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Workers' Party disagrees with GST hike, will object to Budget 2022: Pritam Singh

SINGAPORE: The Workers' Party (WP) will object to Budget 2022 as it disagrees with the Government's decision to raise the Goods and Services Tax (GST), party chief and Leader of the Opposition Pritam Singh told Parliament on Monday (Feb 28).

"We disagree with the decision to raise the Goods and Services Tax, especially at this time," Mr Singh said at the start of the Budget debate, adding that WP Members of Parliament will put forward alternative ideas for revenue generation.

Progress Singapore Party (PSP) Non-Constituency MP Leong Mun Wai also said his party would not support the Budget as "there is no need for the GST hike".

"Our country is in a very strong financial position, but Singaporeans need all the help they can get to overcome their current financial challenges," he said.

Finance Minister Lawrence Wong said in his Budget speech on Feb 18 that the Government will delay the hike to 2023 and stagger the increase in two steps: From 7 per cent to 8 per cent in 2023, and then to 9 per cent in 2024.

This is necessary to support Singapore’s healthcare expenditure and to take care of its elderly population, Mr Wong explained, saying that the country's "revenue needs are pressing". He added that he had considered the overall situation – the pandemic, the state of Singapore’s economy and the inflation outlook - in deciding on the timing of the hike.

The WP has consistently opposed the Government's plan to raise GST since it was first announced in Budget 2018, often pointing to a lack of clarity on long-term projected government income and spending, and suggesting that the reserves framework be adjusted instead.

Mr Singh reiterated these points on Monday, highlighting that the hike will come as "inflation is on the upswing and prices are high".

"Supply chain disruptions are having an outsized impact on people's purses. There is a real concern on the ground that the announcement to raise the GST will lead to price rises across the board," he said.

"In fact, some price rises have already occurred with speculation that these were in anticipation of a GST hike."

To cushion the impact of the GST hike, the Government will add S$640 million to the S$6 billion Assurance Package – announced in 2020 – and improve the GST Voucher (GSTV) scheme.

The enhanced Assurance Package will cover at least five years of additional GST expenses for the majority of Singaporean households, and about 10 years for lower-income households, Mr Wong said.

But should the aggregate price increases be "significant", the impact of the additional offsets might not be as optimistic as highlighted, Mr Singh said.

"In spite of the headline-grabbing GST offset package announced at this Budget, there is anxiety as to how much prices will rise in future over the period the offset package would cover," he said, adding that no offset package would last forever.

RESERVES FRAMEWORK

Mr Singh suggested that the Government tweak the way the reserves contribute to the Budget instead, repeating the party's proposal of including a portion of land sales into recurring revenue, and adjusting the Net Investment Returns Contribution (NIRC) to allow for recurring spending to be raised to 60 per cent from the current 50 per cent.

The Government has previously rejected these suggestions, with Second Minister for Finance Indranee Rajah telling Parliament in 2021 that the NIRC framework is "fair", and that land sales are not considered part of the Government's revenue and cannot be directly used for spending.

Mr Singh said on Monday that the WP remains of the mind that the Government can continue to grow the reserves, but at a slower rate.

"The impending population bulge for our seniors portends stress lines for our healthcare needs and our welfare system," he said.

"For the very Singaporeans whose energies contributed to the reserves, and who have played their part to fatten the golden goose, spending for them in their golden years and their time of need should not even be a question."

Moderating the growth of the reserves also improves intergenerational equity and accounts for the changing needs of Singapore and its people, Mr Singh said, noting that the Government has made "deliberate" moves to adjust the reserves scheme over the years.

These changes have made the NIRC component the largest source of revenue for the yearly Budget, from around S$2 billion in 2006 to close to S$22 billion for the upcoming financial year, he said.

"This is despite the fact that the Government's adjustments have slowed the rate at which the reserves grew," he added.

"Here, I ask that the Government not rule out changes to our Budget framework. Just as we should not kill the golden goose, we should also not fatten the golden goose at the expense of the people's well-being."

MP Louis Chua (WP-Sengkang) asked if the Government would disclose whether its reserves are higher or lower than five years ago after S$43 billion was drawn to combat COVID-19.

"I ask this because it is important to put into the context the growth in our reserves, as we debate the source of funding for future expenditures, even if the Government continues to be guarded over disclosing the absolute size of the reserve itself," he said.

Mr Chua said the reserves are grown through multiple avenues, including the 50 per cent of NIR not utilised, and alluded to how the investment portfolios of the Monetary Authority of Singapore, Temasek and GIC have increased over the years.

"If the goal of this Budget is to ensure a fairer revenue structure ... should we not revisit the contribution of our investment returns as opposed to the individual Singaporean who is grappling with the rising cost of living?" he asked.

PROGRESSIVE TAXES

Mr Singh also highlighted progressive tax measures as an alternative to generate revenue, saying that some of the measures announced and characterised as wealth tax had "limited impact". 

These measures include raising the personal income tax rate for top-tier earners, alongside adjustments to property taxes and an additional levy on luxury cars.

For the latter, a new additional registration fee tier will be introduced for cars at a rate of 220 per cent for the portion of open market value in excess of S$80,000.

As to how much this would curb spending on high-end cars, Mr Singh said "there's still enough wealth going around", citing a news report that quoted a luxury car dealer.

"As the Government continues to explore wealth taxes, the Workers' Party's view is that a distinction needs to be made between different types of wealth taxes," he said.

