In a forum at Mediacorp held on February 21, just after the Budget Roll-out, Finance Minister Heng Swee Keat recognized that many are anxious about the increase in Goods and Services Tax (GST). However, he sought to address everyone’s concerns by emphasizing the importance of the GST increase, and is hoping that citizens are able to see the bigger picture of what is at stake.
The important purpose that Mr. Heng hopes that Singaporeans will comprehend is that these funds are needed for the rising expenses of the country itself.
Mr. Heng described the 2018 Budget as a “strategic and integrated financial plan to position Singapore for the future.” While the Budget’s concentration is toward challenges that are for the long term, it contains courses of action that are aimed specifically toward the society, economy, environment and also to preserve Singapore’s budgetary sustainability.
At Wednesday’s forum, many asked Mr. Heng about the GST increase of 7-9 percent, even if implementation will not occur until sometime around 2021 to 2025. The bulk of the questions centered around corresponding cost of living increases. On example of this is the possible increase of childcare expenses, and Mr. Heng was asked if there would be a rise in salaries as well.
The Finance Minister emphasized the need to understand why the government needs to implement the GST increase, since he had stated during the Budget Roll-out that security, infrastructure and healthcare continued to be financial priorities. Because of these, he said, “We’ll have to find new sources of revenue so that is what we started with. It is important to bear in mind that we are doing this for a very important purpose.”
When asked if the government has additional sources of income aside from higher taxes, Mr. Heng answered that the net investment returns contribution (NIRC) is now number one in contributing to government funds, higher than any collections from personal or corporate taxes. Since 2009, NIRC’s contribution has more than doubled in size. That year, it was S$7 billion, and for FY 2018, it is expected to be S$15.9 billion.
The government is allowed to spend as much as half of the long-term investment returns, under NIR’s framework. Introduced in 2008, the framework began as the reserves under management by the Monetary Authority of Singapore (MAS) and GIC, and then in 2015, Temasek Holdings were included.
Mr. Heng said that he is very thankful for this fund, and that the wants to make sure that it will be used for future generations as well. “As our economy grows, I hope that our reserves will also grow together with the economy and in that way, our younger people can have the same assurance that we inherited from our forefathers.”
Channel NewsAsia posed a question as to whether last year’s Budget surplus, which was larger than expected, actually made the GST increase less palatable and more difficult to convince citizens about. Mr. Heng agreed that the size of the surplus made explaining the GST harder to justify, however it is highly unlikely that this amount of surplus would be occur repeatedly.
The surplus for the last fiscal year is expected to be S$9.6 billion, an amount that grew because of the MAS’ “exceptional” statutory board contributions and bigger collections of stamp duty because property transactions have risen of late. However, the Finance Minister said that the MAS was able to contribute a higher amount only because of gains from fluctuations in the currency but in order to plan for the country’s future, “structural factors” must be considered carefully, including the projected increase of expenditure needs.
The Finance Minister also said that when the GST increase is implemented, efforts will be made to make sure that measures are put in place to ease burdens on lower and middle income families. This increase will also be timed with caution, with local and global economic environments will be carefully considered.
Mr. Heng says that if the economy faces a recession or financial crisis, recalculations will need to be done. But the 2 percentage point increase is appropriate for where the country is, since it means that a collection of 0.7 per cent of gross domestic product (GDP) in revenues annually. “I’m not saying that that itself will be sufficient (because) how our healthcare cost would grow, we cannot predict with certainty. But as far as the GST is concerned, looking at our current projections and trends, 2 percentage point is likely to be the right one.”
The Finance Minister also said that since businesses have been told of the GST increase well in advance, this should give them ample time to adjust appropriately.
Others have commented that it is a risk for the PAP to push for the GST increase. Three years ago, former Finance Minister Tharman Shanmugaratnam had said that the actions the government had taken were adequate to provide for greater expenditures until 2020. This was echoed on November 19, when Prime Minister Lee Hsien Loong said that the current government had sufficient revenue.
Mr. Heng did not dispute this. He said, “That remains correct based on the Government’s projections. If it were a wrong assessment, we would be prepared to say so but it is not. It is the correct assessment that we are in good position right until at least 2020 but beyond that, we know that there are so many new areas of expenditure that we will need. Therefore, it will be irresponsible if I do not state this clearly and plainly.”
When asked if this issue would be used against them in the next General Elections, the Finance Minister said that people in places of responsibility must act accordingly, and have the courage to continue do the right thing.
Netizens commented on the statement former Finance Minister Tharman Shanmugaratnam made in 2015.
Others offered suggestions for where the budget could be cut
Others challenged ministers to live like the poor do, or for ministers to receive a lower salary
Yet others felt that the Budget disregarded the needs fo poor Singaporeans
Follow us on Social Media
Send in your scoops to firstname.lastname@example.org