Singapore Budget 2018 GST hike: MPs voice concerns, suggest alternatives

Singapore

THE future goods and services tax (GST) hike drew varied responses on the first day of the Budget debate, with some Members of Parliament proposing alternative revenue sources and the Workers' Party saying it was "unable to support" the announcement at this point.

Liang Eng Hwa (Holland-Bukit Timah GRC) cheered the adequate warning given for the hike in GST from 7 per cent to 9 per cent, set for sometime from 2021 to 2025.

But other MPs hoped the timeline was not cast in stone.

If Singapore's economy outperforms forecasts in the coming years, the hike could be postponed or the need for it be reviewed, suggested Chong Kee Hiong (Bishan-Toa Payoh GRC) and Foo Mee Har (West Coast GRC) respectively.

Mr Chong wanted to know the expected GDP contribution from large-scale infrastructure projects such as Changi Airport Terminal 5, and how these could reduce Singapore's reliance on future GST hikes.

He also asked if the government would set a cap on GST's contribution to total revenue, or a ceiling to the GST rate.

Many of the 28 MPs who spoke yesterday suggested alternative revenue sources. Ms Foo proposed a broader e-commerce tax extending to goods, higher taxes on liquor and gambling, and a sugar tax.

She also raised the possibility of a capital gains tax or an increase in property tax for non-resident owners.

Similarly, Ong Teng Koon (Marsiling-Yew Tee GRC) asked if Singapore might have to consider a wealth tax: "As technology advances, wages will likely fall as a share of GDP - so making the owners of land and capital pay their fair share may make sense."

Yee Chia Hsing (Chua Chu Kang GRC) suggested having a department to close tax loopholes and look at "creative ways" to raise revenue, offering two ideas of his own: the tender of SG-series car plates, and charging luxury alcohol and tobacco duties based on a percentage of value rather than volume or weight.

One proposal kept off the table, however, was tapping the reserves further. Mr Liang, Ms Foo and Seah Kian Peng (Marine Parade GRC) were among those who cautioned against raising the net investment returns (NIR) contribution to the Budget.

Currently, under the NIR framework, the government can spend up to half of the long-term expected real returns from the assets managed by the Monetary Authority of Singapore (MAS), GIC and Temasek Holdings.

Workers' Party MP Pritam Singh (Aljunied GRC) noted that there have been public suggestions to raise this to 60 per cent.

His own proposal was for land sales proceeds to be considered for government spending - a call the WP also made in last year's Budget debate.

Under the Constitution, land sales revenues are part of the reserves and cannot fund government spending.

Mr Singh added that his party was "unable to support the announcement of a GST hike at this point", citing a lack of clarity about projected expenditure and a lack of information on whether there is scope to "look at the reserves". The WP also needs an understanding of the government's planned offset package, he said.

People's Action Party MPs Lim Biow Chuan (Mountbatten), Lee Bee Wah (Nee Soon GRC) and Vikram Nair (Sembawang GRC) rejected the WP's idea.

"It is wrong in principle to sell land and spend that capital upfront," said Mr Nair, adding that the current approach was "more responsible".[/GONE]

Mr Lim and Ms Lee did have concerns about the GST hike, however, asking if a committee against profiteering would be set up, as was done for previous hikes. Speaking up for businesses instead was Nominated MP Thomas Chua. He noted that some small retailers - particularly in the north of Singapore - worry that the GST hike will drive consumers over the Causeway to shop in Malaysia.

This is particularly with the Johor Bahru-Singapore Rapid Transit System due to start running in 2024, and the Kuala Lumpur-Singapore High Speed Rail in 2026, he added.

Mr Chua, who is immediate past president of the Singapore Chinese Chamber of Commerce and Industry, also addressed the introduction of GST on imported services from 2020.

Although this is a long-awaited levelling of the playing field for local service providers, many firms - especially small and medium enterprises - will face pressure from the rise in operating costs, he said.

Imported business-to-business services include software applications, accounting and IT services.

For more Budget 2018 stories visit bt.sg/budget18