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WP disagrees with GST hike, will object to Budget 2022: Pritam Singh

SINGAPORE — Although the recently announced Goods and Services Tax (GST) increase was anticipated, the Workers’ Party (WP) disagreed that it is the best way to raise more revenue, and put forth several alternatives for the Government to consider instead. It will object to this year's Budget for this reason.

Workers' Party chief Pritam Singh (left) and Associate Professor Jamus Lim (right), fellow Member of Parliament from the party, speaking at a Budget debate on Feb 28, 2022.

Workers' Party chief Pritam Singh (left) and Associate Professor Jamus Lim (right), fellow Member of Parliament from the party, speaking at a Budget debate on Feb 28, 2022.

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  • Workers' Party chief Pritam Singh said his party objects to the planned GST increase
  • He said it comes at a difficult time for Singaporeans
  • As a result, WP would object to Budget 2022, he added
  • Other WP MPs then suggested other options to raise government revenues, without needing to increase GST
  • The party also suggested an exemption of GST on essential items to ease the burden on the lower-income group

SINGAPORE — Although the recently announced Goods and Services Tax (GST) increase was anticipated, the Workers’ Party (WP) disagreed that it is the best way to raise more revenue, and put forth several alternatives for the Government to consider instead. It will object to this year's Budget for this reason.

The party's chief Pritam Singh in Parliament on Monday (Feb 28): "The Workers’ Party notes the broad thrust of the Budget and supports the call for greater fairness, sustainability and a more inclusive society — a philosophy that comes with much promise for the future.

"However, the Workers’ Party will object to the Budget, as we disagree with the decision to raise the GST." 

Outlining his party’s position, the Leader of the Opposition said on the first day of the Budget debate that the planned hike comes at a “difficult time” for Singaporeans, given that not only is inflation on the upswing, but supply chain disruptions have also had an outsized impact on people’s purses.

“There is real concern on the ground that the announcement to raise the GST will lead to price rises across the board,” he added.

“We disagree with the decision to raise the GST, especially at this time.” 

During his Budget speech on Feb 18, Finance Minister Lawrence Wong announced that the GST will be raised progressively, rising to 8 per cent with effect from Jan 1, 2023, and going up again to 9 per cent in 2024.

There is real concern on the ground that the announcement to raise the GST will lead to price rises across the board.
Workers' Party chief Pritam Singh, the Leader of the Opposition

While all Singaporeans aged 21 and above will receive cash payouts of up to S$1,600, which will be distributed over the next five years to help them deal with the impending increase in the GST, Mr Singh said that it will not last forever.

ADJUSTING LEVERS

Taking his turn to speak, Member of Parliament (MP) Jamus Lim of Sengkang Group Representation Constituency (GRC), also of WP, said that one key reason given by the Ministry of Finance to raise the tax is that revenue needs have similarly risen, especially with regard to providing for healthcare in a rapidly ageing population.

However, the associate professor of economics questioned if raising the GST is the “ideal instrument” to tackle these challenges.

To that end, he said that the WP worked out several “levers” — namely through corporate tax, wealth tax, "sin" tax and tapping the reserves — that if implemented, could stave off the need to increase GST.

WP'S SUGGESTED ALTERNATIVES TO GST HIKE

1. CORPORATE TAX LEVER

The first lever accepts the broad premise of the Organisation for Economic Co-operation and Development-led effort to implement a global minimum corporate tax rate of 15 per cent, known as the Base Erosion and Profit Shifting (BEPS) project.

BEPS refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax.

Associate Professor Jamus Lim said that the Workers' Party (WP) also assumed a reasonable loss of corporate and personal income taxes — of 20 and 10 per cent, respectively — derived from firm relocation and associated job destruction arising from Singapore's compliance with the agreement.

This amounts to a two-thirds increase in the effective rate from current levels.

However, the party also allowed, in its simulation, for small- and medium-sized enterprises to retain their current 3 per cent effective rate.

Based on these assumptions, he said that this lever could generate S$3.45 billion a year.

Once the Government's proposed full GST hike to 9 per cent is in force, it will reportedly generate S$3.5 billion a year in revenue.

2. WEALTH TAX LEVER

The second lever deals with wealth tax, which Assoc Prof Lim said would put asset taxation at the “front and centre” of revenue generation.

Under this lever, the party adopted the Government’s present threshold of 10 years required for land leases to be classified as “permanent”— above which sales receipts must be fully channeled into reserves — and extracted the first nine years for recurrent spending, while directing the remainder into reserves.

The party also incorporated the Government’s proposed property tax changes, which are expected to generate another S$380 million.

