Singapore has to strengthen the resilience of its revenue base to meet rising spending needs, including investments to temper inequality and improve social mobility, said Finance Minister Lawrence Wong.
These include enhancing the Progressive Wage Model and income top-ups for lower-income workers and giving more targeted support to their children, seeing to an ageing population's healthcare needs, and managing carbon emissions.
The Government will announce revised carbon tax rates in next year's Budget, and indicate what to expect till 2030, to reflect the cost of carbon and better influence investment decisions, Mr Wong said.
These spending needs are why Singapore is looking to raise the goods and services tax or GST rate, although the timing would depend on overall economic conditions, including the inflation outlook, the minister added.
It must uphold a fair and progressive tax system overall, which is why it continues to study options to expand the system of wealth taxes in ways that are effective, but without undermining the country's overall competitiveness, he said.
Mr Wong discussed the Republic's fiscal strategies at the 35th Singapore Economic Roundtable organised by the Institute of Policy Studies.
In his 30-minute speech, he pledged that the lives of Singaporeans and their children will become progressively better, and nobody - and no group - will stagnate or feel excluded from the benefits of growth.
He said Singapore has succeeded thus far in running a prudent and effective fiscal policy. But this will become harder, given three key challenges or "curves": widening fault lines, and the threat to social cohesion when there is accumulated advantage by a small group of people; a rapidly ageing population, which means a shrinking labour force and greater need for health and aged care; and climate change.
To arrive at a fairer, greener and more inclusive society, Singapore must re-examine its fiscal strategies, and ensure that programmes and investments are funded in a fiscally efficient manner that preserves inter-generational equity.
Singapore has gone beyond just awarding grants to businesses, to using loans and equity to support companies. This will allow it to recycle its fiscal resources in the long run, he said. It also risk-shares with banks, and gives support or invests with private sector partners such as Clifford Capital and Heliconia.
Singapore also strengthens equity between the present and future generations, by making use of borrowing to finance long-term infrastructure projects, such as through bonds under the Significant Infrastructure Government Loan Act, or Singa.
Mr Wong noted that some think borrowing will create more fiscal space and Singapore should borrow more. But he cautioned that borrowing is not a panacea to fiscal challenges, as what is borrowed today has to be paid back tomorrow, and borrowing simply shifts the burden to the future generation.
"We should never seek to make our own lives easier at the expense of future generations. That would not be responsible. Instead, we should always seek to pass on a Singapore in good shape to our future generations," he said. "This has been a cornerstone of our fiscal philosophy since independence, and we will continue to uphold this."
Strengthening revenue resilience is crucial, he said, adding Singapore is in a relatively strong fiscal position. Its reserves are an endowment, with Net Investment Returns Contribution or NIRC giving additional revenue of around 3 per cent of GDP on average. This helps keep the overall tax burden low, where most advanced countries pay 2 to 3 per cent of GDP each year just to service their debts, he noted.
Some want Singapore to spend more from the reserves, but the idea should not be tossed about "flippantly", he said, as returns face significant headwinds today.
Ultimately, he added, the country's fiscal system must sustain a fairer and more just society. "This is our vision, and this is what our fiscal strategies have been built on."
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