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SINGAPORE – The goods and services tax (GST) should be increased to fund increased recurring spending in key areas such as healthcare and to provide more social safety nets, Deputy Prime Minister Heng Swee Keat said on Friday (February 26).
A $ 6 billion guarantee package set aside in last year’s budget will ensure that low-income households pay less than well-off households when the GST rises, said Heng, who explained in detail in his budget summary speech. why the next tax hike cannot be delayed or eliminated.
Increasing GST is most responsible for not being a burden on future generations, as there have been structural increases in Singapore’s recurring spending, Mr. Heng emphasized.
For example, annual health spending has nearly tripled from $ 3.9 billion in fiscal 2011 to $ 11.3 billion in 2019.
“If we want to spend more, we have to increase income … let’s not make irresponsible promises that burden future generations,” he asked the deputies.
“If it’s recurring needs, which need to be financed year after year, we have to find recurring income, which we can raise year after year.”
Singapore is not the only country planning ahead, and Heng noted that even Saudi Arabia, a country blessed with huge oil reserves, recently introduced a 5 percent value-added tax from 2018, increasing to 15 percent. cent since 2018. Last July.
The GST is projected to increase from 7% to 9% between next year and 2025.
Rising costs
Singapore’s health care cost is estimated to rise to 3 percent of Singapore’s gross domestic product by 2030, Heng said.
By that year, the number of Singaporeans aged 65 and over will increase from one in six to one in four, and health care spending will increase, as older people are four times more likely to be hospitalized than their older counterparts. young people and staying twice as long, he added.
“Our demographic trends will mean higher spending, outpacing GDP growth,” he said.
But healthcare is not the only area where spending will increase.
Heng pointed out how in the Budget three years ago, he had mentioned that annual security spending by the Defense and Interior Ministries would likely increase by 0.2 percentage point of GDP to deal with growing threats, such as information warfare.
Social spending, as more funds are set aside for preschool education and lifelong learning, will also increase.
Spending on infrastructure will also increase as more resources are needed in this area to enhance Singapore’s competitiveness, build housing for its residents and improve its connectivity.
Difficult decisions will be required to address these growing spending needs, and Mr. Heng noted that since 2007, the government has already raised a number of other taxes to collect more than the better off. Estate-related taxes, for example, have become more progressive.
These funds are then transferred to the low-income through social spending, all while the GST remained at 7 percent, he added.
While the GST will not be increased now, given that the economy is still recovering from the Covid-19 pandemic, Singapore faces structural trends such as an aging population that will increase its recurring expenses.
For example, public health care capacity is being increased and Heng pointed to a new integrated hospital in Bedok North that will be ready by 2030 and will serve the growing population of the east.
“If we defer this spending, we run the risk of not being able to properly care for our people when the need arises.”
Support for GST increase
Heng assured Singaporeans that the $ 6 billion guarantee package will help cushion the impact of the upcoming GST increase, with more aid targeting low-income households.
This package will effectively delay the GST rate increase for most Singaporean households by at least five years, and low-income Singaporeans will receive higher offsets of approximately 10 years of additional GST expenses.
This is in addition to existing benefits and transfers, such as the permanent GST voucher program, Heng said. “These keep our general tax and transfer system fair and progressive,” he said.
Last year, the top fifth of all Singaporean households by income paid 56 percent of taxes and received 11 percent of benefits, while the bottom quintile paid 9 percent of taxes and received the 27 percent of profits.
He added that the government is concerned about intermediate households, which pay 35 percent of the taxes and receive 62 percent of the benefits.
Heng dismissed as unfounded non-constituent MP Leong Mun Wai’s observation that his Singapore Progress Party does not see Singapore facing a tax revenue shortage for the foreseeable future.
Heng stressed that parliamentarians cannot be defending a national policy “on the basis of personal hunches”, but should focus on the hard work that needs to be done.
“It would be unwise to underestimate the risks and uncertainties we face,” he added.
Budget office
In his speech, Heng also rejected a suggestion by the head of the Workers’ Party and opposition leader, Pritam Singh, to establish an independent parliamentary budget office to improve scrutiny of public spending.
Such an office would be “a useless duplication,” since the government already has such scrutiny, he said.
Aside from the independent audits of the Auditor General’s Office, there is already parliamentary scrutiny of its expenditures through the Public Accounts and Estimates Committees, and Mr. Heng noted that the WP is represented on both committees.
The government has achieved world-leading results while running one of the world’s most efficient administrations, always looking to do better with less, he said.
“Prudence and stewardship are core values of this Government. We hold ourselves to high standards and work hard to ensure that our spending is profitable, to offer the best value for money for taxpayers,” he said.
Mr. Heng also raised concerns about how the WP planned to fund this independent parliamentary budget office and how much it would cost. He mentioned a figure of $ 20 million that he said the WP had proposed spending to set up this office “to do this work for them.”
“Even when they ask for more scrutiny on public spending, we invite them to submit to the same scrutiny,” he said.
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