Singapore cannot rely on 'sentiment-driven' collections for expenditure needs, GST hike to go ahead: Lawrence Wong
Deputy Prime Minister and Finance Minister Lawrence Wong was responding to questions from MPs on whether the increase in tax revenue collected in FY2021/22 could help to defer the planned GST hike.
SINGAPORE: Singapore cannot rely on "sentiment-driven" collections such as stamp-duties as a stable and sustainable source of revenue to meet rising recurrent expenditure needs, said Finance Minister Lawrence Wong on Monday (Sep 12).
Speaking in Parliament, Mr Wong, who is also Deputy Prime Minister, noted that such revenues can fluctuate from year to year.
He was responding to questions from Members of Parliament on whether the increase in tax revenue that was collected in FY2021/22 could help to defer the planned Goods and Services Tax hike in 2023 and 2024.
The GST is set to rise from 7 per cent to 8 per cent in 2023, and to further increase to 9 per cent in 2024.
A total of S$60.7 billion in tax revenue was collected in FY2021/22, a 22.4 per cent jump from the previous year as the economy rebounded following the easing of COVID-19 restrictions.
The increase came on the back of a lower base in the previous year due to the pandemic, when tax revenue fell by 7.3 per cent, the Inland Revenue Authority of Singapore (IRAS) said in a news release last month.
Additionally, the increase was also driven by higher-than-expected collections of "sentiment-based" revenue, said Mr Wong. He pointed out that stamp duty collection accounted for the largest share of the tax revenue increase in FY2021/22.
"The property market has recovered at a much faster rate than many market observers had anticipated. But just as a bullish property market can provide upsides, there can also be downsides in the muted market, as past experience has shown," said Mr Wong.
"We have used the higher tax revenue in FY2021 to support new spending needs, including the enhancements to the Progressive Wage Credit scheme, as well as to provide short term relief for businesses and families. These include our COVID-19 support packages during periods of heightened restrictions last year, and measures to help Singaporeans with cost of living support this year."
HIGHER HEALTHCARE EXPENDITURES
In his reply, Mr Wong also responded to a question on whether the GST hike could be deferred on account of rising inflation.
"The Government shares Singaporeans' concerns over inflation. Over the past decade, Singaporean workers have experienced real wage growth. Wages have exceeded inflation," he said.
"We do not have real wage growth figures for 2022 yet, as the data will only be available later this year. But we know that inflation has gone up in this year and that is why the Government will continue to provide support for Singaporeans to mitigate the impact of higher prices."
Besides measures announced in this year's Budget, Mr Wong noted that the Government announced a S$1.5 billion support package in June with more support given to the lower- income and vulnerable groups.
"While we deal with these immediate cost pressures, we have also been working with employers and unions to help our companies and workers become more productive and competitive. This is important to sustain real wage growth over time," he added.
"We will also continue to uplift the wages of low wage workers by expanding the Progressive Wage Model to more sectors and to raise the wages of lower wage workers, along with enhancements to their skills and productivity."
Mr Wong noted that Singapore's growing spending needs are largely driven by higher healthcare expenditures owing to an ageing population.
The country also needs to accelerate its economic and green transformation and "shore up resilience" in essentials like food and energy amid global economic uncertainty, he added.
"We expect our government expenditure which now stands at 18 per cent of GDP to rise to 20 per cent or more of GDP by 2030. And this is why I had introduced a slate of revenue measures in Budget 2022. These will provide us with the resources we need to meet our long-term priorities in a responsible manner," he said.
"We will proceed with these measures including the GST increase as planned, but as I have assured members previously, we will also ensure that the majority of Singaporean households will not feel the impact of the GST increase for at least five years, while lower-income households will not feel the impact for about 10 years."
The Government will uphold this commitment even with the higher inflationary outlook and will further enhance the Assurance Package if necessary, Mr Wong added.
"Prudent management of our finances has been one of Singapore's strengths. It has allowed us to emerge stronger from COVID-19 and will allow us to continue to meet our collective aspirations and to seize every opportunity that comes our way," he said.
"Let us continue to steward our resources responsibly and sustainably and leave behind a stronger and more resilient Singapore for our future generations than what we had inherited from our forefathers."
Tax revenue collection, which is used to support Singapore’s economic and social programmes, grew by an average of 4.8 per cent on a compounded annual basis over a five-year period, said IRAS in its annual report on Thursday.
The collection represents 73.6 per cent of the government operating revenue and 11.4 per cent of Singapore’s gross domestic product.