The sales tax on everything from groceries to diamond rings will go up from 7 per cent to 8 per cent from next year. Image Courtesy: Reuters
Singapore: Singapore residents are making a beeline for malls to make last-minute purchases as the country prepares to hike its sales tax for the first time in 15 years from 1 January.
The sales tax on everything from groceries to diamond rings will go up from 7 per cent to 8 per cent, according to a Reuters report.
Barring a sharp global economic downturn next year, it will then rise to 9 per cent in 2024 as the city state of 5.6 million people raises revenue to support its ageing population, the report added.
Overall, economists say the impact of the one percentage point tax hike may be muted, with a consumer spending surge before the rise likely to be offset by a drop afterwards.
“A 1 per cent increment may be small, but any savings help in this inflationary environment,” the report quoted 28-year-old engineer Soif Noor, who has been on a shopping spree, as saying.
Noor has already bought furniture and appliances for his new home, four months before he can move in.
Soif said by buying everything before the hike, he’s saving S$250 ($185) on his purchases, now in storage at retailers’ facilities.
At 8 per cent, Singapore’s new sales tax will be slightly higher than Thailand’s 7 per cent but lower than Indonesia’s 11 per cent, less than half the roughly 20 per cent rate imposed in many countries in Europe, and below Japan’s 10 per cent.
While some nations, such as Thailand and Italy, have authorised consumption tax reductions to aid citizens in coping with the crisis of skyrocketing living costs, Singapore has chosen to press forward with the tax rise.
The current “positive bump” in big-ticket consumer purchases was good for the retail sector, but the impact on the overall economy is likely to be muted, OCBC economist Selena Ling told Reuters.
While the impact on car sales is still unknown given that prices are at record high this year, residential real estate sales and leases are not subject to the tax.
Ling expects economic growth in the first quarter of next year to be slow with “less consumer appetite for excessive spending in the near term until the uncertainties abate”.
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