Singapore government is perhaps the most fortunate compared to others because it can take a harsh measure and do it openly, explain the rationale, and people and other stakeholders accept it. The government has decided to hike sales tax by one per cent, from 7 per cent to 8 per cent from the New Year.

The government had explained that this needs to be done to meet the financial commitments to the people as the ageing population – of those over 65 – is set to be a quarter of the city-state’s population. In August, Deputy Prime Minister Lawrence Wong said in response to a suggestion from the opposition to delay the hike that the delay would only increase the burden of the government.

Interestingly, Ikea, the Swedish furniture-maker, promised to absorb the one per cent hike in sales tax and not to pass it on to the customers in the beginning. For how long it would do so was not stated. The Fair Price chain of stores has promised to keep 500 items of basic use out of the raised sales tax bracket.

It is a rare gesture on the part of businesses to protect the buyers, something which cannot be expected in other markets. The reason seems to be the Singapore government keeps everyone in the loop about governance challenges.

The goods and services tax (GST), which is a single rate levied across the board from groceries to diamonds, has been raised to 9 per cent as part of the government’s preparation to face the financial burden in providing for the pensions and health care of the aged.

Singapore is also facing the problem of rise in cost of living, and the inflation rate was quite high in January and February at 5.1 per cent, and it came down to 3.2 per cent in November.

Singapore is a market economy but the government provides the cushion for the majority by providing cheaper housing, schooling and medical services, which are partly paid for by the people.  The people are willing to pay in return for the social security.

At another level, it is possible for people to maximise their earnings and the quality of life is excellent. And the quality of life comes at a higher price.

So, the city is a combination of government protection of basic services of the people while at the same time allowing markets to play their role, where differences in incomes and standards of living will differ. The question of inequality is not an issue, but the government takes care that there is no deprivation and poverty.

This is not an easy task. The ruling People’s Alliance Party, which has been in power for the 60 years plus of Singapore’s existence, has strived to make the city a haven of secure living as well as development.

There is freedom to grow and expand, and there has also been an increase in political freedom.

But the ruling party has delivered on governance, managed the budgets well enough and this can be seen in the absence of absolute poverty in the city.

And the government has taken upon itself the responsibility of providing for the people when they are old, and it continuously anticipates the future needs. The increase in taxes now is to provide the funds for 2030 and later when the government’s social care expenditure will rise because of the change in demographic pattern, where the older and retired people will be significantly higher.

Singapore is also forced to take into account as to how many people it can accommodate, and how much population it needs to keep a vibrant market economy going.