Inflation, GST hike key concerns raised at SBF panel discussion on business outlook

INFLATION, as well as the impending Goods and Service Tax (GST) hike, and how it would affect the costs incurred by businesses here, took up the bulk of a panel discussion by the Singapore Business Federation (SBF) on Thursday (Jan 20).

SBF chief Lam Yi Young, who moderated the panel, noted that companies are concerned about the impact inflationary pressures will have on their businesses in the coming year, and are worried about how the upcoming tax hike will exacerbate this.

Manpower costs were also the most cited business challenge by respondents to the latest National Business Survey by SBF; 48 per cent of those polled named it as a concern.

Responding to these concerns, senior DBS economist Irvin Seah pointed out that the authorities are set to tighten monetary policy again later this year, and such monetary interventions can help to soften the overall domestic inflationary impact on businesses.

Not only that, but the year will see positive wage growth of between 3 to 4 per cent, and this will also buffer a tax increase, he said.

Chiming in, Takua Kamata, director of World Bank Singapore, said that when it comes to business costs, Singapore is still in a good position because all the costs are visible and transparent - unlike many other international markets, which often have many hidden costs.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Separately, the panellists were also asked to weigh in on who should bear the costs of decarbonisation in the push towards sustainability, given that green solutions are currently priced at a premium, and this would make Singapore companies less price-competitive than their regional peers.

Agreeing that this is a concern, Seah said this is the reason the current tax rate in Singapore is much lower than many other countries.

But he noted that Singapore still has to move quickly on the issue; its being a small island state means it would feel the impact of climate change far sooner than other bigger countries.

"We can't simply push back and delay this carbon tax hike, it's just a matter of time," he said, adding that the government could instead consider giving businesses clarity on how quickly it intends to raise the tax so businesses can make preparations.