For instance, he said the legitimate accumulation of wealth through effort and tangible business activity, especially that which creates jobs for Singaporeans, should be recognised in the form of tax rebates for such individuals.

"However, wealth accumulated through capital appreciation should be dealt with differently and taxed accordingly in the name of a fairer and more inclusive society," he added.

To stave off the GST hike, MP Jamus Lim (WP-Sengkang) suggested four levers of revenue generation – derived from corporate taxes, wealth taxes, reserves contribution and externalities – that he said could generate close to the S$3.6 billion revenue expected from the GST hike.

The wealth tax lever includes using some receipts from land sales for recurrent expenditure, while the externalities lever includes increasing "sin taxes" on products like gambling, tobacco and alcohol, he said.

"We limit the increases in each of these channels to no more than 28 per cent, which is what the GST increase will entail," Assoc Professor Lim said.

Even within GST, MP He Ting Ru (WP-Sengkang) urged the Government to consider exempting certain essential items like food supplies and childcare services from the tax.

"This is what economies such as the UK, Australia and Japan currently do, and their experiences should inform us as we come up with our own list of exemptions that will be most beneficial to more vulnerable Singaporeans," she said.

The Finance Minister had announced in his Budget speech that GST will continue to be absorbed on publicly subsidised healthcare and education.

While Ms He acknowledged the argument that GST exemptions could increase compliance costs for businesses, she said this could be alleviated with the use of artificial intelligence and technological advances.

"Any upgrades to accounting or associated software should be a one-time cost for both Government and businesses," she said, noting that small businesses with turnovers of less than S$1 million are not required to register for GST.

"How can it be that a country such as Singapore, which has long prided ourselves on having targeted, efficient, even convoluted at times policymaking, could shy away from implementing a system of GST-exempt items by saying it's too much effort?"

REVENUE AND EXPENDITURE PROJECTIONS

Beyond these measures, Mr Singh repeated his call for the Government to lay out its revenue and expenditure projections for the rest of the decade.

"This is so that the necessity of a GST hike can be considered properly and with a greater introspection," he said, urging the Government to explain why it does not make such medium-term forecasting part of its public-facing budgetary process.

"Doing so will allow the public to have an in-depth insight as to the need to raise GST and the sustainability of public finances in the years to come," he said.

Nevertheless, Mr Singh welcomed the setting up of a Committee Against Profiteering, chaired by Minister of State for Trade and Industry Low Yen Ling, to address concerns that businesses could use GST as a cover to raise prices.

He also revealed that PSP NCMP Hazel Poa will sit on the committee as the sole opposition MP.

For the committee to be effective, Mr Singh said the public should be informed on the evidence they would need to file a complaint, and that the committee should recognise that some businesses may have a good reason, such as supply chain issues, to raise prices.

The committee should also look into businesses that move to raise prices before the GST hike is introduced, and closely track price rises at heartland shops where many Singaporeans purchase essentials, he said.

Mr Singh said there is "little doubt" that the GST has been put to good use by the Government to finance spending.

"But after more than two decades, its drawbacks remain," he added.

"The GST is a regressive tax that hits lower-income earners harder, and this fact has been recognised since the GST was introduced in the early 90s."

LOW-WAGE WORKERS

On other aspects of the Budget, Mr Singh urged the Government to remove the new minimum income criterion of S$500 for the expanded Workfare Income Supplement scheme.

The expanded scheme will be extended to younger workers aged 30 to 34, and have its qualifying income cap and annual payouts raised. The minimum income criterion was introduced to encourage part-timers and casual workers to take up regular, full-time work.

But Mr Singh believes the criterion will penalise part-timers and casual workers "significantly", pointing out that there could be legitimate reasons for taking up part-time work.

"Some may be caregivers who do not have the flexibility to take up full-time work. Others may not be able to stand for eight hours a day in a food and beverage setting for various reasons, including their advanced years," he said.

Citing labour force figures, Mr Singh said 46,600 residents earned less than S$500 a month last year, and that they would miss out on the expanded Workfare Income Supplement scheme because of the new criterion.

"I would urge the Minister for Finance to remove this criterion so that our most financially vulnerable workers can benefit from Workfare," he said.

PSP's Mr Leong said he will recommend a minimum living wage of S$1,800 a month in take-home pay for all Singaporean workers, working out to about S$2,250 in gross monthly wage.

While Mr Leong said this figure might appear "high", it could be "easily" be reached once schemes like Workfare, GST vouchers and the Progressive Wage Credit were added.

"Hence, instead of handing out dribs and drabs to Singaporeans, the Government could have provided a lump sum to top up the average worker's gross wage to S$2,250 per month," he said.

"A permanent monthly wage of S$2,250 will give workers more clarity in making personal financial plans for himself and for his family."

Mr Leong said the Government is sitting on "massive reserves", extrapolating from how assets under management in Singapore amounted to trillions of dollars, adding that there was "ample room" for the Government to cut down on existing spending.

"The Finance Minister has disclosed he's imposing a 3 per cent cut on existing expenditure from next year. If we can achieve that every year, we will have a saving of S$3 billion per year," he said, noting that Singapore's Budget has increased to about S$100 billion for the financial year 2022.

"Again, there is no need for the GST hike. And we can probably do more cut than 3 per cent."

Mr Wong said on Monday that he will give a "full response" on the GST and other tax changes when he delivers his round-up speech at the end of the Budget debate.

Source: CNA/hz(gs)

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