ANALYST: GOVT TO INTRODUCE 10% GST AFTER UPCOMING GENERAL ELECTION?

At a televised forum on Channel 5 on Tuesday (24 Feb), DPM and Finance Minister Tharman 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,” he said.

Some tax experts and economists feared that Mr Tharman’s words may signal a shift towards a “broad-based” tax system later to get more revenue for the government as social spending continues to increase in subsequent years.

A “broad-based” tax system refers to indirect taxes such as the GST, which taxes Singaporeans broadly.

PricewaterhouseCoopers tax partner Koh Soo How noted 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.

Mr Koh also said that 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.

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.

Raising the top marginal rate of personal income tax beyond the 22% announced by Mr Tharman during Budget 2015, may hurt Singapore’s competitiveness, Mr Koh added.

KPMG Singapore head of tax Tay Hong Beng also agreed that increasing the tax burden on a minority of taxpayers “might not be the fairest way forward”.

“Taking the concept of ‘collective responsibility’ further, the best option remains to grow the Singapore economy. A growing economy directly increases the takings from taxation without the need for excessively high tax rates,” he said.

Ernst & Young Solutions head of tax Chung-Sim Siew Moon thought that GST hike may occur after 2020.

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

The experts and economists interviewed by the media predicted that GST could go up to 9 or 10%, in line with the Asia-Pacific average. Other indirect taxes the Government could raise include consumption taxes such as duties on alcohol, tobacco and petrol, stamp duties and property taxes, they said.

Indeed, in line with increasing indirect taxes, Mr Tharman also announced an increase in petrol duties during Budget 2015 in Parliament.

He told Parliament that the government has increased the petrol duty so as to “encourage less car usage and reduce carbon emissions”. He also said that the petrol duty rates have remained unchanged since 2003 (thus hinting that they are due for a raise).

The duty for premium grade petrol has gone up by $0.20 per litre, and intermediate grade petrol by $0.15 per litre. Therefore, the tariff for premium grade petrol is now 64 cents a litre while that for intermediate-grade petrol is 56 cents per litre.