GST hike responsible way to fund spending needs: Heng
Windfalls and one-off gains - like the ones that led to the unexpected Budget surplus of $9.6 billion in the last financial year - cannot form the basis of prudent fiscal policy, Finance Minister Heng Swee Keat said yesterday.
That is why the goods and services tax (GST), a broad-based tax, has to be raised - to fund expenses in healthcare, education and security long into the future, he said. Given Singapore's ageing population and the need to counter the terror threat, this spending is likely to recur year after year.
"The responsible way for us to fund such spending is to raise taxes. As Dr Lee Bee Wah pithily reminded us, you don't fund recurrent spending needs by hoping to strike 4D," said Mr Heng.
But the GST issue provided unexpected drama, with the Workers' Party (WP) saying it could not support a future hike without more information. For the first time in three decades, it cast its votes against the national Budget.
This came after WP chairman Sylvia Lim (Aljunied GRC) initially said the party intended to support the Budget when the vote was called, but not the announcement of a GST hike to take place some time between 2021 and 2025.
But Mr Heng made it clear that the Budget presented the Government's overall financial policy - both spending and financing options, including the GST increase.
He called on the WP to "square" its position. Mr Heng said: "Do you support all those increased spending? Or are you contradicting all your MPs' position yesterday where everyone spoke about doing more? Where is the money going to come from, and would a 2 percentage point increase help us in some ways?"
Ms Lim responded tersely: "To make it clear, we are unable to support the announcement on the GST hike."
The eight WP MPs present yesterday proceeded to vote "no" when a division - a formal recording of votes - was called.
To MPs who questioned the need for a GST hike despite the large Budget surplus, Mr Heng said it was largely due to one-off, exceptional factors. "We cannot fund our plans to secure Singapore's future on the basis of episodic windfalls," he said.
Instead, the only sustainable way to finance this was to raise taxes, he said. And a broad-based tax like the GST was deemed the most suitable.
Mr Heng reiterated that this hike would not cover expenditure needs, but would only make the fiscal gap more manageable.
On other financing options, he said the wealthy are already being taxed more, as are buyers of more expensive property.
Drawing on the reserves would not be responsible, he said, as these are needed to help Singapore weather economic storms. That left borrowing as a viable option for long-term infrastructure projects, and GST to meet recurrent needs.
Things began heating up in the House when Ms Lim voiced her suspicion that the GST hike might have been among this year's measures if the public had not reacted so negatively when the idea was floated.
"And I rather suspect myself that the Government is stuck with that announcement. Otherwise, perhaps we would be debating a GST hike today," she said.
This triggered a rebuttal from Law and Home Affairs Minister K. Shanmugam, who said Ms Lim was "basically making an accusation that the Government is behaving willy-nilly, dishonestly".
Ms Lim said she did not make any such accusation and was merely raising an "honest suspicion".
To this, Mr Shanmugam said: "Does Ms Lim agree it doesn't accord with the standards of a First World Parliament and honest debate for someone to come here and start talking about (how) 'this is my suspicion. I cannot back it back'?"
Mr Heng stepped back into the debate, noting he and Ms Lim were both former police officers. "Now, I want to present myself as your witness because I have been working on this ever since I became Finance Minister," he said, adding that the GST hike was based on an honest assessment of Singapore's fiscal position.
In a Facebook post last night, Prime Minister Lee Hsien Loong said that with the passing of the Budget, the Government has laid out its mid-to long-term plans clearly.