SINGAPORE: The Government’s rationale behind hiking the Goods and Services Tax (GST) to 9 per cent in a few years' time found support among most Members of Parliament (MPs) who spoke on the first day of Budget debates in Parliament.
However, there were calls to review if all avenues have been explored before imposing the tax hike.
In the wide-ranging debate on Tuesday (Feb 27), the MPs who spoke on the issue of the GST hike covered topics like expanding the scope of GST for e-commerce, reviewing gambling and liquor taxes and imposing a cap on future GST hikes.
MP for West Coast GRC Foo Mee Har called this year’s Budget a "bitter-sweet" one. Amid news that the country’s economy grew at a faster-than-expected pace and last year’s Budget had a healthy S$9.6 billion surplus, Finance Minister Heng Swee Keat had also prescribed the "bitter pill of a GST hike" to cater for an expected rise in spending due to an ageing population and infrastructure developments, she explained in her speech.
Mr Heng had announced the 2-percentage-point hike on Feb 19 but did not set a firm date for its implementation, saying it will be between 2021 and 2025 depending on the state of the economy, how much expenditures grow and how buoyant existing taxes will be.
CEILING ON FUTURE GST HIKES?
But Ms Foo said the recovering Singapore and world economies, and the shift in global economic weight towards Asia represent “significant opportunities for our firms and people". If Singapore's economy continues to outperform forecasts, generating recurring Budget surplusses, the Government should review the need for a GST rate hike, she suggested.
She pointed to the imposition of GST on imported services as a "significant step" in broadening the Government's tax revenue streams and suggested expanding the scope of GST to cover the rapidly growing e-commerce market as an example of other possible streams of revenue.
The MP also suggested reviewing the taxes on liquor and gambling. “By bringing Singapore’s low gambling tax rates of 5 to 15 per cent closer in line with Macau’s rate of 39 per cent and Australia’s rate of up to 45 per cent in some states, the authorities can collect much of the S$3 billion intended to be drawn from a 2-percentage-point GST hike," she said.
She also proposed other measures such as introducing a sugar tax in the light of growing concerns over diabetes.
People’s Action Party (PAP) MP Chong Kee Hiong, spoke up on the GST hike too, asking if the Government will hold off increasing the GST increase beyond the stated time window if Singapore’s future economic performance is better than expected.
Mr Chong, who is MP for Bishan-Toa Payoh GRC, also wanted to know under what circumstances would the Government use other combinations of income instruments to replace the tax contribution from the GST increase and whether there is a need to set a ceiling on future hikes as it cannot keep increasing GST.
Meanwhile, Nominated MP Thomas Chua pointed out that some smaller retailers, particularly those from the northern part of Singapore, are concerned that following the GST hike, more consumers would head across the Causeway to shop for daily necessities. These retailers believe this is "very likely to happen" as the Singapore-Johor Rapid Transit System Link will start operating in 2024, he added.
"With the further ease of travelling, more convenient customs clearance, easier conveyance of goods and the strength of the Singapore dollar vis-a-vis the Malaysian ringgit, the lure across the Causeway would only grow greater," Mr Chua said.
The Workers' Party was "unable to support the announcement of a GST hike" presently, said its assistant secretary-general Pritam Singh. Mr Singh added that the party's stand was due to the absence of details on projected revenue from additional taxes like the GST on imported services, as well as a "lack of information" on whether there is scope for the country’s financial reserves to "better support" Singaporeans.
PREVENTING ILLEGAL PROFITEERING
Some MPs also raised concerns about profiteering after the GST increase and suggested the Government set up a committee to prevent this from happening.
"In previous years when GST was increased, a Committee Against Profiteering was set up to combat any illegal profiteering due to GST increase," said MP for Mountbatten SMC Lim Biow Chuan. "Would there be a similar committee set up before the GST increase is implemented?"
Nee Soon GRC MP Lee Bee Wah made a similar point, noting that when it was announced that prices of water would be increased, some businesses took the opportunity to raise prices even before the raise kicked in.
"Residents understand the need for the Government to raise GST," she said. "However, they worry about businesses profiteering by raising prices excessively, and in some cases, in advance."
"I hope the Government can look into a taskforce to ensure commercial entities do not use the GST increase as an excuse to exploit consumers."
The Budget debate will continue on Wednesday.