Four months before he can settle in, Singaporean Soif Noor has reportedly purchased furnishings and appliances for his future house.
He’s been on a spending binge like many locals because on January 1 Singapore’s sales tax is to be increased for the very first time in 15 years.
The sales tax will increase from 7% to 8% as of the following year on everything from foodstuffs to diamond jewels.
It will then increase to 9% in 2024, barring a severe global economic crisis, as the 5.6 million-person city-state increases money to maintain its ageing population.
Overall, by the beliefs of experts, the effect of the one percentage point tax increase may be subdued because a boost in consumer expenditure prior to the increase is expected to be countered by a subsequent decline. However, it serves as a crucial trigger for locals like Soif.
The 28-year-old engineer explained that even a tiny increase of 1% helps in the current inflationary atmosphere. Soif claimed he is saving S$250 ($185) on his transactions by making all of them prior to the price increase, which is currently being stored at retail locations.
Soif claimed that several of his male co-workers are rushing to get wedding bands after receiving advice from girlfriends that if they don’t do so, the cost will increase the next year.
The new sales tax in Singapore will be 8%, which is marginally greater than Thailand’s 7% but below Indonesia’s 11%, only about 1⁄2 the roughly 20% rate applied in several European countries, and below Japan’s 10%.
While other nations, like Thailand and Italy, have approved consumption tax exemptions to assist their residents in coping with the rising price of living crisis, Singapore has decided to continue forward with the tax rise.
The present “positive uptick” in big-ticket consumer purchases, according to OCBC economist Selena Ling, is beneficial for the retail industry but is unlikely to have a significant impact on the economy as a whole.
Residential property sales and leases are excluded from the tax, although it’s unclear how this would affect auto sales given that prices are at historic highs this year.
Ling anticipates that until the uncertainties subside, economic development would be modest in the first quarter of the following year and that consumer desire for extravagant spending will decline.
With advertisements urging customers to beat the tax on services and goods increase, clever businesses are capitalising on citizens’ “smart shopping” habits, from retail stores to furniture businesses.
Michael LeCaine, the co-founder of the jewellery store LeCaine Gems in an expensive mall next to Marina Bay, claimed he has been pressuring hesitant customers into transactions by mentioning the tax increase so they will decide right away.
According to official data, retail is doing nicely.
Sales increased by 11.2% in September when compared to the same month the previous year, and by 10.4% in October. The third quarter of 2021 saw an increase in outstanding credit card holdings of 16% year over year in Singapore, based on the statement by the central bank.
While the jewellery retailer SK Jewellery Group recorded a 25% increase year-over-year for the months from September to November, LeCaine Gems had a 15% rise in sales last month in comparison to the same month in 2021.
The positive spending is set against a backdrop of public anxiety and some dissent to the tax increase.
Supporters of the proposal argue that, in order to deal with the anticipated growth in its elderly population, Singapore must enhance state revenue. By 2030, the government predicts that 25 per cent of the population will be 65 or older.
As part of an S$8 billion “assurance package,” the government has promised to provide nearly 3 million Singaporeans with at least S$700 in payouts over five years to lessen the shock. Additionally, it has stated that if there is a significant global slump in 2019, it will review the two steps of the tax increase.
Engineer Soif will be ready to move into his new home with his wife and have peace of mind after his spree, which will take place in the meantime.
Everyone wants to finish it and put it behind them, he said.