Budget 2020: Opposition parties welcome putting off GST hike, but question its necessity

SINGAPORE — Not raising the Goods and Services Tax (GST) until after 2021 is a welcome move but the planned tax hike is not needed in the first place, three opposition parties said in response to the Budget statement by Deputy Prime Minister Heng Swee Keat.

Mr Heng, who is also Finance Minister, had announced on Tuesday (Feb 18) that the planned GST increase from 7 per cent to 9 per cent will not happen in 2021, but will still take place by 2025.

In separate statements on Wednesday, the Singapore Democratic Party (SDP), the Singapore People’s Party (SPP) and the Progress Singapore Party (PSP) lauded certain parts of Mr Heng’s speech and did not pan the Budget 2020 measures in its entirety, though the planned GST hike was a common topic raised by the three parties. 

In response to TODAY, SPP chairman Jose Raymond said it is “undeniable” that Budget 2020 is “very generous, with practically something for everyone”. 

“The support appears comprehensive, and the devil will be in the details when revealed during the Committee of Supply debates. Given the current circumstances surrounding the economic fallout from Covid-19, it makes sense that there is greater expenditure by the Government, to keep companies afloat, and to protect jobs and livelihoods," he said.

“Overall, the Government has appeared to provide a very comprehensive Budget which looks after the needs of most if not all. As such, it is also important for us to say ‘thank you’.”

However, Mr Raymond maintained that the GST hike is “a sore issue of public concern”.

“There has also been no discussion or indication whether there will be any further increase in GST beyond 9 per cent, and this needs to be discussed or raised so that there is absolute clarity over the elephant in the room.”

In a video posted on SDP’s YouTube channel, party member and entrepreneur Alfred Tan railed at the Government to “stop the GST hype”, stating that it will be foolish to raise the GST in the near future when the Covid-19 outbreak is expected to be global and far reaching.

“We are disappointed that the Government is sticking to plans to raise the GST… This is a concern because the economic impact on Singapore is not going to last just a few months,” Mr Tan said, making note of the “financial burden” of a higher GST on the average consumer.

He criticised the GST Voucher scheme, arguing that the state collects more than S$11 billion in GST revenue but that the GST Voucher Fund, which was set up in 2012, pays out around S$800 million a year.

Mr Heng said in his Budget speech that when the GST is raised, the permanent GST Voucher scheme will also be enhanced. 

In the more immediate term, in response to the Covid-19 outbreak, there will be a one-off cash payout to all Singaporeans above 21 of between S$100 and S$300, depending on income. The Government will also double the amount of Utilities-Save (U-Save) rebates, which help Housing and Development Board households with part of their utilities bills — with larger households that have five or more members getting extra.

SDP chairman Paul Tambyah said in the video of these measures: “Unfortunately, the Budget is full of little tweaks and complex schemes, but short of bold moves to address the challenges that face all Singaporeans.”

Dr Tambyah said he had hoped that the Budget would address the concerns of the country’s citizens who are professionals, managers, executives and technicians (PMETs).

He argued that the GST is highly regressive and “makes the poor pay a far higher proportion of their income in taxes than the wealthy”.

At an Institute of Policy Studies event last month, Mr Heng had responded to Dr Tambyah who, as a member of the audience, criticised the GST and asked if the Government had considered alternatives to raising revenue.

Replying that the GST “may look regressive but it is not”, Mr Heng said: “What we collect in GST has also to be seen against other taxes and also against spending. And in fact, we have deliberately been careful in designing policy so that the tax system benefits those who need help the most.”

In the SDP video, Dr Tambyah said that deferring the hike for at least a year meant that it could occur in 2022, right after the next General Election. The election must be called by April 2021.

Mr Tan of SDP urged the Government to adopt a retrenchment insurance scheme that would pay a retrenched person 75 per cent of his last drawn salary for the first six months, 50 per cent for the next six months and 25 per cent for another six months.

'GST INCREASE NOT NECESSARY'

In a statement, the PSP acknowledged that the Government has “listened to reasonable voices” in deferring the increase. However, it argued that since the Government is able to delay the increase in the midst of economic difficulties caused by Covid-19, it means that raising GST was not necessary in the first place.

The party that was founded by Dr Tan Cheng Bock, a former parliamentarian of the ruling People’s Action Party, said: “(The Government) is now able to postpone the increase in GST despite the economic difficulties and in addition, disburse S$6.4 billion in support packages, without resorting to draw down from reserves. This showed that the increase in GST is actually not necessary.”

The S$6.4 billion packages refer to the Budget 2020 measures to mitigate the impact of the Covid-19 outbreak, and comprises a S$4 billion special package for workers and businesses, a S$1.6 billion package for households, and another S$800 million for frontline agencies dealing with the crisis.

PSP said that a more sizable Budget should be allocated to households to cope with the outbreak beyond the S$1.6 billion package. It proposed more relief to cover the loss of income for Singaporeans in this period.

PSP's assistant secretary-general Leong Mun Wai said: “We propose another S$1 billion to S$2 billion to be allocated to households to cope with Covid-19 crises and economic slowdown.” 

TODAY has reached out to other opposition parties, including The Workers’ Party, for comment.