Finance Minister Heng Swee Keat
Finance Minister Heng Swee Keat Reuters

Finance Minister Heng Swee Keat announced on Monday that the Singapore Government has prepared itself to raise the sales tax from 7 percent to 9 percent and that the change will not be implemented immediately but in between 2021 and 2015.

During the announcement of 2018 budget, Heng said in parliament that the Goods and Services Tax (GST) has remained at 7 percent since 2007.

According to Asia One, Heng said that the exact timing for applying the change will depend on "the state of the economy, how much our expenditures grow, and how buoyant our existing taxes are. But I expect that we will need to do so earlier rather than later in the period."

Despite prudent spending, saving and borrowing, "there is still a gap," he noted and added that the government understood that to increase social spending and to meet the requirements of Singapore's rapidly aging population, a hike in GST is required.

The minister also said that the change in the sale tax will definitely provide a boost in government revenue at almost 0.7 percent of GDP per year.

In 1994, for the first time, the country with 5.6 million population introduced the GST at 3 percent rate. In 2003 it was raised to four percent and then in 2004, it became five percent. Between 2021 and 2025, it may see another hike to touch a higher level.