2% GST hike may come in one-off adjustment: PM Lee
By Dominique Loh, Channel NewsAsia | Posted: 24 January 2007 2127 hrs

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SINGAPORE: Prime Minister Lee Hsien Loong has indicated that the 2 percentage point hike in the Goods and Services Tax will likely come in a one-off adjustment, and the government is also seriously looking at increasing the employer's contribution to the Central Provident Fund.

He was speaking to a gathering of union leaders and government officials, and employers in a tripartite forum on Wednesday.

There were several issues this gathering had in mind for the Prime Minister, such as the impending GST hike.

Some are hoping the increase will be staggered over time to cushion the impact, but Mr Lee thinks otherwise.

"Is it better to take your medicine sooner or stretch it out? Take medicine once or two times? I prefer to make my medicine early, why? This is something we need to do, once we have done it, we can move on; we have the resources to have the revenue from the GST that we use, for all the things we want, further investments, etc. If I stretch it out, my revenues come in slower, that means I cannot do all the things I need to now," said Mr Lee.

A smaller hike could also mean less money for the offset package, which is meant to help cushion the impact on the needy.

When asked about using the CPF as a tool to adjust wages when the economy turns, Mr Lee explained that there was less hesitation to cut the employer's contribution after the Asian Financial Crisis, because the 20 percent rate provided a large buffer.

Employers and employees was able to adjust accordingly.

Mr Lee added: "When I put the CPF at 33 percent, that buffer is a lot less - it's going to be a much higher hurdle to persuade me that it is necessary to cut the CPF now. If there is a world recession - if China crashes, India crashes, the Americans crashes - I would have no choice but otherwise my buffer is lower. I ought to treat the CPF more as a structural piece of people's salaries - with that mind set that myself and MOM is looking at adjusting the CPF now. "

Mr Lee says the government is also mindful about keeping CPF rates within range for Singapore to be competitive.

It is also working on a qualifying criteria for the workfare bonus, especially if it is going to be a permanent feature.

The inaugural forum was aimed at maintaining, and expanding the good tripartite relations in Singapore. - CNA/dt/ch