Workers' Party post arguing against GST hike is 'inaccurate and misleading': Indranee

SINGAPORE – A recent social media post by the Workers’ Party (WP) suggesting there was no need to raise the goods and services tax (GST) because of the Government’s cash surpluses is inaccurate and misleading, said Second Minister for Finance Indranee Rajah in Parliament on Monday (April 5).

The bulk of the Government’s cash surpluses comes from land sales proceeds, she told the House. “Such cash proceeds do not create additional revenues for the Government, and are therefore not a valid reason for holding off the GST increase.”

She noted that proceeds from land sales are not considered part of the Government’s revenue, and cannot be directly used for spending.

Instead, the proceeds are invested, and part of the investment income is used to support the spending needs of Singaporeans via the Net Investment Returns Contribution (NIRC) – the largest single source of government revenue and supporting about one-fifth of spending needs, she said in response to Mr Liang Eng Hwa (Bukit Panjang).

Ms Indranee was referring to a WP Facebook post on March 19 that said the Government’s reported deficit figures do not account for the “significant cash surpluses” it had accumulated.

The post said that the “reported deficit” for 2021 was $11 billion, but the “actual deficit” – based on “expected receipts and expenditure” – was $3.5 billion. “Is the additional burden of increasing GST truly necessary given our actual fiscal position?” it said.

Mr Liang had asked whether the Government’s published cash surpluses indicate it has more fiscal space than stated in its budget statements, and if this reduces the need for the planned increase in GST rate.

The planned GST increase will take place between next year and 2025, but sooner rather than later and subject to the economic outlook, Deputy Prime Minister Heng Swee Keat had said in his Budget speech in February.

Mr Louis Chua (Sengkang GRC) asked whether the raising of a regressive tax such as the GST was the best option to raise revenue, and if other options could be explored, such as revisiting the NIRC framework.

In response, Ms Indranee noted that what the WP post was “really saying is that the Government is not setting out the correct fiscal position”.

She added: “The Government has set out the correct fiscal position. We do expect this year a deficit of $11 billion and we have explained why.”

Ms Indranee noted that the Government is “badly constrained” and had to dip into Singapore’s reserves because of Covid-19.

“We are squeezed on the corporate tax front. Because of the economic situation, we’re going to have a scenario where even your personal income tax is going to be affected. So GST is one of the options that we have,” she said.

The Government knows that lower- and middle-income households will be affected by the eventual hike, which is why it has set aside a $6 billion Assurance Package to buffer the majority of Singaporeans for five years against the increase, and the lower-income for 10 years, she added.

As for the NIRC framework, she said that spending 50 per cent for today’s generation and another 50 per cent for tomorrow’s generation was a fair one, even though there was no magic to the formula.

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Mr Chua then reiterated that the GST should be reconsidered because “while the Assurance Package could offset the impact of the increase of 2 per cent for a number of years… this is going to stick with them basically for the rest of their lives”.

He also pressed the issue of revisiting the NIRC framework, noting that this has been updated several times since it was introduced.

Ms Indranee replied: “We all know that things are not set in stone always. But we also know that when it comes to a matter of public policy and when you have frameworks, especially frameworks for expenditure, you cannot just chop and change every other year.”

She added that the permanent GST Voucher Scheme will also be enhanced when the GST rate is raised, to provide a permanent cushion for lower- and middle-income households even after the temporary support ends.

There is also time for incomes to rise over five or 10 years, she said.

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“So it’s been thought through very carefully, understanding there is an impact on the middle- and lower-income (households), but we have taken the steps to ameliorate that.

“But this still brings me back to the point I started off with, which is that it is not correct to suggest that because we have a certain amount of cash surpluses… our fiscal position is better than we have stated, or that we do not need to raise GST.”

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