According to the Straits Times news report "No basis to claims of GST hike: MOF" (Aug 8) – "In its post, the Finance Ministry said that in the debate in Parliament on the Budget in February, Deputy Prime Minister Tharman Shanmugaratnam said the increased spending planned for the rest of this decade is sufficiently provided for by measures that the Government had already taken".

Promise of 5 years no GST increase

It may be even better if we are more explicit to promise that – like about five years ago –  the Government promised not to raise GST for five years which is now coming to an end. So as to put down definitively the question that has been asked with the elections looming – whether the promise not to raise GST will be extended?

$9.97b cumulative Budget surpluses last 4 years?

The Budget surplus for FY2011, 2012, 2013 and 2014 was $2.32, 3.86, 3.92 and -0.13 billion, respectively. In other words, the cumulative surplus from FY2011 to 2014 was $9.97 billion.

The Budget estimate for FY2015 is a deficit of $6.67 billion, but this is after a $6 billion top-ups to endowment and trust funds, which under IMF fiscal reporting guidelines may not be allowed as an expenditure item.

More than $100b cumulative cash Budget surpluses last 4 years?

In this connection, the estimated cash Budget surplus under IMF fiscal reporting guidelines is more than $24 billion for FY2014, and also more than $20 billion every year in the last five years or so.

So, clearly, there may be no justification or need to increase GST.

Lowest government spending

Moreover, according to the Economist magazine (Sep 27) – Singapore seems to have the lowest government spending in the world amongst developed and developing countries – “(in) Denmark, government spending runs to nearly 60% of GDP. More diverse America allocates just 39% of GDP to government, in polyglot Singapore the figure is just 14%”.

Only 3.5% of GDP social spending?

According to the article “Asia spending too little on poor: Report” (Straits Times, Jul 12, 2013) – “Singapore spent 3.5 per cent of GDP on social protection, which includes the Central Providend Fund (CPF).

This was far below the 19.2 per cent by Japan and 8 per cent spent by South Korea, the only other high-income countries in the study.”

Implications of raising GST? 

For discussion sake – what are the possible implications of a GST rise in the distant future?

… the cost of living may increase

… leading to increasing wage pressures against a backdrop of persistent low productivity growth

… the cost of doing business may increase

… which may make Singapore less competitive vis-à-vis other countries

… with increasing prices passed on to consumers

… higher inflation

… against a backdrop of hardly any real increase in the median basic, gross and total wage (excluding employer CPF contribution) in the last 16 years or so

… perhaps even more Singaporeans households than the estimated 30 per cent of households (estimated about a million people) which had expenses exceeding incomes – finding it hard to make ends meet

… and since GST is a regressive tax – the lower-income may be hit harder

So, arguably, if GST is rsised in the distant future – the only party that may be better off is the Government’s coffers, despite the huge Budget surpluses described above.

As to the recent rhetoric that we need to have more revenue in order to fund our increased social and infrastructure spending needs (Straits Times news report “As spending needs rise, S’pore can supplement funds: Minister”, Feb 27) – don’t you think that it may be better if there are concrete  details as to what exactly the increased revenue needed will be spent on?

Leong Sze Hian

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