SINGAPORE — The Government has not decided on the exact time to raise the Goods and Services Tax (GST), Finance Minister Heng Swee Keat said in a wrap-up of the Budget debate on Thursday (Feb 28).

Responding to Member of Parliament (MP) Foo Mee Har’s request on Tuesday to delay the impending GST hike, Mr Heng said that the Government will exercise care on when it will take place, by monitoring “prevailing economic conditions, trends in expenditure and buoyancy of Singapore’s revenues carefully”.

During the Budget statement last year, Mr Heng announced that the Government would increase GST from the 7 per cent now to 9 per cent sometime between 2021 and 2025.

Ms Foo, MP for West Coast Group Representation Constituency (GRC) suggested that there may be room to postpone the “unpopular” GST hike for “as long as possible”, as the current term of government has accumulated a sizable amount of surplus from previous financial years (FYs) that could be a buffer in an economic downturn.

Including the estimated budget deficits for FY 2019, this term of government would have accumulated a surplus of about S$15 billion.

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Mr Heng said that the decision to raise GST was not “made lightly”.

The Government had to distinguish between “one-off factors” and underlying structural increases in healthcare spending, pre-school education and security, he added.

Such healthcare spending is of a completely different scale and nature from the cohort-based package set aside for the Merdeka Generation or the Pioneer Generation, he said.

“As our population ages, spending on permanent healthcare schemes and other parts of the healthcare system will continue to increase structurally. Funding this requires a structural increase in our operating revenues.

“In other words, the base of our healthcare spending is rising.”

There is thus a need to raise primary revenue to address growing fiscal burdens without going into debt.

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The GST hike is expected to increase revenue amounting to about 0.7 percentage points of Singapore’s gross domestic product, Mr Heng said.

He addressed several questions from MPs as well on how the Government will utilise the surpluses.

VOLATILE SOURCES OF REVENUE

Forecasting is an inherently difficult exercise, he noted.

Some sources of revenue, such as stamp duties, can be volatile as it depends on sentiment-driven markets.

There can also be unexpected cuts or increases in expenditure. For example, the suspension of the Kuala Lumpur-Singapore High Speed Rail reduced the total expenditure for FY 2018.

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Unexpected surpluses are also not because of the inclusion of state investment firm Temasek Holdings into the Net Investment Returns Contribution (NIRC) framework, but because of volatilities and uncertainties in financial markets.

The NIRC refers to the investment returns from the country’s reserves.

There was a one-off “exceptional contribution” from the Monetary Authority of Singapore, thanks to higher investment returns from recovering global markets in FY 2017, for example.

Mr Heng said that Singapore’s actual revenue and expenditure figures have generally deviated from its original estimates by about 4 per cent, which is reasonable and respectable by international standards.

He acknowledged that there is room for improvement in this area though.

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As for the surpluses that Singapore has accrued, they can provide support for businesses and individuals who may need help to tide over an economic downturn.

However, Mr Heng said that “we should not have the mentality of trying to spend everything that we have, before the end of each term of government”.

Instead, financial resources should only be deployed “where necessary”.