Political risk in announcing GST hike? Govt has to do ‘the right thing’, finance minister says

SINGAPORE — Despite the political costs of announcing before the next General Election that the Goods and Services Tax (GST) will be raised, Finance Minister Heng Swee Keat stressed on Wednesday (Feb 21) that the Government’s ruling People’s Action Party (PAP) must have the courage to do “the right thing” and “not make narrow personal calculations”.

Speaking to reporters after a televised Budget forum, Mr Heng was asked whether delaying the hike until after 2021 meant that the PAP is making good its promise that revenues need not be raised during this term of government. He replied: “I think that is a correct statement.”

Mr Heng also said that the 2-percentage-point hike is “appropriate” based on present projections, though he assured the public that the Government will redo its sums if the economic conditions are not ideal during the period of 2021 to 2025 when the GST hike is slated to kick in.

Some political observers said that the PAP is taking a political risk by announcing the GST increase before the upcoming General Election — which must be called by January 2021.

Asked whether he is concerned that opposition parties might use it against the PAP, Mr Heng said: “I believe that those of us in a position of responsibility must act responsibly. And, therefore, the way to act responsibly is that when we know that this is the right thing to do, we must have the courage to do it and not make narrow personal calculations. I think it’s very important that we do the right thing because that’s how we can serve Singaporeans better.”

In recent elections, the PAP has repeatedly dismissed claims that it will soon raise GST after it was voted into power.

Leading up to the General Election in 2011, Prime Minister Lee Hsien Loong quashed claims that there would be a GST hike should the PAP win the polls. In 2015, Deputy Prime Minister Tharman Shanmugaratnam, who was also then Finance Minister, said that the Government had taken measures to cater to the increased spending till 2020.

Most recently at the PAP Convention last November, Mr Lee said that there is enough revenue to last this current term of Government.

Pointing out that the message has been consistent throughout the years, Mr Heng said: “When we do our projections, both for revenue and our expenditure needs, the assessment that was made earlier remains correct. If it was the wrong assessment, we are prepared to say so but it is not.

“It is a correct assessment that we’re in a good position at least till 2020. But beyond that, we know there are so many new areas of expenditure… and therefore it would be irresponsible if I do not state this clearly and plainly.”

When pressed on the type of economic conditions that are needed to trigger the GST hike, Mr Heng said: “I hope the economy will continue to grow. If we are in a deep recession or there’s a global financial crisis again, then we will have to redo our sums to see what else we may need to do.

“Going by our current projections, we think we are likely to proceed some time within that frame.”

Earlier, during Channel NewsAsia’s one-hour Ask the Finance Minister programme, Mr Heng was fielding questions from five Singaporeans who are of different age groups and economic backgrounds.

Some of the issues raised included whether workers’ wages would be enough to tide them over the impending GST increase, how to ensure childcare costs remain affordable, and what are the measures available to help people in the “sandwich generation” who have obligations to both young children and aging parents.

Wrapping up the programme, Mr Heng noted that the Budget is not just an “accounting exercise” but “very much an exercise in looking at how do we allocate resources properly to secure the long-term future of Singapore”.