Finance Minister Lawrence Wong spoke at the budget debate and rejected proposals from the Workers’ Party to raise revenue as alternatives to the upcoming GST hike.
What WP proposed:
Workers’ Party MP Jamus Lim suggested alternative sources of revenue such as raising corporate tax, increasing taxes on wealth, and reducing the share of reserve interest income that is returned to Singapore’s reserves.
He also expressed concern that the GST hike could stoke already-elevated inflation and questioned whether it is the ideal instrument for raising public funds to support the healthcare needs of Singapore’s ageing population.
Key points:
- Caution against GST hike during Singapore’s post-Covid-19 recovery, citing Japan’s GDP collapse as a result of a rise in consumption tax
- Alternative sources of revenue proposed, such as raising corporate tax and reducing the share of reserve interest income
- Concerns raised about stoking inflation and the regressive nature of the GST
- Questioning whether GST is the ideal instrument for raising public funds to support healthcare needs of Singapore’s ageing population
- Support expressed for other aspects of the Budget statement
Why PAP said cannot:
Wong dismissed WP’s suggestions to raise personal income taxes to match the revenue from the GST hike, stating that a sharp increase would damage Singapore’s competitiveness and jobs.
He argued that Singapore needs a mix of income, asset, and consumption taxes for a diversified and fair revenue base.
He also cautioned against using global tax rule changes to avoid raising the GST.
Wong discussed property and wealth taxes and how a net wealth tax would be difficult to implement practically, while taxes on tobacco and gambling are regressive.
Key points:
- Singapore needs a diversified and fair revenue base of income, asset, and consumption taxes.
- Alternative proposals by the Workers’ Party to raise revenue are not feasible to replace the upcoming GST hike.
- Personal income tax rates cannot be sharply increased to match GST revenue without damaging Singapore’s competitiveness and jobs.
- Wong cautioned against using global tax rule changes to avoid raising the GST.
- Property and wealth taxes need to be balanced, and a net wealth tax would be challenging to implement.
- Taxes on tobacco and gambling are regressive and not for generating revenue, but for deterring consumption.
