Day 2 of Budget debate 2022: MPs discuss supporting low and middle-income households, inclusive workforce
SINGAPORE: Members of Parliament (MPs) discussed issues involving low and middle-income households, creating an inclusive workforce, and ensuring a just transition for petrochemical workers on the second day of the Budget 2022 debate on Tuesday (Mar 1).
In particular, they spoke on how to better support low and middle-income households amid rising costs and the impending Goods and Services Tax (GST) hike, protecting platform workers from exploitation, and scaling up promising sustainability projects to attract carbon credit financing.
They also stressed the importance of ensuring a just transition for petrochemical workers, as Singapore pushes ahead with its plans to decarbonise and reach net-zero by or around mid-century.
Meanwhile, tax changes continued to be actively debated, with some MPs calling for more progressive property taxes and more details on tax computations.
A total of 36 MPs spoke on the second day of the Budget debate, which lasted about nine hours.
CHANGES TO TAX SYSTEM
Opposition MPs continued to object to the GST increase, while People’s Action Party (PAP) MPs supported a delay in implementing the GST and the move to raise 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.
This is a “bad time” to raise GST, as Singapore does not need the revenue now, said Progress Singapore Party’s Hazel Poa (NCMP).
“Singaporeans are concerned about the rising cost of living. Additional worries are on the horizon over the inflation outlook,” she added.
Although the rebates given out now is more than the expected amount of GST to be collected, “it is only a matter of time” before most Singaporeans have to pay more in GST, said Ms Poa.
“It is therefore time to review our previous approach of raising GST to cut corporate and personal income taxes. Income taxes are progressive, while GST is regressive. The pandemic has also worsened inequality by hitting the poor more than the rich,” she added.
In light of new tax developments and the current environment, Singapore should reverse its earlier moves, and look at raising corporate and personal income taxes instead of raising GST for additional revenue, said the PSP representative.
MPs across the board agreed with the decision to increase personal income tax.
The PSP is “happy to note” that the personal income tax rate for the highest tax brackets will be raised, said Ms Poa.
“But we believe there is room for more,” she added.
“And while our corporate tax rate is 17 per cent, there are tax incentives that lower the effective tax rate of many companies. Even if you were to raise our corporate tax rate to 20 per cent, it would still be low compared to the region.”
Mr Murali Pillai (PAP-Bukit Batok) supported the decision to require those with more to contribute more tax to fund social programmes, but stressed that Singapore’s fiscal discipline must also continue.
“If you don’t, and just continue to fund social expenditure for the less fortunate through major increases in tax for the wealthy, then I’m afraid the social compact will ironically weaken,” he said, adding that an “us-against-them” mentality could develop.
Noting calls from private property owners for Government support, Mr Pillai stressed that with the current landed property prices, these people can afford their own expenses through “readily available” reverse mortgages.
This will allow them to live comfortably in their homes until they die - the house will be sold after that and the proceeds will be applied against the loans extended by the bank, he added.
“It’s not easy to make these arguments to people who feel strongly about their properties. But we must, on behalf of a society, where more than 90 per cent live in flats,” said Mr Pillai.
“At some point in time, as our social spending increases, we all have to make hard decisions on whom we should support through social assistance so that we can keep public spending lean, and only be given to those who truly need it, while we focus on making our safety trampoline springier.”
Dr Lim Wee Kiak (PAP-Sembawang) also questioned whether Singapore’s tax system should be more progressive, and whether the Government can take a “closer look” at property tax, especially on high-end properties like Good Class Bungalows.
With recent record transaction prices of good class bungalows, Dr Lim noted that Singapore’s property tax is based on the annual value of the property, which is computed based on its imputed rental value.
Comparing the land area of a good class bungalow with a more densely populated condominium, the property tax levied on a good class bungalow is “comparatively low”, said Dr Lim.
“The expanse of land for a condominium includes many facilities and carparks, but the density is much higher, even for HDB blocks. They could be paying much more property tax per square foot than the GCB.”
INCLUSIVE WORKFORCE AND SUPPORT FOR WORKERS
Speaking on the measures rolled out for workers in the Budget, MPs also called for support for disadvantaged workers, and stressed the importance of inclusive growth.
Singapore can do more to support lower-wage workers, and it is important to ensure that productivity improves so that wage growth is sustainable, said Mr Sharael Taha (PAP-Pasir Ris-Punggol).
“How can we encourage and support SMEs to transform their businesses so that lower-wage workers can be deployed more productively, with more scope for progression? How can we get business associations to support more SMEs?” he asked.
To encourage lower-wage workers to upskill and upgrade, Mr Sharael suggested the Government consider a yearly workfare income supplement bonus for lower-wage workers who utilise their Skillsfuture credits or attend training and courses.
Platform workers also need assistance to meet their needs, and get “baseline coverage” for work injuries, he noted.
These workers have “limited bargaining power” and “fight hard” to earn a sustaining wage if they do not work full time, said MP Don Wee (PAP-Chua Chu Kang).
“It is time for us to review their work conditions and consider if we should amend legislation to require platform companies to treat the full-time platform workers as employees, as well as to allow them to form unions to protect their rights, including fair and timely payment,” he added.
“Presently they are prone to exploitation and have very little say on how much they get paid - they are price takers,” said Mr Wee.
“In order to make a decent living, which includes incentive pay, which comes with completing certain assigned jobs, they have to work long hours to reach their target wages.”
Inclusive growth should also create opportunities for seniors, workers with special needs and those with caregiving responsibilities, said Mr Sharael.
With the increasing prevalence of flexible work arrangements, he suggested the Government consider promoting flexible work hours and work-sharing to create opportunities for these individuals.
