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Day 1 of Budget debate 2022: MPs raise issues related to GST, cost of living and sustainability

Day 1 of Budget debate 2022: MPs raise issues related to GST, cost of living and sustainability

People wearing face masks cross the road in Tampines in Singapore on Feb 25, 2022. (Photo: CNA/Gaya Chandramohan)

SINGAPORE: Taxes and rising costs were key topics on the first day of the Budget debate in Parliament, as Members of Parliament rose to air their views on the Budget statement delivered on Feb 18.

Tax changes, especially the proposed Goods and Services Tax (GST) hike and wealth taxes, were actively debated on Monday (Feb 28), with opposition MPs objecting strongly to the GST increase.

Many MPs also raised concerns about the rising cost of living, and the manpower constraints and costs faced by businesses.

Carbon taxes and sustainability were also on the agenda of numerous MPs. A total of 25 MPs spoke on the first day of the Budget debate, which lasted about seven hours.

GOODS & SERVICES TAX

People’s Action Party (PAP) MPs who spoke supported a delay in implementing the GST and the move to increase it in two steps.

Finance Minister Lawrence Wong had said in his Budget speech that the GST would be raised from 7 per cent to 8 per cent in 2023, and then to 9 per cent in 2024, although it had been widely anticipated that the tax could go up by mid-2022.
 

Said Ms Foo Mee Har (PAP-West Coast): “This move by the Finance Minister brought some relief to concerns amidst rising prices. We all know that it would have been more expedient for the Government to effect the total increase in one go and the earlier the better … but we appreciate the sensitivity shown to delay it and to do it in two separate steps.”

Some PAP MPs also suggested ways for the public sector to trim public expenditure and manage rising costs.

"As we rethink our nation’s taxation structure, it is equally sensible to be prudent in our use of funds and resources as well. This involves creative solutioning to problems ... working with existing resources and infrastructures instead of investing in new ones," said Ms Cheryl Chan (PAP-East Coast).

But opposition MPs said that they would not support the Budget statement because they were opposed to the GST hike.

Leader of the Opposition and Workers’ Party (WP) secretary-general Pritam Singh made clear that he thought the rise was unnecessary, and voiced doubts on whether the Assurance Package and subsidies announced would be sufficient to offset the rise in costs.

He also disagreed with the timing of the rise as it “comes at a difficult time for our people”. 

Non-Constituency MP Leong Mun Wai (Progress Singapore Party) started his speech by saying he would not support the Budget because of the GST hike. 

He said the Government can cut public spending and had sufficient resources to cover rising healthcare costs, which was the reason given for the GST increase.

“The virtue of frugality is preached by the Finance Minister, who is telling cash-strapped Singaporeans to tighten their belts again while the Government is sitting on massive reserves and under-utilised revenues,” he said.

He also said that middle-class Singaporeans would bear the brunt of the burden of the GST.

But Mr Saktiandi Supaat (PAP-Bishan-Toa Payoh) challenged this. He said that more than 60 per cent of net GST collected from households and individuals was estimated to be from the well-off, foreigners living in Singapore and tourists.

Mr Saktiandi also pointed out that Mr Leong’s estimate of the tax burden on the middle-class did not take into account transfers that would cushion the impact of the GST on Singapore households.

He, too, spoke up for middle-class Singaporeans, saying that while subsidies do help, Singapore should grow the wages of middle-income workers to cope with the rising costs of living in a “sustained manner”.

He suggested raising the salaries of COVID-19 frontline workers and placing more focus on reskilling workers who face structural unemployment.

WEALTH TAXES

While MPs welcomed wealth taxes on higher-end properties and luxury cars, some thought more could be done to narrow inequality.

A number of PAP MPs highlighted that this year’s Budget is a shift in the social compact, with Mr Saktiandi praising the Government for “walking the talk” on addressing inequality. But he also asked that the Government look at reinstating estate duty.

But Mr Louis Chua (WP-Sengkang), one of several MPs who said the announced measures fell short of expectation, called the taxes “tokenism”.

He raised the possibility of a net wealth tax, particular in countries - such as Singapore - where neither capital gains nor inheritances are taxed.

MPs also sought to allay fears of capital flight. 

Mr Liang Eng Hwa (PAP - Bukit Panjang) said Singapore possessed advantages other than low taxes or costs, highlighting its status as a “triple A-rated global hub” with excellent infrastructure, and a strong and stable government.

“We are rated among the best place to live in the world,” he said.

