Parliament: Planned GST increase alone won't be enough for future spending needs, Sitoh says

SINGAPORE - The planned GST increase is but one measure to meet rising spending needs, and will not be able to meet them in full, Mr Sitoh Yih Pin (Potong Pasir) said on Wednesday (Feb 27), as he reminded members about the need for fiscal sustainability and financial prudence.

The Goods and Services Tax, currently at 7 per cent, is estimated to bring in $11.69 billion in the coming financial year.

And the rise in the tax rate by 2 percentage points to 9 per cent, sometime between 2021 and 2025, is expected to bring in an estimated $3.3 billion more in revenue, at best, he said.

Mr Sitoh, an accountant by training, turned to numbers to make his case. Spending on an ageing population and expanding and renewing infrastructure is rising, he noted, in the final speech on the second day of the Budget debate.

The Health Ministry's expenditure increased three-fold in 10 years, from $3.8 billion in Financial Year 2009 to an estimated $11.7 billion for FY2019, he noted. Overall government spending has risen from $57 billion in FY2009 to a projected $80.25 billion in FY2019.

This figure does not include special transfers such as Central Provident Fund and Medisave Top-ups, GST vouchers and household rebates, amounting to $15.3 billion for FY2019.

"The projected GST increase is therefore simply only one measure to mitigate the trend of rising expenditure, but clearly is unable to meet it in full," he said.

He noted that one way to meet these needs was through borrowing, and was supportive of this approach to finance long-term infrastructure projects such as Changi Airport Terminal 5.

"Singapore is in a better position now to dictate favourable borrowing terms than in the past, as our Government's credit rating is now among the world's best," he added, noting that the MRT lines were paid for in this manner in the 1980s.

Although this strategy of government spending is fairer and more equitable, it is also not without risk, he added.

Ms Foo Mee Har (West Coast GRC) urged the authorities to postpone the "unpopular GST hike for as long as possible", referring to the planned GST hike of two percentage points, from 7 to 9 per cent, between 2021 and 2025.

"We have seen enough examples around the world of countries mired in debt arising from careless borrowings and reckless funding of projects," he said.

He also urged the Government to ensure oversight over major infrastructure projects funded by borrowings, such as by creating an independent panel or body.

Speaking earlier in the day, Mr Gan Thiam Poh (Ang Mo Kio GRC) raised the possibility of increasing taxes on gambling activities, such as on winnings, as a way to support recurrent spending.

"(This) could provide a sustainable and long-term revenue to support the rising Singaporeans' social expenditure needs, leaving a rise in GST as a last resort," said Mr Gan.

Mr Gan also suggested that the Government prioritising the citizenship applications of high net worth individuals who have paid significant personal or corporate income tax, or have spent a substantial amount hiring Singaporean workers over a period of time.

On Tuesday, Workers' Party chief Pritam Singh (Aljunied GRC) asked whether debt financing for large infrastructure projects will free up revenue to fund recurrent spending, such as in a universal and permanent healthcare initiative.

In previous years, the WP had also suggested temporarily raising the Net Investment Returns Contribution to fund infrastructure investments, while the proceeds of private land sales could be used to top-up national revenue and used for recurrent spending.

But Mr Sitoh noted that without the Net Investment Returns (NIR) - proceeds from investing Singapore's reserves - the budgets will be in a substantial deficit every year.

Under the current framework, half of the expected long-term real returns from the GIC, Monetary Authority of Singapore and Temasek can be spent, while the remaining half is re-invested into the reserves. The NIR contributes about 20 per cent of the Budget.

"There are those who advocate for more returns to be used for the present, but I think the current arrangement is fair," said Mr Sitoh. "As they say in Hokkien, 'jip nang jip bua' - half for this generation and half saved for future generations."

This article was first published in The Straits Times. Permission required for reproduction.