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Unwise to amend rules on land sales proceeds, net investment returns: Heng Swee Keat

SINGAPORE'S approach to land sales proceeds and using the returns on its national reserves strikes a balance between present needs and preserving these resources for future generations, said Finance Minister Heng Swee Keat in Parliament on Thursday.

Mr Heng was responding to Workers' Party assistant secretary-general Pritam Singh, who had suggested that proceeds from land sales should be used to boost revenue, instead of raising the Goods and Services Tax (GST).

The GST is set to go up from 7 per cent to 9 per cent some time from 2021 to 2025, Mr Heng announced in his Budget speech last week, to support growing spending needs such as in healthcare.

Land sales convert physical assets into financial assets and are protected as past reserves, said Mr Heng in his Budget debate round-up speech.

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"This principle of asset conversion is sound. It is irresponsible to mislead people that the principle suddenly does not apply when we use say just 20 per cent instead of 100 per cent of land sale proceeds," he added.

The proceeds from land sales are added to the reserves, which are invested. From the returns, the government takes up to 50 per cent as the net investment returns contribution (NIRC) to supplement its budgetary needs.

"This achieves a balance between supporting the needs of the current and future generations," said Mr Heng.

The NIRC is now the largest contributor to the annual Budget, he noted.

"If we did not introduce the NIR framework, we would have had to double our personal income tax collection or our GST collection to raise the same amount of revenues."

In response to suggestions that Singapore should raise the NIRC spending cap or use a portion of land sale proceeds for recurrent social spending, Mr Heng said that these options "sound very tempting" and seem "painless" compared to raising taxes.

But "to amend the rules as a first resort is ill-disciplined and unwise".

"If as soon as we need more money, the first thing we do is relax the rules, that is the surest way to change Singapore's basic orientation - from saving and building for the future, to living for today and letting tomorrow look after itself."