Manpower Minister, Leader of Opposition spar on effectiveness of taxation levers

GETTING around the increase on Goods and Services Tax (GST) by putting a heavier load on richer Singaporeans sounds "very simple and attractive" but Manpower Minister Tan See Leng questioned its feasibility in Parliament on March 1, noting that the raised taxes will ultimately hit middle income earners.

"The Workers' Party (WP) suggests that we can do away with the GST increase if we raised more taxes through other means. Now, that is a revenue shortfall of S$3.5 billion. They say put a heavier load on some Singaporeans so that we don't have to have a GST increase. It sounds very simple and attractive. But ask yourselves: Is it really doable?"

Instead of increasing the GST, Member of Parliament Jamus Lim said on the first day of the Budget debate (Feb 28) that the WP had worked out several "levers" - namely a corporate tax, wealth tax, "sin tax" and tapping of the reserves - that if implemented, could circumvent the need to raise the GST rate.

"Make no mistake. This government's approach is that the rich should carry a heavier load," said Dr Tan. "The well off will pay more and receive less and the less well off will receive more and pay less. But there's a significant difference between what constitutes a load and what constitutes a punitive load."

Indeed it is "not possible" to get the entire GST amount of S$3.5 billion by loading it entirely on those who are just at the very top, he said.

"The revenue options proposed by the WP - it suggested increasing personal income tax and property tax even more - if we were to do that we will have to raise the tax rates on income and property even more substantially," said Dr Tan.

"(We would) have to make more people, including middle income earners, pay more because it is not possible to have extremely punitive taxes on just the top 1 per cent or 5 per cent."

The effects would percolate through the upper-middle and middle income, including those who have benefited from Singapore's education system and have "laboured hard through the years to move up from more modest circumstances".

Meanwhile, higher property taxes will be applied to landed property, condominiums, executive condominiums and eventually even larger HDB flats, he said.

Leader of the Opposition Pritam Singh rebuffed Dr Tan's characterisation of the WP levers as "punitive", stating that "the point of our suggestions really is a more equitable load".

"In the spirit of seeking a more equitable tax distribution amongst various segments of society, I think the Workers Party is fully entitled to raise alternate forms of revenue, which we have. So I disagree with the minister's characterisation," he said.

He also said Dr Tan "cherry picked" and criticised parts of the proposal instead of looking at them holistically.

WP's Lim too stressed that of the 4 levers, the wealth tax lever is the only one which looks to tax high net worth individuals.

"Even within this particular scenario, we had made very modest recovery assumptions, amounting to something in the order of S$1.2 billion on wealth taxes alone. Now, of course, the whole is S$3.5 billion and so it is important to understand that the rest of that whole would have been met by much more broad base forms of taxation."

The corporate taxation lever meanwhile would have been targeted at multinational firms and not small and medium-sized enterprises, he said.

"It's important to clarify that we are not philosophically seeking a very narrow tax base. We are in fact seeking alternative revenue levers that subscribe to the general principles of public finance, which are - as much as possible - to spread the revenue schemes in as broad a manner as possible while at the same time recognising the importance ... of a certain degree of fairness and equity."