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Raising the goods and services tax (GST) from the existing five percent to seven percent will mean more money for new measures in education and healthcare to help poorer Singaporeans, The Straits Times newspaper quoted him as saying.
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"It's essential for us to tilt the balance in favor of lower income Singaporeans because globalisation is going to strain our social compact," Lee told parliament Tuesday as he outlined his government's agenda for the next five years and beyond.
"That's why we are doing all this," he said, adding more details of the planned tax hike will be released when his government presents its annual budget in February.
In his speech, Lee, 54, ruled out Singapore ever adopting the generous welfare systems for which Scandinavian countries were known.
He said that system was unsuitable because the city-state's situation is different.
"We cannot follow the Scandinavian model," Lee said.
Unlike Scandinavian countries, Singapore is resource-poor and relies heavily on i