GST hike shows PAP's care for present, future generations; WP should provide alternatives 'workable' in even 50 years: Chee Hong Tat

SINGAPORE — The Government’s move to raise the Goods and Services Tax (GST) reflects the "moral and social responsibility" of the ruling People’s Action Party (PAP) in caring for Singapore's population today, without taking away from future generations.

Mr Chee Hong Tat, Senior Minister of State for Finance and Transport, said this on Tuesday (Nov 22) in an article on Petir, PAP's political newsletter.

In it, he outlined "fundamental differences" between the positions of PAP and that of Workers’ Party on the GST. He called on WP to provide "workable" alternatives that not only cater to immediate needs, but also Singaporeans’ needs in 10, 20, or even 50 years.

Noting that there is "no ideal time for tax increases", Mr Chee said that the GST hike must be done at a time when the Government has the ability to do so "even if conditions are less than ideal".

The GST debate in Parliament on Nov 7 showed the difference in PAP and WP’s political values and approach towards fiscal discipline, Mr Chee added.

"Both the PAP and the WP presented impassioned arguments for and against the GST increase. The differences in political values and attitudes towards fiscal discipline between the two parties could not have been more sharply defined.

"It is important to consider these differences especially since the WP has grown in strength over the years and is now positioning itself as the government-in-waiting," he wrote.

“For the PAP, a vote for the GST increase is to accept our moral and social responsibility of caring for our ageing population today, without taking away resources from or borrowing against future generations,” Mr Chee said.

"For the WP, they ought to be providing policy alternatives that are workable in practice and cater not only for our immediate needs but also Singaporeans’ needs in 10, 20, or even 50 years. And they must explain clearly to Singaporeans the details of their proposals and the associated trade-offs."

WHAT WAS SAID DURING GST DEBATE

GST is set to increase from 7 per cent to 8 per cent come Jan 1, 2023, and to 9 per cent from Jan 1, 2024, after Parliament passed the GST (Amendment) Bill after a five-hour debate on Nov 7.

Opposition party members present at the debate, as well as Non-Constituency Members of Parliament Leong Mun Wai and Hazel Poa from the Progress Singapore Party, recorded their dissent against the Bill and voted against it.

WP's Members of Parliament had argued during the debate for the GST increase to be delayed, saying that inflation is driving up the cost of living.

Associate Professor Jamus Lim, for instance, suggested adopting a multi-rate GST system and temporarily exempting essential goods and services from the GST increase altogether, noting that such items have been subjected to the highest price volatility in recent months.

WP had also proposed a reduction in the share of reserve interest income that goes back to the reserves — now held at 50 per cent — to a “lower-but-still-respectable” 40 per cent, and the usage of proceeds from land sales to fund current spending.

Mr Chee said: “Both measures mean using more from the reserves, and leave behind less for future generations.”

He added that maintaining the current 50-50 ratio on spending investment returns from the Net Investment Returns Contribution (NIRC) “strikes a fair and necessary balance between the needs of today and tomorrow, and between current and future generations”.

The NIRC framework allows the Government to spend up to 50 per cent of the net investment returns on net assets invested by Singapore's sovereign wealth fund GIC, the Monetary Authority of Singapore and state investment firm Temasek Holdings — the three entities that manage and invest Singapore's reserves — and up to 50 per cent of the net investment income derived from past reserves from the remaining assets.

“The PAP government believes that we should spend within our means — if expenditure increases, so must tax revenue,” Mr Chee said.

“We also believe that every generation must do its part to safeguard Singapore’s hard-earned reserves, to ensure it can continue to generate resources for the future and to provide a rainy-day fund for subsequent future generations to tackle any emergencies.

“The WP believes that we should avoid unpopular broad-based taxes like the GST and fund our higher expenditure by taking more from the reserves, thereby leaving future generations of Singaporeans with less money and a weakened financial position.” 

Mr Chee also referred to the support measures rolled out by the Government such as the assurance package, which has been enhanced to S$8 billion to help cushion the impact of the GST increase for most Singaporean households.

Finance Minister Lawrence Wong already announced more than S$3.5 billion of support measures to help Singaporeans cope with higher inflation this year, with more assistance for lower- and middle-income families and retirees, Mr Chee said.

He added: "If earlier generations of Singaporeans had done what the WP proposed and spent more of our reserves and investment returns in previous years, we will have less reserves and NIRC today. 

"This means we would then have to increase taxes even further to fund our current and future spending needs. We would not be looking at an increase in GST from 7 per cent to 9 per cent, but a bigger increase to 11 per cent or perhaps even 13 per cent to fund our higher expenditures."