Finally, the party also followed the net wealth tax tiers that have previously been proposed by WP to the House, to derive revenue from this channel "under very modest recovery assumptions".

All in, Assoc Prof Lim estimated that this lever could generate S$3.7 billion.

3. RESERVES CONTRIBUTION LEVER

Under the third lever, Assoc Prof Lim said that Singapore could reduce the share of reserve interest income that is sent back to reserves — now held at 50 per cent — to a “lower-but-still-respectable” 40 per cent.

“Importantly, this does not constitute a draw on the reserve stock — the level of reserves will not go down— but merely represents a reduction in the rate of accumulation of reserves.”

The opposition MP said that such a policy alone could generate S$4.31 billion a year.

4. EXTERNALITIES LEVER

The final proposed lever entailed increasing “sin” taxes, that is, those levied on gambling, alcohol, tobacco and even carbon-generating activities.

Assoc Prof Lim said that WP'’s simulation limited the increases along each channel to no more than 28 per cent, close to the rate of increase in the GST (a two percentage point increase from 7 per cent to 9 per cent is equivalent to a 28.5 per cent increase).

These added increases would generate S$3.65 billion a year in revenue.

“We have deliberately worked out the math behind these alternatives such that any single one of these levers would be sufficient to meet the revenue needs that GST would offer,” Assoc Prof Lim said.

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However, Assoc Prof Lim acknowledged that the Government, with its array of analysts and access to data and information, would be able to find fault in either some or all of the party’s suggested scenarios.

“What, then, is the purpose of this exercise? (It is) to put on the table the tantalising possibility that we can, in fact, choose not to raise GST, by adjusting some of the other levers available to us.”

Sengkang GRC MP Louis Chua also spoke of the need to examine whether the wealth taxes announced by Mr Wong “adequately capture the wealth” of Singapore’s richest.

He also noted that “corporate profitability as a whole didn’t fare too badly” last year, and there could be room for them to contribute more to the Government’s revenues.

MAKING GST LESS REGRESSIVE

Aside from their suggestions on alternatives to raising revenue, WP MPs also spoke about how to make the GST system less regressive to ease the burden on the lower-income group.

Sengkang GRC MP He Ting Ru said that the Government could consider allowing exemptions on the GST for certain essential items such as food supplies, healthcare and care services, including childcare.

This is what economies such as Australia, Japan and the United Kingdom do, and Singapore could learn from their experiences in deciding which items should be exempt and which should not.

Ms He added that GST exemptions applied to children’s products and childcare will also be a “welcome relief” for parents or prospective parents, and go towards addressing Singapore’s low total fertility rate as financial concerns are often a key reason why people delay having children or choose not to have them.

DON'T OVER-FATTEN THE GOLDEN GOOSE

On the topic of Singapore’s reserves, Mr Singh said that the nation can continue to “grow the golden goose” — a term former prime minister Goh Chok Tong used to refer to the reserves — but at a slower rate.

“While it is responsible to ensure that wastage (of the reserves) is minimised as far as possible, our healthcare needs will likely be on an upward trajectory,” Mr Singh said.

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

Mr Singh repeated his party’s past proposals to revise the reserves framework and the way it contributes to the Budget.

The party previously proposed including a portion of land sales into recurrent revenue, and also an adjustment of the net investment returns contribution allowed for recurrent spending to be raised to 60 per cent from the current 50 per cent.

“I ask this Government not to 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,” he said.

NO TO A ‘GOODIE BAG APPROACH’

Aside from WP, Mr Leong Mun Wai from the Progress Singapore Party  also objected to increasing the GST and raised some suggestions of his own.

The Non-Constituency Member of Parliament repeated his previous calls to impose a standard wage levy of S$1,200 on all Employment Pass holders who do not contribute to the Central Provident Fund social security system.

If implemented, Mr Leong estimated that the levy will raise close to S$3 billion in added revenue a year and make the GST hike unnecessary.

He added that his party is also against the “goodie bag approach” adopted by the Government to get Singaporeans to accept the GST hike.

“Handing out short-term ad-hoc goodies to Singaporeans, instead of using permanent schemes, will not produce resilient Singaporeans but dependent Singaporeans,” he said.

Instead, he recommended a minimum living wage of S$1,800 a month in take-home pay for all Singaporean workers, or S$2,250 in gross wages a month.

Mr Leong said that while this may appear high, if the Government had channelled the funds used for various schemes such as the Workfare Income Supplement, Community Development Council voucher scheme, and Progressive Wage Credit scheme, the gross wage he suggested “could be easily reached”.

“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,” Mr Leong added.

“(This) permanent monthly wage… will give workers more clarity in making personal financial plans for himself and for his family.”

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Budget 2022 WP Workers' Party GST

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