PUBLISHED ONFebruary 28, 2025 9:45 AMByKhoo Yi-HangThe decision to raise the Goods and Services Tax (GST) wasn't easy, but it had to be done, Prime Minister Lawrence Wong said as he wrapped up the three-day Budget 2025 debate in Parliament on Friday (Feb 28).
PM Wong had announced a record $143.1 billion Budget proposal on Feb 18, including SG60 vouchers and fresh CDC vouchers, adding that a surplus of $6.8 billion is expected for the financial year 2025.
Addressing concerns on whether financial plans have been too conservative, Wong recalled Singapore's battle with Covid-19, which he described as "truly tough times", and addressed Leader of the Opposition Pritam Singh's concern that the GST hike may have led to "turbocharged inflation".
Wong said that during the Covid-19 pandemic, 2020 saw five budgets and 2021 had three — the Government sought approval from then-President Halimah Yacob to draw from reserves on five occasions.
The Government realised that spending would increase, and attempts to raise revenue through property and income taxes were insufficient.
Wong, who is also Finance Minister, said: "That's why we had to consider the GST increase. It was a difficult decision, it was a difficult choice. It's never easy to raise taxes, and certainly not a tax like the GST.
"But governance is about making responsible choices, not just popular ones. We must ask ourselves, do we want short term populism or long term stability? Do we want to kick the can down the road or take the hard but necessary decisions."
Once the economy began stabilising, the Government rolled out the GST increase alongside a comprehensive assurance package to delay the effects of the GST increase for most Singaporean households.
The package, which also underwent several enhancements, tackled cost of living concerns so that majority of households would not be impacted by the GST increase for at least five years, Wong said.
This is on top of the permanent — and similarly enhanced — GST vouchers aimed at supporting and protecting lower-income groups indefinitely.
"If we chose to avoid the GST increase because it is unpopular, or if we did not enjoy the unexpected upsides in corporate income tax collections which emerged only in the last two years, we would have ended financial year 2024 on a deficit," Wong added, also stating that the projected balance in the financial year of 2025 would also have been a deficit.
Leader of the Opposition Pritam Singh had raised concerns that the GST hike resulted in a "turbocharged inflation" during his speech on the first day of the Budget debate on Feb 26.
Wong asserted: "Let's be clear — as a small and open economy, our inflation was driven primarily by global factors: wars, supply chain disruptions and rising energy costs... even before the GST increase, prices were already going up globally and in Singapore."
The effects of the GST increase on inflation in January 2023 and January 2024 "would be transitory", he also said.
Consumer price index (CPI) inflation was 6.1 per cent in 2022, moderating to 4.8 per cent in 2023 and 2.4 per cent in 2024 as GST rates were raised by one percentage point each year.
“Where is the turbocharging? Look, I know elections are approaching, but this chamber is not an election rally. Let’s not get carried away by hyperbole and have a debate based on facts,” PM Wong countered.
Replying to the Prime Minister, Singh said that he took reference from a statement by the Monetary Authority of Singapore which estimated core inflation for 2024 to be 2.5 to 3.5 per cent, and that the GST rate increase would contribute slightly less than one per cent to core inflation.
"So if you take that figure with the lower end of the estimate at 2.5 per cent, that's 40 per cent, and that is the contribution of the GST hike," he said.
Wong also stated that Singapore is "fortunate" to have surpluses in the financial years of 2024 and 2025, but does expect expenditure to increase in the future as more monies go into upcoming needs.
Reserves should be able to remain steady and keep pace with the economy if the Government continues being responsible and prudent with finances, Wong said.
He also drew comparison with the fiscal situation in countries in the West which have "record levels of fiscal deficits" and growing national debts.
"We should appreciate all that we have here in Singapore," he said. "In contrast to so many other countries which are using their revenues to service interest payments, we have the opposite. We receive a boost to our revenues from our investment returns.
Countries that have natural resources are usually the ones to have "this luxury of investment returns", Wong said.
"We have nothing, and yet we are in this position. It is truly unique, and it is a Singapore miracle."
Aside from concerns regarding fiscal projections and plans, Wong also addressed two other overarching issues of supporting businesses and workers to navigate the new economic reality and helping Singaporeans cope with the stresses of life.
On the first issue, Wong highlighted concerns raised by MPs due to disruptions arising from rapid technological advances.
"Existing jobs will be redesigned and new jobs will be created. Understandably, all this will contribute to anxiety and concerns among Singaporeans about jobs," Wong explained.
He warned: "These concerns are real and I acknowledge them, but we have to understand the underlying reasons and avoid pinning the blame on foreigners, because we can see this happening in so many other countries where foreigners are to blame and public discourse ends up spiralling into very negative, very toxic and xenophobic directions.
"That's not what we stand for in Singapore, and we must never allow that to happen here."
Wong also shared that despite the progress made on SkillsFuture, which helps Singaporeans upskill their lifelong journey, there is still much to improve and build up — not an easy task, as Singapore is "already at the forefront in many respects" and "there are no ready models for us to look to".
"We have to experiment, innovate and find our own way forward... We cannot save every job, but we will support every worker in Singapore," he stated. "We will create even more opportunities, and better jobs for all Singaporeans."
Addressing questions from MPs on bread-and-butter issues such as the rising costs of living, Wong clarified that the SG60 package as well as the cost-of-living support measures only make up about five per cent of the overall Budget.
A much larger part of Budget expenditure goes into structural programmes aimed at empowering Singaporeans through education, skills training, skills upgrading, job training and SkillsFuture, he said.
Wong added: "This will ensure Singaporeans do not just receive help, but are able to stand on their own feet and seize better opportunities for themselves and thrive in a rapidly changing world."
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