Govt has to make good case for GST hike and ensure lower-income given support: PM Lee

PUTRAJAYA – Raising taxes is never an easy thing to do, Prime Minister Lee Hsien Loong acknowledged on Saturday (May 19) as he stressed that the Government would continue to make a good argument for an impending two percentage points hike in the Goods and Services Tax (GST) while ensuring that lower-income households are given adequate support to cushion the impact.

“You have to work very hard to make sure you have a very good case to be able to explain to voters why you're doing this, what you're using the money for and to persuade them that you know what you're doing and they can trust you,“ Mr Lee told the Singapore media after meeting Malaysian Prime Minister Dr Mahathir Mohamad and his designated successor Anwar Ibrahim in Putrajaya.

Mr Lee was asked whether Singapore's plans to raise the GST, some time between 2021 and 2025, would be affected by recent developments in Malaysia, where the introduction of the consumption tax three years ago became a hot button issue in the recent May 9 election.

Some analysts have suggested that unhappiness over the GST was one of the key reasons why disgruntled Malaysian voters turned away in droves from the Barisan Nasional (BN) coalition, which had governed Malaysia for six decades. The Dr Mahathir-led Pakatan Harapan (PH) alliance, which won the election, had campaigned aggressively on abolishing Malaysia's 6 per cent GST.

The Malaysian finance ministry announced on Wednesday (May 16) that the country's GST would be be set at zero per cent from June 1. Economists and credit-ratings companies like Moody's Investors Service have warned the move would cut government income and widen the budget deficit if not offset by other revenue-raising measures.

While reiterating that it is "never a light matter" to raise taxes, Mr Lee pointed out on Saturday that "each case is different, the circumstances in every country is different".

In a wide-ranging speech in Parliament on Wednesday, Mr Lee said that Malaysians had rejected the economic arguments for the GST as they had linked the tax with other complaints against the government of former Prime Minister Najib Razak.

"Does that mean no government should ever raise taxes? Alas that is not the real world. From time to time the country will need to spend more – on healthcare, on defence, on education, or something else – and if revenues are not enough, it will have no choice but to raise taxes," Mr Lee told Parliament.

For Singapore, the Government had announced during this year's Budget that the country’s GST will go up by two percentage points, from the current 7 per cent to 9 per cent sometime between 2021 and 2025, to fund long-term infrastructure and support the needs of the ageing population.

Expenditure in healthcare is projected to go up by about S$3.6 billion in the next decade to provide for an ageing population and the rising prevalence of chronic conditions. Preschool spending is expected to double in the next five years to S$1.7 billion anually, by 2022. With the heightened terrorism threat, the Republic will also invest more in security.

Finance Minister Heng Swee Keat had explained that raising taxes was “the responsible way” to fund spending for Singapore's recurring needs year in year out. The move to announce the GST hike well in advance also reflected the Government’s “honest and upfront” approach towards meeting the country’s long term needs, he added.

Mr Lee further pointed out on Saturday that it was imperative that the tax hike be implemented smoothly and fairly, with an eye to giving help to the needy and lower income who would be "most hurt" by the changes.

Noting that the Government has given “a lot of notice” on the impending GST hike, Mr Lee added: “I think there's time to explain, and there's time to work out how exactly we will make sure that Singaporeans are given the right support in order to be able to live with a new tax.

"It's something which we are taking very seriously indeed.”