Budget debate: Govt must be mad to hike GST if alternatives are really so straightforward, says MP Xie Yao Quan

The GST hike is expected to net an additional $3.66 billion in revenue. PHOTO: ST FILE

SINGAPORE - Raising the goods and services tax is the fairest way for Singapore to fund its growing needs in areas such as healthcare, said PAP backbencher Xie Yao Quan (Jurong GRC) on Tuesday (March 1).

Defending the necessity for a tax hike, he added: "If the alternatives are really so straightforward, this Government must be mad to want to press on with GST. I think Singaporeans understand, deep down, that all options have been fully considered, and raising GST is necessary."

The GST hike, details of which were announced during this year's Budget, is expected to net an additional $3.66 billion in revenue.

But the Workers' Party has pushed back against this proposal.

During the first day of debate on Budget 2022 on Monday, its MPs Jamus Lim (Sengkang GRC) and Louis Chua (Sengkang GRC) rose to put forth alternative methods of generating the required funds.

These include getting businesses to pay more corporate tax, implementing higher wealth taxes, reducing the share of reserve interest income that is returned to the country's reserves and increasing "sin" taxes.

Addressing these proposals in his speech, Mr Xie said people should recognise that the Government has already moved to increase property and personal income taxes in this year's Budget.

He also defended the current Net Investment Returns framework, which allows the Government to spend up to 50 per cent of the expected long-term investment returns generated by Temasek, sovereign wealth fund GIC and the Monetary Authority of Singapore.

This formula is "just right" because it allows Singaporeans today to leave something for future generations, he said.

In fact, raising the GST rate should actually be a lever of first resort, Mr Xie added.

This is because redistribution takes place, with government transfers ensuring that a large proportion of GST is paid by foreigners, tourists and locals who spend more.

"All of them contribute to most of the GST. We then take some of this, to return to most other Singaporeans a portion - if not all - of the GST they pay."

What remains is then spent on healthcare for all Singaporeans, said Mr Xie, who is head of healthcare redesign at Alexandra Hospital.

Mr Xie also observed that the GST rate applies to all, sending the signal that everyone is "in this together".

This is in line with Singapore's efforts to renew and strengthen its social compact - a topic that has emerged as a key theme in this year's Budget, he said.

Renewing the social compact should not be about getting only those with more to contribute, Mr Xie stressed.

"It cannot be about: What can you give to me? Because all of us, we are in this together. So, while those with more will contribute even more in future, we must be careful not to take it to the extreme."

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The GST issue should not be seen as a "convenient scapegoat" to explain why prices are rising, as such prices are affected by many other factors, he said.

"We can address both GST and rising prices with separate, appropriate measures. And this is what this Budget has done."

Mr Xie also stressed that discourse on the topic should be based on facts and be rooted in Singapore's local context, with any examples of other countries "thoughtfully analysed and interpreted".

"Above all, I hope our discourse ahead will seek to elevate us collectively, to an ever more mature, more inclusive democracy," he said.

Workers' Party MP Leon Perera (Aljunied GRC) rose to observe that increasing the Net Investment Returns Contribution spending cap would not mean depleting Singapore's reserves. These reserves continue to increase, but at a slower rate, he said.

"I'm asking if there's anything magical, if there's some special methodology that leads us to say that 50 per cent is the 'Goldilocks' zone that is exactly right, but 60 per cent is irresponsible?" he asked.

Mr Xie responded that every society has to find its own "sweet spot".

"I think it is really a question of judgment," he said, adding that he believes the current formula strikes the right balance.

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