GST hike not the only option considered for raising revenue: Indranee

GST hike not the only option considered for raising revenue: Indranee

Indranee on KOM
Senior Minister of State for Finance and Law, Indranee Rajah, responding to questions in Parliament. 

SINGAPORE: The increase in goods and services tax (GST) was not the only option considered for raising revenue, but it is the most sustainable source of income over the long-term, said Senior Minister of State for Finance and Law Indranee Rajah.

“There are a few other things we have explored as well … But GST is the one that will give you, over the long term, a sustained revenue of sufficient amount that will take care of our expenditure needs, for healthcare, infrastructure, security and education,” Ms Indranee said on Tuesday (Feb 20) on 938NOW’s Talkback call-in programme.

Calling the changes that Singapore faces “unprecedented”, Ms Indranee highlighted the country’s greying demographic, saying that “the number of people who are getting older, in the next five to 15 years, is not something that Singapore has seen before”.

“So, the need to spend more is going to jump. And that is the reason why we have to look at the GST. Because what you really want is long-term sustainable revenue. Cutting expenditure will help, and that is something we must do and have done. But in and of itself, it will not take care of the increased expenditure that we will need,” she added.

Ms Indranee acknowledged the impact of the GST on low-income groups, but she also explained to a caller why it was not feasible to exempt some basic goods and services from the tax.

“Let's just take rice, for example. Rice is eaten by not only the low income, but also the high income. So if let's say we exempt rice, then you're also exempting the high income from paying GST on rice. And then, do you say you'll have GST only on white rice and not on brown rice? How about organic rice? So, firstly, it's going to be very difficult to administer. But if you say you'll exempt all rice, actually, given that the higher income are the ones who can afford to buy more, they are likely to benefit more,” she said.

Another listener asked if the government would consider bringing back the estate duty - or taxes collected on wealth inherited after an individual’s death - which was abolished in February 2008.

“As Deputy Prime Minister Tharman Shanmugaratnam explained in Parliament (at that time), it's the middle income who are more affected by it. The ones who are wealthier are able to do their estate and tax planning and figure out how to get round the worst of it,” Ms Indranee said.

Ms Indranee added that the government also decided against having a wealth tax, because it wants Singapore to be a place for wealth management.

“That creates employment in the financial industry. So, it's a balance. We have decided against having the wealth tax, and I don't think we'll be changing that, at least not at this stage,” she said.

A luxury tax was another form of wealth tax that the finance ministry had considered, but eventually decided not to adopt, partly because it would not have brought in enough revenue.

“There are only so many handbags you can buy, only so many watches you can buy, only so many people who can afford those. So, you wouldn't be able to get the kind of revenue that you do need to support healthcare, infrastructure, security, education,” she said.

“The second thing is that it's also going to impact the retailers here, retailing those luxury goods … We decided at the end of the day, it's not going to bring in a huge amount of revenue that would do what we needed to do, and that's the reason why we have not put it in,” she added.

When asked why the government decided to give out the SG Bonus, considering the projected increased expenditures in the near term, Ms Indranee said that it was because of the government’s commitment to share part of the surplus from this financial year’s Budget.

Finance Minister Heng Swee Keat announced during his Budget speech on Monday that all Singaporeans aged 21 and above this year will get a one-off SG Bonus of up to S$300 each.

This comes after Singapore’s revised Budget position for FY2017 showed a surplus of S$9.61 billion, helped by exceptional contributions from Statutory Boards and higher-than-expected Stamp Duty.

The SG Bonus will cost the government S$700 million. 

“The surplus was more than expected, about S$9.6 billion in total … We've set aside S$5 billion for infrastructure, and put that into the Rail Fund. Another S$2 billion, we've set aside for ElderShield ... Then, we’ve got extra, we must share. We must share it with Singaporeans, and that's part of our commitment as the government,” Ms Indranee said.

Source: CNA/aj