SINGAPORE: The Government will take steps to strengthen its revenue position like raising the Goods and Services Tax (GST), but it will “carefully monitor” the timing of such moves by considering the state of the economy and spending needs, said Deputy Prime Minister Heng Swee Keat on Friday (Aug 28).
Mr Heng, who is also Finance Minister, was outlining how the Ministry of Finance (MOF) aims to maintain “a sound and sustainable fiscal system” in the ministry’s addendum to President Halimah Yacob’s Address.
After using “a generation’s worth of savings” – equivalent to over 20 years of past Budget surpluses – to combat the COVID-19 pandemic and its economic repercussions, Singapore must ensure its fiscal balance is put back on a stable path when the economy recovers, Mr Heng said.
However, a challenging economic environment lies ahead, the minister added.
"COVID-19 will give rise to new spending priorities, even as we spend more to support our families with their healthcare and pre-school needs, and keep them safe."
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At the same time, slower global growth in the aftermath of the pandemic and sharper international competition over tax revenues will pose greater pressure on Singapore's revenues.
Mr Heng said the Government will take steps to strengthen its revenue position and will do so "in a way that fosters collective responsibility, with each generation contributing its fair share".
This is why it plans to raise the GST to fund growing healthcare and social spending needs, while making responsible use of borrowing to finance infrastructure investments, he added.
"We will carefully monitor the timing of such moves, including the state of the economy and our spending needs," Mr Heng said.
READ: Budget 2018: GST in Singapore to be raised to 9% between 2021 and 2025
Mr Heng first flagged the need for GST to be raised from 7 to 9 per cent in Budget 2018, and had said then that the increase will take place sometime between 2021 and 2025.
During the first Budget in February this year, he announced that the GST hike will not take place in 2021.
Among other priorities, Mr Heng said his ministry will continue to "steward the reserves well" to prepare the country for future shocks and crises, and to "invest them for long-term returns that will be shared equitably between present and future generations".
URGENCY OF ECONOMIC TRANSFORMATION
The Government has rolled out successive major fiscal packages so far to buffer workers and businesses from the economic impact of the coronavirus outbreak, but Mr Heng said it will not be sustainable to continue this level of support indefinitely.
Beyond immediate relief, the pandemic has raised the urgency of economic transformation.
"We must help businesses and workers adapt and grow in an economy profoundly reshaped by COVID-19," he said.
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The Government is hence accelerating its innovation and digitalisation push across each of its 23 Industry Transformation Maps, growing its base of innovative enterprises and pursuing new frontiers of growth by investing in research across various fields, said the minister.
It is also forging stronger connections to major innovation nodes and key demand markets through trade facilitation and digital economy agreements, platforms like the Global Innovation Alliance, as well as by pressing on with major investments in the country's sea port and airport, Mr Heng added.
Initiatives such as the S$2 billion SGUnited Jobs and Skills Package will also help to build an adaptable and skilled workforce that can take on quality jobs and power the economic transformation, he said.
STRENGTHENING SOCIAL COMPACT
Mr Heng said policies are also being reviewed and enhanced to build a "fair and just society".
"A strong society is our stabiliser in an ever more uncertain and volatile world," he said.
"We will redouble efforts to strengthen our social compact, and build a united Singapore."
MOF will deploy resources to "maintain social mobility and opportunities for all at each stage of life", he added.
This includes doubling the annual spending on pre-school education from 2018's S$1 billion to S$2 billion within the next few years, as well as building up "an industry-relevant skills ecosystem" that will enable Singaporeans in the workforce to upgrade themselves.
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Support for low-wage workers, vulnerable seniors and households with greater caregiving burdens will also be strengthened.
"This continues the shifts that we have progressively made over the years to strengthen social security, through schemes like Workfare and Silver Support, and enhancements to pre-school, education, and healthcare subsidies," said Mr Heng.
"We will continue to support affordable and quality education, healthcare, and housing for the broad base of Singaporeans, particularly the lower- and middle-income segments. These investments build human and social capital."