"We are a nation that is always passionate about excelling ourselves and constantly charting ahead and investing for a better future. This is the Singapore premium.”

MOVING TO A GREEN ECONOMY, DIVERSIFYING ENERGY MIX

On the issue of carbon taxes - which will go up from the current rate of S$5 per tonne of emissions to between S$50 and S$80 by 2030 - Ms Poh Li San (PAP-Sembawang) said this phased increase would help businesses to transition gradually to greener practices.

But she noted that there had been “little mention of grants for developing talents needed to support the green economy”.

With many countries “fighting for talents” to support their sustainability-related industries, she said Singapore should start positioning itself as a “serious regional green hub” in order to attract these talents.

It is also time to invest more in the training and nurturing of a new generation of innovators and engineers for the sustainability sector, she added.

On the issuance of around S$35 billion of green bonds by 2030 to fund public sector green infrastructure projects, Mr Edward Chia (PAP-Holland-Bukit Timah) asked for more details about these projects, in particular the opportunities that local businesses can be involved in so as to build necessary capabilities.

Mr Tan Wu Meng (PAP-Jurong) said Singapore can explore hydrogen and nuclear power as it looks to diversify its energy sources. 

In a speech focused on energy security amid the climate crisis, he mooted the idea of Singapore’s potential as a hydrogen hub and suggested starting up hydrogen-based electricity generation and fuel-cell capability.

Singapore should also keep a close watch on developments in nuclear energy, both fission and fusion, he added.

EASING LABOUR CRUNCH, HELPING LOW-WAGE WORKERS

MPs also addressed the ongoing labour crunch faced by both small and big firms.

With the pandemic already exacerbating manpower shortages, planned increases to the minimum salaries of new Employment Pass (EP) and S Pass applicants will hurt businesses, said Ms Foo.

It was announced in Budget 2022 that the minimum qualifying salary for new EP applicants will go up to $5,000, from the current $4,500, in September this year. For the financial services sector, where the salaries are higher, the bar will be raised to S$5,500 from the current S$5,000.

Meanwhile, the minimum qualifying salary for new S Pass applicants will go up to S$3,000 from the current S$2,500. In the financial services sector, a higher minimum qualifying salary of S$3,500 will also be introduced.

“With the tight labour market, employers shared that the S$500 dollar increase in work pass qualifying salaries will likely translate to ‘forced’ salary increases for their foreign workforce, as there are few alternatives in the foreseeable future,” Ms Foo said.

The use of salary thresholds, she added, is “a blunt instrument” that does not take into account skills requirements and gaps in the market. Higher work pass thresholds have also “triggered international firms to review the sustainability of their operations in Singapore”, she told the House.

A “points system”, which considers a range of non-salary factors for the approval of work passes, will help to make the system more transparent and economical, Ms Foo suggested.

Mr Saktiandi said he welcomed the rise in minimum qualifying salaries, but wondered if the Government would consider a further differentiation of sectors beyond just financial services.

This is because different sectors have vastly different salary scales, as well as needs for foreign labour and expertise. A single uniform qualifying salary may also penalise sectors that Singaporeans are less interested to work in, he added.

Nominated MP Janet Ang also asked the Government to consider sector-differentiation when adjusting foreign worker policies, at least for the foreseeable short to medium term.

She noted that some sectors, especially construction and food and beverage, were “very concerned” about the newly announced change, given how they have had little success in hiring more Singaporeans over the past two years.

On support for low-wage workers, Ms Jessica Tan (PAP-East Coast) asked if authorities could review the introduction of a minimum income criterion for the Workfare Income Supplement scheme.

The scheme – which supports workers whose earnings are in the bottom 20 per cent via cash payments and Central Provident Fund top-ups – was expanded to support more people and with higher payouts in Budget 2022.

A minimum income criterion of S$500 per month was also introduced, to nudge part-timers and casual workers to take up regular, full-time work. 

But this new criterion, which kicks in next year, will affect older low-wage workers, or those who are caregivers and need the flexibility of part-time work, said Ms Tan.

She cited the example of a resident currently working as a relief programme coordinator at an eldercare centre. With monthly income ranging from S$200 to just over S$500, the resident in her late 60s is concerned that she will not be eligible for the Workfare scheme moving forward, Ms Tan told the House.

WP’s Mr Singh also proposed that the Government remove this newly announced minimum income criterion, as it would penalise those with legitimate reasons for not taking up regular, full-time work and who are often the most financially vulnerable.

Source: CNA/hm(ac)
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