More taxes needed to fund social spending: Analysts

SINGAPORE: While the Government has raised income tax rates for top earners in Singapore for a more progressive tax system, taxes paid by a broader swathe of Singaporeans, such as the Goods and Services Tax (GST), will probably go up in the coming years to pay for social spending, said tax experts and economists.

The GST could go up after next year to 9 or 10 per cent, in line with the Asia-Pacific average. Other taxes the Government could raise include consumption taxes, stamp duties and property taxes, they said.

On Tuesday, Finance Minister Tharman Shanmugaratnam had dispelled the notion that the Government had adopted a “Robin Hood” strategy for this year’s Budget by taxing the rich more to give to the poor. He said the bulk of the spending is for the common interest and not one particular group.

“This is our society… We need to take collective responsibility,” said Mr Tharman, who is also Deputy Prime Minister, on a televised forum on Channel 5.

PricewaterhouseCoopers tax partner Koh Soo How said Mr Tharman’s words signal a continued shift towards a “broad-based” system that reaps revenue from indirect taxes such as the GST. Noting the Government had committed not to raise the GST for five years during the 2011 General Election, he said any hike would probably take place in 2016 or 2017.

On the other hand, Ernst & Young Solutions head of tax Chung-Sim Siew Moon does not expect a hike in the GST before 2020. “The minister has indicated that the revenue measures that have been put in place will be sufficient for the increased planning needs until the end of the decade,” she noted.

The GST contributes the second largest share, after corporate income taxes, to Singapore’s total operating revenue, contributing about 16.5 per cent in Financial Year 2014.

Taxes such as the GST, which are collected from the domestic population, can be raised without affecting Singapore’s international standing in terms of tax competitiveness, Mr Koh said. He noted that many countries, including the United Kingdom, Malaysia and countries in the European Union, are also gradually increasing tax revenue from indirect taxes. Indirect taxes include consumption taxes such as duties on alcohol, tobacco and petrol.

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