“Can we create second careers for our seniors who are still able to work but do not want to work full-time?” he asked.
SUPPORTING MIDDLE-INCOME HOUSEHOLDS
Turning to the impact of rising costs and the impending GST hike on households, several MPs called for more support for the “sandwiched” class, referring to lower-middle-income households who do not qualify for the support schemes meant for those with a low income.
During his budget speech, Mr Wong unveiled a S$560 million household support package to provide support for daily essentials as well as an additional top-up of S$640 million to the $6 billion Assurance Package to cushion the impact of the planned GST increase.
Workers’ Party MP Dennis Tan (WP-Hougang) noted that while assistance packages will be provided to cushion the impact of the proposed GST increases, the Assurance package will only be available for a few years.
Mr Tan said that the GST increase will eventually be a burden on the middle class as it would increase their cost of living. Being a “sandwiched” class, this may be something they can much less afford as compared to higher income groups above them, he said.
The Government should pay attention to Singaporeans in their 30s to 50s, of which the majority are paying for necessities not just for themselves but also their parents and children, said Mr Tan.
In addition, while government healthcare expenditure will be increased significantly, healthcare costs paid by citizens will also increase as a result of the GST hike, said the Hougang SMC representative.
“Can the Government assure Singaporeans that the hike in GST will not mean that Singaporeans are going to pay more in their out-of-pocket healthcare costs?” Mr Tan asked.
To help middle-income households cope with the rising cost of living, nominated MP Abdul Samad Abdul Wahab proposed for the assessable income threshold to be raised further.
Mr Wong had previously announced that the assessable income threshold for the GST voucher scheme would be increased from S$28,000 to S$34,000 to cover more Singaporeans.
“Let us also not forget the group of lower-middle-income workers, who are earning slightly more than low-income individuals, but their families are also struggling with increasing daily expenses,” said Mr Samad.
“Yet they are losing access to government support schemes as they have just fallen short slightly of the income criteria of these support schemes.”
Mr Samad also asked if the government could review the income criteria of various support schemes such as Kindergarten, Student Care, and Childcare Subsidies, CPF Housing Grants, in tandem with the income of workers.
This will help to prevent the “cliff effect”, which refers to the sudden and often unexpected decrease in public benefits that can occur with a small increase in earnings, and better support lower-middle-income families, he said.
Meanwhile, MP Mariam Jaafar (PAP-Sembawang) suggested implementing a permanent growth dividend that is tied to GDP growth or budget surplus, with different payouts based on wealth or income. Part of this will be in cash, while the rest can be in CPF, she said.
Explaining her rationale, she said this will give Singaporeans an additional stake in the nation’s economic progress, “reinforcing that (Singaporeans) win and lose as a team”.
ENSURING A ‘JUST’ TRANSITION
MPs also expressed support for the revised carbon tax rates, which will be increased progressively to reach a rate of S$50 to S$80 per tonne of emissions by 2030.
First announced in this year’s budget, the revised tax trajectory will help Singapore to meet its new target of reaching net-zero “by or around mid-century”, aligning its goals with the Glasgow Climate Pact.
With the tax rate currently only applied on facilities that directly emit at least 25,000 tCO2e of greenhouse gas (GHG) emissions per year, Workers’ Party MP Dennis Tan (WP-Hougang) asked if it would be extended to those who emit less than this to enhance Singapore’s efforts towards a net-zero ambition.
As the country moves away from fossil fuels to cleaner energy, he stressed the need for a “just” transition within the petrochemicals industry so as to “not leave anyone behind”.
He asked for more details on how the Government intends to manage the green transition in Singapore’s petrochemicals industry, and whether it will continue to attract and keep parts of the industry in Singapore that are relevant for the green economy.
Citing figures provided by the Ministry of Trade and Industry in its previous parliamentary replies, Mr Tan noted that the number of people employed by the energy & chemicals industry had decreased from 28,000 in 2017 to 27,000 in 2020.
Any growing resistance in Singapore against the oil and gas industry may mean a talent pipeline disruption in this strategic pillar, he added.
“While we build for the economy of tomorrow, the reality is that if we take away the manpower and capital in the petrochemical industry abruptly, we will cut the oxygen prematurely at a time when our green ambitions have only just begun,” he said.
“And there is still a need for some petrochemicals in the modern green economy, as some petrochemicals can be found in modern solar panels, modern wind turbines, and batteries, to name but a few,” he added.
Other MPs suggested doing more to help businesses and households to embrace sustainability.
Mr Pillai said the government could partner local entrepreneurial firms that have promising sustainability projects but lack the scale necessary to attract carbon credit financing.
During his budget speech, Mr Wong announced that businesses will be able to use high-quality international carbon credits to offset up to 5 per cent of their taxable emissions from 2024.
To help smaller businesses undertake larger-scale projects to reduce carbon emissions that can be financed through carbon credits, Mr Pillai said the government or statutory boards could partner them in the provision of services such as waste-to-energy plants to power lamp posts in business parks.
“With established track records, these Singapore businesses would be able to establish good branding and reputation as leaders in this field,” he said.
“Through this we would have developed a value proposition for Singaporean businesses and allow them an opportunity to participate in the international carbon credit value-chain,” he added.
Meanwhile, MP Gerald Giam (WP-Aljunied) renewed his call for a national hydrogen strategy and roadmap to spur the creation of a hydrogen economy in Singapore.
“This will set Singapore on a path towards being a global player in the hydrogen industry and benefit Singaporean workers,” he said.
On reducing the excessive use of plastic disposables, he suggested requiring large supermarkets to offer a discount as an incentive for not using plastic bags, instead of implementing a bag charge which the National Environment Agency (NEA) is currently mulling over.