As countries such as Singapore and Malaysia take action to broaden their fiscal bases to support ageing populations and close budget gaps, consumption taxes are set to rise in parts of Southeast Asia in early 2024.。

Singapore will increase the Goods and Services Tax (GST) from 8% to 9% from January 1, while Malaysia will increase the Sales and Services Tax (SST) by two percentage points to 8% from March, excluding basic expenses such as food, beverages and telecommunications.。

An expanded tax base would bring in additional revenue but could dampen domestic consumption in the near term。With inflation and economic conditions still unstable, some areas such as Vietnam will postpone tax increases.。

The Monetary Authority of Singapore (MAS) said on December 26 that the country's core inflation rate "is expected to be affected by consumption tax increases and seasonal factors" in early 2024, but prices should return to an "overall slowing trend" throughout the year..5% to 3.5%。

Singapore's core inflation rate at 3.2% from last month's 3.3% decrease。However, the MAS noted that upside risks remain, such as "geopolitical conflicts and severe weather events," which could have an impact on food and energy prices.。

Local supermarket chains such as Sheng Siong and Giant announced this month that they would launch a three-to-six-month discount campaign in January to encourage customers to buy after the consumption tax hike took effect.。

Singapore's planned consumption tax hike is a hot topic in parliament this year。The first tax increase occurred in January, with the rate rising from 7% to 8%, the first since 2007.。

In August, Deputy Prime Minister and Finance Minister Wong Shyun Tsai said: "Delaying the consumption tax hike until 2024 will only accumulate more problems, and any delay will deplete the country's resources and fail to meet growing fiscal needs."。"

Steady tax increases highlight Singapore's desire to shore up revenue base amid rising healthcare costs。In the 2023 budget, the country's total spending on health care tripled from a decade ago to S $16.8 billion ($12 billion).。As of June 2023, Singapore's population aged 65 and over accounted for 19% of the total population..1%, up from 11 a decade ago.7%。

In October, neighboring Malaysia announced an increase in SST as part of a draft budget for next year, the largest proposed increase in the country's history.。

Malaysia has one of the lowest taxes in Southeast Asia, and international organizations, including the International Monetary Fund (IMF), have been urging Malaysia to increase taxes.。According to the Organization for Economic Cooperation and Development (OECD), the country's tax revenue as a share of gross domestic product (GDP) in 2021 was 11.8%, compared to 12 in Singapore.6%, 16% in Thailand.4%, 18 in the Philippines.1% in Vietnam, 18.2%。

Malaysia relies heavily on direct taxes, such as personal income tax and corporate income tax, which account for 65% of its tax revenue.。According to an October report by EY, only 26% of tax revenue comes from the GST.。

Amarjeet Singh, head of ASEAN tax at Ernst & Young, said: "As direct taxes are highly vulnerable to economic cycles, Malaysia's tax revenues are prone to fluctuations that could lead to a sharp decline during a recession.。"

Malaysian Prime Minister Anwar Ibrahim stressed that the government can only restore a sustainable fiscal position by reducing the national deficit and debt.。As a result, he said in his October budget report: "Despite the enormity of the task, reform is essential.。"

Some economists predict that the reform will have some impact on the Malaysian economy.。In a November report, Oxford Economics said: "SST hikes and other new rationalizations of tax measures and subsidies are likely to dampen private consumption and investment.。"

economic headwinds, adverse factors such as the uncertainty of external demand make some countries tend to take opposite actions。Last month, Vietnam's parliament approved a plan to extend a 2% cut in value-added tax (VAT) on specific goods until the end of June 2024 in response to a slowdown in the export-led economy.。

As stagnant exports put pressure on the economy, Vietnam temporarily lowered VAT from 10% to 8% between February and December 2022 to boost domestic consumption and production.。In January, the rate returned to 10 per cent, but fell back to 8 per cent in July.。The latest tax cut, originally scheduled to end in December, will now last until the end of June 2024.。

Due to climate risks such as El Niño or food supply disruptions, the Asian Development Bank (ADB) in December raised Southeast Asia's 2024 inflation forecast from an earlier forecast of 3.3% up to 3.5%。"Inflation has generally slowed in Southeast Asia due to weak global demand and weak oil and commodity prices, but inflation remains high in some countries," the ADB said.。"