Senior Minister of State for Law Indranee Rajah has earned the ire of some Singaporeans after she commented on the impending Goods and Services Tax (GST) hike that Finance Minister Heng Swee Keat unveiled in his 2018 budget speech on Monday.
Speaking at a REACH dialogue on the Budget, Indranee said that tapping on more than the returns from investing Singapore’s reserves is a “slippery slope”.
Presently, the Government can tap on up to 50 per cent of the expected long-term investment returns generated by the Monetary Authority of Singapore, Temasek Holdings and GIC.
Indranee indicated that introducing an increase in GST to manage expenditures is a more secure fiscal plan than increasing spending of the Net Investment Returns (NIR) of the reserves to above 50 per cent:
“We think that 50 per cent is a fair figure. If you start going down the slippery slope then after a while you have to make your principal work a lot harder. And then you are also not assured that you will be able to get consistent returns all the time, you don’t know what the investment market will be like.
“The better thing to do if you want to ensure consistency, stability and sustainability…is to continue to tap, but keep it at 50 per cent and then also introduce the increase in GST.”
She added in a subsequent Facebook post:
“The greater the percentage of NIR we use, the more the risks are magnified.
“We take 50% to be fair and prudent – use half now, and leave half for the future. We should continue this for as long as we can, in order to both preserve and grow our inheritance.
“The NIR contribution from reserves is already the largest single source of revenue. Rather than over-relying on the yield from our reserves, we need to ensure a continuing and sustainable source of revenue to fund our future needs. Increasing the GST rate would achieve this.”
Indranee’s comments echo Heng Swee Keat’s explanation during Budget 2018, that the government has been tapping on the reserves over the last decade, but that we must dispense these resources “prudently” given the mature economy and aging population.
He proclaimed that relying too much on the reserves will deplete Singapore’s nest egg and stressed, “this is not the Singapore way.”
Netizens responding to Indranee’s explanation about the necessity for a GST increase appear to remain unconvinced.
One Facebook user slammed the parliamentarian’s explanation and criticised the lack of substantive proof that a GST hike is absolutely negative. He added, “GST affects everyone from craddle to grave, yet all we got is such a sloppy decision making process based on gut feel.”
Kenny Chong: I read the whole piece and no where does she present any substantive argument other than saying “We think that 50 per cent is a fair figure.” Who is ‘we’? Where is the input from economists, mathematicians, statisticians, academics, big data analysts, sociologists? GST affects everyone from craddle to grave, yet all we got is such a sloppy decision making process based on gut feel. And our PM is satisfied with his team’s sloppiness in running the country based on fantasies?
At the very least, the government should show the absolute NIR trend over the last 10 years, and run a model against it so that we know what absolute dollars are we talking about. Then forecast the NIR trend for the next 5 years to check consistency. 50% is but a relative figure. Against an NIR of $10B and $20B, it is $5B and $10B respectively. But I don’t believe GST spending has any correlation with NIR. Therefore the debate should not be about 50 or 60%, but rather the absolute quantum.
Others called on the government to initiate a ministerial pay cut instead of taxing average Singaporeans further:
This is not the first time Singaporeans have clamored for a ministerial pay cut amid hints from the government that tax will rise.
Prime Minister Lee Hsien Loong’s confirmation that it is a matter of when and not whether taxes will be increased, at the PAP Convention late last year, prompted netizens to urge the PM to slash the high salaries ministers draw, instead of pushing the financial burden of increased spending to the people:
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