PAP MPs welcome deferment of GST hike, urge Government to do more to help people cope with living costs

The GST hike of 7 per cent to 9 per cent will be implemented in two stages. ST PHOTO: KUA CHEE SIONG

SINGAPORE - The deferring of the goods and services tax (GST) hike to 2023 and 2024, was welcomed by People's Action Party (PAP) backbenchers on Monday (Feb 28), with many of them saying that it would assuage anxiety about soaring prices.

Speaking on the first day of debate on the Budget 2022 statement, the nine PAP MPs who noted the delay said they were glad the Government had listened to feedback from the ground and had responded to Singaporeans' concerns.

"Many Singaporeans feel that while the GST increase is inevitable, it is better later than early. It is better to raise it in two tranches than two percentage points in one go," said Mr Liang Eng Hwa (Bukit Panjang), who chairs the Government Parliamentary Committee for Finance and Trade and Industry.

The GST hike of 7 per cent to 9 per cent will be implemented in two stages, with one percentage point on Jan 1, 2023, and another one percentage point on Jan 1, 2024, Finance Minister Lawrence Wong had announced in his Budget statement on Feb 18.

Of particular concern among MPs who spoke on the subject on Monday was how the tax increase might affect those in the middle-income group, who typically do not qualify for many support measures and will not get as much help, but could see their spending power eroded as prices of utilities, food and other necessities rise.

MPs said the $6.6 billion Assurance Package - meant to help cushion the increase in GST - may help this "sandwiched generation" tide over the transition period, but noted that they would need more help to cope with higher living costs after that.

Their remarks prompted Mr Wong to assure the House that he would give a full response to their "relevant, important questions" during his round-up speech on Wednesday (March 2) after all MPs speak.

Some MPs had, in their speeches, suggested that part of the answer to helping middle-income earners cope lies in raising their wages.

Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) said this would help Singaporeans cope with rising costs of living in a "sustained manner". He mooted raising the salaries of all front-line workers across the board, including healthcare workers and pre-school teachers, to recognise their contributions to society during the pandemic.

Meanwhile, Mr Chong Kee Hiong (Bishan-Toa Payoh GRC) said workers should be given more training opportunities so that they can upgrade themselves and go on to jobs with higher wages as they progress in their careers.

He urged the Government, unions and businesses to work together to come up with the most suitable training models for their sectors, and to find the best trainers.

Other MPs like Ms Jessica Tan (East Coast GRC) suggested tweaks to the criteria for determining a person's eligibility for support schemes.

She noted that using the annual value of someone's place of residence as a criterion for means testing could result in some people not qualifying for support schemes, such as those living with elderly relatives who need care. She said it would be more accurate to refer to the annual value of property a person owned.

Even as the backbencher MPs acknowledged that tax increases were bound to be unpopular, they agreed that raising the GST was a necessary step to take in the face of growing social and healthcare spending.

Many noted that the tax system has become more progressive over the years and said the GST increase, along with the offset packages, will further this leftward shift.

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Mr Henry Kwek (Kebun Baru) underlined that the Government had taken other steps to raise revenue before deciding to increase the GST rate.

He cited the recent moves to finance long-term infrastructure investments through borrowing, and to transfer some of the foreign reserves managed by the Monetary Authority of Singapore to sovereign wealth fund GIC so as to generate more income from the reserves.

He also pointed to the wealth taxes, as well as an increase in income taxes for earners in the top income brackets, that were introduced in this year's Budget.

"All these show that our Government has listened carefully to people from all walks of life, balanced our country's needs with the complex global situation, and came up with practical ways to make Singapore better," he said.

Nominated MP Hoon Hian Teck, who is dean of Singapore Management University's School of Economics, noted that raising revenue through different tax sources can help balance equity with efficiency.

Giving the example of raising income taxes, he said that beyond a certain point, it could result in people working less, leading to the tax base shrinking.

Hence, it makes sense to diversify and raise various taxes, such as consumption taxes and wealth taxes, instead of focusing on only one type of tax.

Professor Hoon added that it makes sense to raise taxes to pay for recurrent spending, so that the national reserves can be saved for use on a rainy day to manage external shocks, as has been done during the Covid-19 pandemic.

Another MP who shared Prof Hoon's sentiment on striking the right balance was Mr Yip Hon Weng (Yio Chu Kang).

He warned: "If we push the narrative that the wealthy are responsible for driving inequality, we risk provoking resentment and jealousy against those who may have accumulated wealth through hard work and sacrifices. This will only further polarise society."

Summing up a sentiment expressed by many of the PAP backbenchers who spoke on Monday, Mr Yip said: "Our current revenue structure is a balanced one, where ultimately, everyone contributes taxes, but those who are richer contribute more."

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Even as MPs acknowledged the need to raise revenue, Mr Yip also reminded the House that "doing more for our people doesn't necessarily mean we should spend more".

"Instead, we should challenge ourselves and think hard about what we should spend less on," he added.

Urging prudence, he suggested that government agencies can cut down on duplication of work, for instance, better coordinating works like the laying of broadband cables, water pipes and electrical cables that involve the digging up of roads so that everything can be done at one go, instead of having the roads dug up time and again.

Mr Yip also noted that there was a mentality that if a ministry has surpluses, it means the ministry did not work hard enough, and said that this should change.

"Ministries should not feel guilty about having excess money to return to the coffers. In fact, the Government should throw a grand challenge - create an award and recognise ministries that best reduce their expenditure, streamline their operations, and cut out non-essential projects," he said.

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