No need for GST hike, other options available: Pritam Singh

SINGAPORE — The impending hike in the Goods and Services Tax (GST) is unnecessary, with other options such as a wealth tax and more progressive corporate tax policies available, said Workers' Party chief Pritam Singh in Parliament on Monday (28 February).

"While the GST hike was anticipated, it comes at a difficult time for our people," said Singh, citing rising inflation, supply chain disruptions, and rising prices. "What continues to weigh heavily on Singaporeans today is the rising cost of living, including for the middle-income or sandwiched class."

Noting that 2021 saw cost increases in electricity, gas and transport, the Leader of the Opposition added that the drawbacks of the GST remain more than two decades after it was first introduced in Singapore. "The GST is a regressive tax that hits lower-income earners harder."

Speaking during the debate on Budget 2022, Singh noted, "We have supported the call for fiscal prudence as a principle of governance. But we also believe that the judicious use of progressive tax measures can achieve wider societal goals in Singapore."

Four years in the making

GST was introduced in 1994 as part of a shift from direct taxes to indirect ones to boost Singapore's international competitiveness. It was first raised from 3 per cent to 5 per cent over 2003 and 2004 – by one percentage point at a time – and then to 7 per cent in 2007.

In his Budget speech on 18 February, Finance Minister Lawrence Wong announced that GST will be raised from next year, and it will be staggered out in two steps: from 7 to 8 per cent on 1 January 2023, and from 8 to 9 per cent on 1 January 2024.

The GST hike was first announced by Wong's predecessor, Deputy Prime Minister Heng Swee Keat, in 2018. The increase was held off last year as Singapore grappled with the COVID-19 pandemic. Prime Minister Lee Hsien Loong indicated in his 2022 New Year message that the government would have to "start moving" on the hike as the economy emerges from the pandemic.

To cushion the impact of the GST hike, Wong announced an additional top up of $640 million to the $6 billion Assurance Package announced by Heng in Budget 2020.

The Assurance Package unveiled by Heng provided all adult Singaporeans with cash payouts of between $700 and $1,600 over five years, so most households will get enough to offset at least five years' worth of additional GST expenses.

But Singh warned the House on Monday, "As Singaporeans well know, no offset package lasts forever. The government expects that in time, Singaporeans will internalise the GST hike."

He called on the government to lay out its revenue and expenditure projections for the rest of the decade, so that the necessity of a GST hike can be considered properly and with greater introspection. "We note the government has resisted the publication of such revenue and expenditure projections. Publication of such information is not unusual in other jurisdictions."

Different types of wealth taxes needed

While the WP has proposed a wealth tax, the Aljunied Member of Parliament stressed that a distinction needs to be made between different types of wealth taxes.

The legitimate accumulation of wealth through effort and tangible business activity, especially that which creates jobs for Singaporeans, should be recognised. "Even as there remains scope for wealth taxes, the values of entrepreneurship and equitable reward for hard work can nonetheless be recognised and even promoted through tax rebates or reliefs for such individuals."

Conversely, wealth accumulated through capital appreciation should be dealt with differently and taxed accordingly in the name of a fairer and more inclusive society.

Reserves framework must change

Singh also pointed to previous WP proposals to tweak the reserves framework and the way the reserves contributed to the Budget, such as including a portion of land sales into recurrent revenue, and an adjustment of the Net Investment Returns Contribution (NIRC) allowed for recurrent spending to be raised to 60 per cent from the current 50 per cent. "The government has disagreed with these reasonable suggestions."

He also alluded to then-Prime Minister Goh Chok Tong's 2001 description of the reserves as a golden goose. "The Workers’ Party remains of the mind that we can continue to grow the golden goose, but at a slower rate."

Pointing to Singapore's ageing population, Singh noted Wong's remarks that starting from current levels of healthcare spending and assuming increases at a similar rate in the next 10 years, the government could be spending $27 billion on healthcare yearly by 2030 compared to $11.3 billion in 2019.

"For the very Singaporeans whose energies contributed to the reserves and who played their part to fatten the golden goose, spending for them in their golden years, and at their time of need should not even be a question," said Singh.

"Here, I ask this government not to rule out changes to our Budget framework. Just as we should not kill the golden goose, we should also not fatten the golden goose at the expense of the people’s well-being."

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