Workers' Party disagrees with upcoming GST hike, plans to object to the Budget

WHILE the Workers' Party (WP) agrees with the broad principles of the Budget to build a more inclusive society, it is still objecting to the Budget as it disagrees with the upcoming goods and services tax (GST) hike.

Speaking during the Budget debate in Parliament on Monday (Feb 28), WP chief Pritam Singh, along with other WP Members of Parliament (MPs), argued that the government could have considered other options for raising revenue.

For instance, it could have fully adopted the effective corporate tax rate of 15 per cent for multinational enterprise (MNE) groups as part of the Global Anti-Base Erosion rules under the second pillar of the Base Erosion and Profit Shifting initiative (BEPS 2.0), said WP MP Jamus Lim.

Progress Singapore Party also decided not to support the Budget due to the upcoming GST hike. "The government is sittng on massive reserves and unutilised revenues," said its non-constituency Member of Parliament Leong Mun Wai.

Singh said that while the GST hike - which will be raised to 9 per cent in 2 steps over the next 2 years - was anticipated, it comes at a "difficult time for our people".

"Inflation is on the upswing and prices are high. Supply chain disruptions are having an outsized impact on people's purses," he said.

"There is a real concern on the ground that the announcement to raise GST will lead to price rises across the board. In fact, some price rises have already occurred with speculation that these were in anticipation of a GST hike," he added.

While the government has announced a S$6.6 billion offset package to help households cushion the impact of the hike, Singh said "no offset package lasts forever" and in time, the government expects Singaporeans will internalise the hike.

WP MP for Sengkang Group Representation Constituency (GRC) He Ting Ru asked why the government could not put in place exemptions in the GST for certain essential items, such as food supplies and healthcare, like other economies such as the United Kingdom and Japan have done.

"How can it be that a country such as Singapore, which has long prided ourselves on targeted, efficient - even convoluted at times - policymaking, could shy away from implementing a system of GST-exempt items by saying it is too much effort?" she asked.

Lim laid out several alternative tools that the government could have used to raise revenue.

Aside from raising the effective corporate tax rate to 15 per cent for MNEs, he suggested a slew of "wealth tax levers", including introducing a wealth tax of 0.5-2 per cent on the most wealthy here.

While fellow WP MP for Sengkang GRC Louis Chua noted that the government had made adjustments to property and luxury car taxes as an answer to taxing wealth here, he called the moves "a mere tokenism rather than a meaningful attempt at wealth taxes", arguing that they do not make a big enough impact on the wealthy.

Lim said the government could also reduce the share of reserve interest income that is sent back to the reserves to 40 per cent, from 50 per cent currently.

"This does not constitute a draw on the reserve stock … but merely represents a reduction in the rate of accumulation of reserves," said Lim.

Finally, he suggested imposing a "sin" tax on gambling, alcohol and tobacco, as well as carbon-generating activities.

For carbon-generating activities, Lim set the tax at S$80 per tonne, and said that half of the revenues will be channelled to revenues towards mitigating the transition and encouraging the adoption of green technologies.

"We have worked out the revenue possibilities for each of these levers, which could amount to close to S$3.66 billion expected from the GST hike," said Lim.

"The math suggests that any single one of the levers we propose would be sufficient to fill the GST hole, much less alternative permutations and combinations of them," he added.