SINGAPORE: An almost palpable sense of apprehension over possible tax hikes progressed into outright anger in some quarters on Budget day as Finance Minister Heng Swee Keat announced a Goods and Services Tax (GST) hike from 7 to 9 per cent “sometime in the period from 2021 to 2025".
GST will also be imposed on imported services from 2020.
Mr Heng’s explanation for the hike didn’t seem to convince online commenters especially since Singapore also ended 2017 with its largest Budget surplus in recent years in absolute terms - S$9.61 billion, or 2.1 per cent of the GDP.
2017’s surplus has been described as an anomaly by analysts as spending on housing, transport, education and healthcare was lower than expected, while revenue from statutory board contributions and stamp duty was higher than anticipated.
But we have seen surpluses almost every year, so accepting any tax hike is naturally challenging. How can the Government justify it, many asked.
Hence, a hongbao to possibly blunt the blow of the impending tax hike, in the form of the “SG Bonus”, didn’t seem to help. Instead, it sparked a maelstrom of online comments along the lines of “the Government will take more than it will give”.
UPHILL TASK TO JUSTIFY HIKES
Urging Singaporeans to look at the bigger picture, Mr Heng listed a range of items that will need financing in the next decade – from healthcare and education to security and infrastructure projects.
Since then, Singaporeans have asked why, for instance, the Net Investment Returns Contribution can’t be increased to finance the country’s needs, or why wealth taxes can’t be introduced instead of a hike in GST.
Singaporeans are right to question higher taxation and it is a responsible Government’s duty to explain the need for it. It has been doing so since the announcement.
Furthermore, whether Government expenditure is cost-efficient, effective and whether subsidies are disbursed equitably or whether taxation is levied fairly, will see rightful debate, as Singaporeans scrutinise long-term Government plans for spending and raising revenue.
A major issue is whether taxes are being levied equitably. The rich should be paying more, but are they? Can taxes be even more progressive? The Government also has to do more to explain the trade-offs associated with wealth taxes or capital gains taxes for instance.
It is also considering using the country's national reserves to guarantee borrowings that might be required to fund some infrastructural projects on a case-by-case basis.
But it has to show how these projects will have a positive knock-on impact on the economy and directly or indirectly benefit every Singaporean so that we are able to come to terms with the need for us to contribute.
This could go some way to address the mentality that someone else should foot the bill. Measures also need to be in place to shield the lower-income group and we’re seeing this even when it comes to cushioning this group from GST hikes.
Even as the Government defends its policies, those of us who question these hikes may also need to come to terms with the realities.
A VIRTUOUS CIRCLE IN SOCIAL AND INFRASTRUCTURAL SPENDING
If we want to enjoy subsidies, and want the needy in society to benefit from them too, we must accept that the money has to come from somewhere and those of us who can contribute, must.
A recent study by the Institute of Policy Studies (IPS) found there is little consensus among Singaporeans on how higher social spending for the elderly should be funded.
Two in five Singaporeans - or almost 40 per cent of respondents - disagreed with paying higher taxes, while about 34 per cent indicated the opposite. Some 26 per cent of respondents sat on the fence.
It’s natural for us to have misgivings about paying higher taxes considering we have to take into account our own expenses and post-retirement costs.
These concerns must be addressed.
With higher taxation, there needs to also be a virtuous circle that results in those who pay higher taxes today benefiting from them when they themselves need support.
SELF-RELIANCE VS WELFARISM
Another factor is how the official Government narrative over the years might have influenced our thinking.
In a country where social welfarism has been carefully avoided and the Government’s narrative of self-reliance in the early years has been somewhat entrenched, many Singaporeans may find themselves subconsciously begrudging taking money out of their own pockets to finance society’s needs.
Is the "every man for himself" mentality making it harder for some of us to accept this?
Perhaps people wouldn’t mind paying more if they knew that the money is going to the right places and given to people who really deserve it, and that any taxation system evolves towards greater, not less progressiveness.
In other words, ensuring that those with the greatest means do more for those with less.
This has to be increasingly shown through policy and adequately explained by the authorities.
And here, the Government has seemingly moved in that direction in this year’s Budget by raising the top marginal Buyer’s Stamp Duty from 3 to 4 per cent. This will apply to the portion of residential property value in excess of S$1 million.
In fact, a more progressive tax structure was also introduced for properties and cars in 2013.
In the immediate post-independence years, hard work and self-reliance were the tenets of social policy and the family was the first line of support.
It was in the 1990s that the downsides of meritocracy and the competitiveness that came with it were noticed. Then-Prime Minister Goh Chok Tong espoused the need for a gracious and compassionate society and has since also emphasised the need for a compassionate meritocracy.
Community organisations became better supported in order to help the needy, hence the “many helping hands” approach.
Prime Minister Lee Hsien Loong ushered in the era of working towards creating an inclusive society. More is being done to empower voluntary welfare organisations, to encourage the spirit of giving and volunteerism, and to create initiatives to empower those with lower income, for instance through work schemes that incentivises employment.
OPENING OUR MINDS TO THE BIGGER PICTURE
With this in mind, we may need to embrace a social compact that enables us to secure mutual protection when it comes to social spending beyond looking for handouts for ourselves.
No doubt, the Government needs to do its part to evolve the narrative, with the aim of strengthening confidence and trust on this issue.
While those efforts continue and we continue asking questions, we need to make an effort to address our own mindsets to search for answers beyond hongbaos for ourselves or complaining about costs.
We need to open our minds to the bigger picture and our place in this picture.
Bharati Jagdish is host of Channel NewsAsia Digital News' hard-hitting On The Record, a weekly interview with thought leaders across Singapore, and The Pulse, Channel NewsAsia’s weekly podcast that discusses the hottest issues of the week.