- Mr Speaker Sir, a cornerstone of Singapore’s progress from third world to first has been our fiscal strength. This has enabled us to overcome challenges, and pursue opportunities with confidence.
- Much has been said of our fight with Covid-19 pandemic. It was a similar case with the Financial pandemic in 2009 during the Global Financial Crisis where we were able to muster financial resources, to protect lives and livelihoods through the $4.5B Jobs Credit Scheme and skills upgrading program. In both situations, Singapore was able to land safely in both crises due to our government’s fiscal prudence and decisive actions.
- While we have emerged from Covid-19 better than other countries, many challenges lie ahead. Our nation’s expenditures are projected to grow to meet rising needs. These must be financed by tax receipts which are impacted by an increasingly gloomy economic outlook.
Maintaining NIRC Prudence
- The Net Investment Returns Contribution or NIRC framework was debated in this House. I want to add my piece to caution against the seemingly attractive suggestion to spend more from our investment returns and save less. This easy way out is not a solution to this GST Bill proposed.
- The real economy is slowing globally. Investment experts have highlighted declining trade liberalization, increasing geopolitical uncertainties, along with the unwinding of a decade-long quantitative easing. The era of cheap money and borrowing is over. If one borrows to invest, one needs to price in the higher risks. In other words, businesses and investors are faced potentially with lower returns on average on a risk-adjusted basis.
- The world has changed dramatically in the recent past. As such, we need to take heed that “past returns are not a guarantee of future performance”. This context is relevant when we apply our minds and talk about the NIRC framework.
- As this framework allows the government to spend up to half of the long-term expected real returns on invested net assets, can DPM clarify if MOF has factored the known macroeconomic headwinds into the long run expected returns, and if so, does MOF expect lower funding available for our upcoming budget?
- Also, given the challenging investment environment, what are the plans to steadily grow our reserves, to increase the dollar returns available for higher expenditures in the longer term?
- The backdrop of the current investment climate calls for the need to uphold prudence and discipline in the NIRC, so that the returns from our reserves can continue to be a key source of funding proportionate the higher expected expenditures that is to come.
The Way Forward – A Holistic and Inclusive GST System
- Sir, no one aspires to pay more taxes. While I am convinced that the GST increase is required to support higher expenditure, I am also concerned about its impact on my residents and fellow Singaporeans, given inflationary pressures which are driving higher costs of living. On this basis, I reflected on the GST implementation and design.
- A simplistic GST system is by nature regressive. However, factoring the GST Assurance Package, and the Permanent GST Voucher scheme (introduced since 2012), the net effect is one where the impact of the GST increase is different across different income segments of our population.
- What is salient, is that taken holistically, the support packages transform the GST scheme into a tiered consumption tax system.
- In the prospective regime, the lower income, including retirees, continue to pay an effective GST rate of 0-3%, the middle segment, or those with per capita household income from $2000 – $4000, will pay around 4-7%, of which 7% is already the existing GST rate. It is the higher income who will pay closer to the new headline rate of 9%.
- There were suggestions in this house to consider further increasing taxes paid by those in the higher income, in place of this proposed GST Bill in place of this proposed GST bill. However, this proposed GST system when taken holistically, in fact taxes the higher income significantly more, at not only a higher effective rate, but also because of their relatively higher consumption and significantly more spending on luxury goods.
More Support in a Challenging Climate
- As mentioned, what weighed on my mind was my residents’ and the broader population’s concerns on the GST hike coming at a time of high global inflation, geopolitical tensions, and a deteriorating global economic landscape, which all seem like a perfect storm.
- Most recently, MOM reported that Singapore’s job market showed signs of slowing momentum, with an uptick in retrenchments. Amidst rising costs of living, job loss worries will weigh on the minds of residents.
- Relating to high inflation and the cost of living, I am heartened that the government has responded decisively in addressing cost of living concerns, with two $1.5 billion Cost of Living packages that were first announced in June and then in October this year, on top of the Household Support Package.
- I also welcome DPM’s announcement today on updating the GST assurance package, and his continued assurance on further updates to account for further hikes in expected inflation, when it happens.
SMEs
- Shifting the focus to businesses, I understand through the Association of Trade & Commerce the concerns expressed by smaller SMEs. They generally worry about cost increases. In particular, those which are non-GST registered cannot claim GST expenses paid to GST-registered suppliers. Some considered voluntary GST registration but find it difficult to comply with the requirements due to limited resources. Against this, can DPM share if there will be further support for smaller SMEs to better navigate the GST rate change?
Longer-Term
- On the longer term, should economic uncertainties persist and result in lower tax receipts even after the GST increase, can DPM share what are other potential levers, to ensure we can keep up with our long-term expenditure needs? Can the government assure us that GST rate will not increase beyond 9% in the near term?
议长先生，
我们社会的开销越来越大，我知道提高消费税是必要的。
可是，现在通货膨胀，生活费越来越高，我很担心居民会吃不消。
因此，我仔细研究了我国的消费税制度。
如果把消费税和各种援助配套，例如亿元的安心与援助配套，和每年发放的消费税补助券一起看，据估计，低收入和退休人士实际给的消费税是0到3%，中等收入是4到7%，只有高收入人士给的消费税，会是7到9%。
我相信，新加坡的消费税制度，经过我们独有的设计，是更有深度和层次的，能够更实际地帮助解决新加坡所遇到的挑战，同时照顾到新加坡人的需要。
虽然如此，对新加坡人来说，现在大家的开销压力都很大。
这个时候提高消费税，我能感受到居民的担忧。我很高兴政府说到做到，在有需要的时候，出手帮助新加坡人，让他们放心。例如在6月和10月宣布的两个额外援助配套，就能帮助国人应付生活费上涨。
副总理也刚刚宣布，会在明年宣布更新后的安心与援助配套。我希望副总理可以提供更多详情，让居民更加安心，让新加坡人知道政府会继续尽力帮助他们，尤其是那些最需要帮助的人。
最后，我也希望政府可以进一步帮助本地中小型企业。一些做小生意的业者，也会因为消费税增加而有压力，因为他们的成本更高了。可是，他们也担心如果起价的话，会被以为是乘机牟利，也担心老顾客会接受不了。我相信政府不会忘了我们的中小型企业。
Conclusion
- Sir, in conclusion, I support this GST Bill because of the holistic nature of how it is being executed.
- While I have some queries, I am also glad that Government has tabled this Bill to discuss openly this inconvenient truth about funding for Singapore’s future. It is an easy thing to speak about spending more but a lot harder to find the means to fund the spend.
- At the heart of the GST Bill is the broader theme about caring for our People, for not just the short but most importantly to fund the long-term needs of Singapore and Singaporeans.
- Taken in totality, the GST system with targeted support packages is part of an inclusive and resilient fiscal structure. It funds our expenditures while providing support for the lower- and middle-income segment at the same time.
- The challenges ahead require us to make this difficult but responsible decision, to secure the well-being of all Singaporeans for the long term. Thank You.
Watch the speech here.
