Indranee Says GST Hike Still Necessary Even With Govt’s Cash Surpluses; Calls WP’s Facebook Post “Inaccurate & Misleading”

On 19 March, the Worker’s Party (WP) shared a Facebook post regarding their concerns over the hikes in both petrol prices and Goods and Services Tax (GST).

The WP opposed the GST hike, arguing that it will disproportionately affect lower-income Singaporeans.

They added that the tax hike is not necessary due to the country’s “significant” cash surpluses.

The party said that while a deficit of -$11bn was reported for 2021, the “actual” deficit is -$3.5bn when cash surpluses are taken into account.

“Is the additional burden of increasing GST truly necessary given our actual fiscal position?” the WP asked.

Well, now they have an answer.

Indranee Says GST Hike Still Necessary Even With Govt’s Cash Surpluses; Calls WP’s Facebook Post “Inaccurate & Misleading”

Second Minister for Finance Indranee Rajah maintained that the GST hike is necessary, calling the WP’s Facebook post “inaccurate and misleading”.

For those who don’t know, the proposed GST hike from 7% to 9% could happen any time between next year and 2025.

After the WP’s post, Member of Parliament (MP) for Bukit Panjang SMC Liang Eng Hwa filed a parliamentary question about the need for a GST hike, given the cash surpluses.

In response, Ms Indranee said WP’s claim is “inaccurate and misleading”, as cash surpluses and government revenue are not the same thing, because the latter reflects the amount available for spending.

The biggest difference, Ms Indranee explained, is that the bulk of the cash surplus comes from the sale of state land.

The surpluses gained from land sales don’t generate fresh revenue and are “simply a transformation of one asset to another”, she said.

“When land is sold, the asset is converted to cash. State land that is not due for immediate development is typically leased out for interim use. This yields revenue for the government, too, in the form of rental income.”

“So selling land does not increase the Government’s revenue, and if we were to spend all the proceeds from land, it would deplete our store of wealth”, she said.

Given that cash proceeds do not contribute to government revenue, it’s not a “valid reason for holding off the GST increase”, Ms Indranee said.

S$6 Billion Package to Cushion GST Hike

Ms Indranee pointed out that the government is aware how the GST hike will impact the low- to middle-income groups as it has introduced the S$6 billion assurance package to cushion the financial blow.

Under this package, most Singaporean households will receive offsets to cover at least five years’ worth of additional GST expenses incurred.

The package also includes a cash payout ranging from S$700 to S$1,600 over five years for every adult Singaporean.

Feature Image: YAKOBCHUK VIACHESLAV / Shutterstock.com