Targeted support for most needy to mediate regressive indirect tax
Singapore is the latest jurisdiction to confirm a ‘GST Voucher’ scheme, which provides targeted welfare cash payouts to compensate the most-needy for the regressive nature of consumption taxes. This is similar to other schemes in Canada and Japan, as well as Uzbekistan which offers automated discounts at the checkout.
A common criticism of VAT or GST regimes is that they are regressive – consumers pay the amount irrespective of their wealth. This is partially alleviated by reduced VAT or GST rates on essentials such as food or public transport. But this is considered economically inefficient since the tax break is awarded to all, no matter their income or wealth.
Singapore and others have therefore introduced rebate or voucher schemes. In July, over 1.5 million Singaporeans will receive S$850 (approx. €565). This will be payable to citizens receiving less than S$39,000 per annum (approx. €26,000).
The assessable income threshold for GSTV – Cash payouts will also be raised from S$34,000 to S$39,000 “as the incomes of lower- and middle-income Singaporeans have improved”, MOF said in a media release.
