If you think life in Singapore is expensive already, wait till the next year arrives.
Yes, I am talking about the GST hike from 7% to 8% from 1 January 2023, and from 8% to 9% from 1 January 2024.
A huge (five-hour long) debate sparked off between the PAP and the Workers’ Party (WP) as the latter expressed extreme disapproval when this Goods and Services Tax (Amendment) Bill was passed on 7 November 2022.
Yup, this was just passed. You can watch this video to understand why this is so important:
@goodyfeed Got good news and bad news #sgtiktok #tiktoksg #foryourpage #singapore ♬ original sound – Goody Feed
Here’s a summary of the debate.
Questions Raised by the Opposition
With Singapore’s economic landscape looking bleak as the world continues to battle the effects of COVID-19, the opposition parties have questioned the necessity for the raise in GST during this time of ongoing inflation.
WP’s Louis Chua pointed out that this is the worst possible timing to come up with such a measure.
“Do we really want to fan the flames of inflation and contribute an additional unnecessary one percentage point increase in the cost of living, and contribute to inflationary pressures?” he said.
Mr Lawrence Wong had announced in the Parliament earlier that day that the government will allocate $1.4 billion more to make up for the hike in GST for at least five years.
Now for many of you who have failed in economics, let me emphasise that a two percent GST tax rate hike does not increase the GST revenue by the same amount—instead it increases by 28% according to data from Singstat.
This means that even if it looks like the government is taking 1.4 billion off its reserves, the truth is that there is more money being added into its reserves due to the tax revenue.
Good for the government, I guess.
Anyways, the question for the government is that how do you think that this extra money that you are giving is going to help every single one in Singapore manage the GST charges which will affect them on a daily basis?
Is There Such a Thing called Oversaving?
WP’s Jamus Lim, MP for Sengkang Group Representation Constituency (GRC), said that “based on our calculations, when the Government adjusted the NIRC (Net Investment Returns Contribution) in 2008, it moved from about 10% to the current 50%.”
In layman terms, we spend 50% of the estimated gains from investment, and put the remaining 50% back into the reserves to save it for future uses.
When Dr Lim questioned whether this adjustment meant the government was undersaving and that WP’s proposal to increase NIRC might not also mean it is undersaving, Mr Sitoh Yih Pin, MP for Potong Pasir, responded that for a small country such as Singapore, “There is no such thing as oversaving”.
Great not only is there a hike on the tax but it seems that the government is unwilling to spend the money on the reserves. How else is the economy going to be boosted?
Mr Sitoh’s logic behind his stance is that we are able to invest for the future precisely because of the reserves that our forefathers have given us and thus we have to save as much as we can.
When WP’s MP for Aljunied Leon Perera pressed on Mr Sitoh whether he agrees that there is no oversaving or not, Mr Sitoh said that the WP is “providing analgesia” and that the country would be better off taking PAP’s direction.
Concerns Surrounding this Issue
Several MPs, including PAP MPs, raised concerns on how to help certain groups of the public cope with the raise in taxes other than the GST support packages.
One of them was PAP’s MP for East Coast Ms Jessica Tan who asked if the annual value threshold of one’s residence can be raised, so that those who live with relatives in properties above the eligibility ceiling of S$21,000 can qualify for support schemes.
She rationalised her concern by stating that “these persons could be elderly parents or siblings who live with relatives as they need care or cannot afford housing.”
PAP’s MP for Pasir Ris-Punggol, Ms Yeo Wan Ling, also expressed concerns that non-GST registered small and medium enterprises and the self-employed will have to suffer more.
She suggested introducing a yearly allowance for a basket of low-value goods below S$400 that is considered and reset yearly in order to help them cope with the taxes charged when they buy goods for their business which they cannot recover.
DPM Lawrence Wong’s Response
With all shots fired, here is Deputy Prime Minister and Finance Minister Lawrence Wong’s response.
For now, Singapore’s economy and labour markets are still holding steady, and the projected GDP growth for this year is 3% to 4%, said Mr Wong.
The resident unemployment rate has also recovered to pre-pandemic levels, and sectors like aviation and tourism are recovering, he added.
“More importantly, the economic challenges we face are not just near-term or cyclical in nature … These are the realities we have to deal with, not just in the near term but very possibly for a more prolonged period.”
“Next year, we will continue to monitor the inflation situation and we will assess what additional support measures might be needed. At the same time, we will press ahead with our economic structuring and transformation plans,” he added.
“Because when we make ourselves more productive and competitive our workers will be able to earn more and this can more than make up for the higher prices and ensure that we are better off in real terms.”
Pertaining to WP’s feedback, he added, “Essentially, they (WP) have painted a very simplistic narrative that the Government has not considered these alternatives. That we are on autopilot, we are not open to ideas. We are just stubbornly pushing away, and something we decided to do anyway. But that’s completely false.”
He continues to criticise the WP by saying, “Unfortunately, I’m very disappointed that the Workers’ Party has chosen to take a different path. And I wonder if this is because they feel that this approach is the best way to advance their political agenda, as they have been over the years, to paint the PAP Government as uncaring and out of touch.”
Nevertheless, whatever it is, the bill has been passed, so be prepared for fork out more for your favourite cai png.
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Featured Image: YouTube (CNA)
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