Only a matter of time before GST goes up: Economist
SINGAPORE — Singapore’s Goods and Services Tax (GST) is due for a revision, said CIMB economist Song Seng Wun.
“No one wants the tax to go up ... but at this point in time, we know the GST has to go up,” said Mr Song. “I think the fact that we are finally charging a bit more for water after 17 years reflects that somebody forgot it hasn’t been done yet.
“The fact is that the GST was raised 10 years ago and water tax was (raised) 17 years ago,” Mr Song said. “The GST will go up and it is a matter of time,” he added.
The need to increase revenue is part of the fiscal plan to take into account the climbing social expenditure, and every percentage-point increase in GST can bring along a healthy adjustment in total revenue, said Mr Song.
His remarks on the GST were made in response to comments about the rise in social welfare related costs, issues raised by fellow panellists Dr Chua Hak Bin, senior economist at Maybank Kim Eng and SIM University senior lecturer Walter Theseira at the Economic Society of Singapore’s Panel Discussion Forum on post Singapore Budget 2017 yesterday.
According to research from data provider CEIC, Budget 2017 and Maybank Kim Eng, social development spending is rising sharply, especially since the financial year 2012. Social expenditure includes education, healthcare and national development.
Mr Chua challenged Mr Song’s view on whether it is right to increase the GST, when it currently gives an advantage to online retailers whose sales are not GST applicable.
While acknowledging that the “online portion” should also come in, Mr Song added that Singapore can still adjust the GST while trying to tackle the cross-border issue of online sales.
“Because (the move) brings dollars and cents in a more practical way on the table for now,” Mr Song said.
The GST is a broad-based consumption tax levied on the import of goods (collected by the Singapore Customs), as well as nearly all supplies of goods and services in Singapore.
In other countries, the GST is known as the Value-Added Tax or VAT.
The rise of e-commerce has resulted in a loss of tax revenue, as overseas online retailers are generally not taxed in Singapore on their income generated from consumers here. Retail sales have also been hit, partly due to the disruption from online retail.
Finance Minister Heng Swee Keat had said in the Budget statement on Monday that with the increasing digital transactions and cross-border trade, some countries have taken steps to adjust their GST system, to ensure a level playing field between their local businesses which are GST-registered and foreign-based ones which are not. The Republic is studying how it can do likewise.
The GST was first introduced in Singapore on April 1, 1994 at 3 per cent. The GST rate was increased to 4 per cent in 2003 and to 5 per cent in 2004. The last rate increase was in 2007 at 7 per cent. Angela Teng