to deal: You are charged GST when you pay for goods and services provided by GST-registered businesses. But even businesses that are not GST-registered will hike up their prices, since their costs are likely to rise. That also means that by controlling your spending and budgeting strictly, you stand to save even more. If there are things you habitually pay for in other countries (e.g. contact lenses in Malaysia, clothes in Thailand), you could benefit even more by doing so now. The same applies to online shopping, but only if the government doesn't start taxing online purchases. Which brings us to…
Unfortunately, another likely candidate for taxes is online shopping. Right now, you're only obliged to pay GST if the value of your goods in a single shipment costs $400 and above.
But the government appears to be studying ways to tax e-commerce further. This could come in the form of blanket GST being imposed on all purchases regardless of value. But it could also come in the form of a separate tax to be applied to all goods and services being sold online to Singapore consumers.
The worst thing is that you don't need to be receiving an actual parcel in the mail to be taxed in this way. You could also be taxed on digital services like e-book downloads or mobile apps.
How to deal: The online stores which you usually patronise because their products are cheaper than local retailers' may no longer offer as good a deal. So make sure you comparison shop to check that the things you routinely buy online are still worthwhile. Making sure you at least benefit with a good online shopping credit card might become significantly more important now as well.
Singapore's income taxes are famously low. It's possible they'll go up by a bit in order to raise tax revenue, but the government will still want to keep them relatively low for fear that all the rich people will up and leave.
The real question here is which tax brackets will be affected most. It is also possible that the tax brackets themselves will be adjusted so that some people get bumped up into a higher bracket.
How to deal: It is unlikely the government will raise income tax to the point where it becomes worthwhile to work less just so you fall into a lower tax bracket. So just budget for higher annual tax expenditure if you are affected, and cut back in other spending areas to make room for it.