Questioning The GST Increase

I, and I suppose most of you all were too, was greatly surprised (in a mildly unpleasant way) by PM Lee's, who is concurrently Finance Minister, announcement yesterday in Parliament that the Goods & Services tax (GST) will be increased from its current 5% to 7% as a means of increasing the Government's income to finance its increased expenditure to help the less well-off in Singapore's society.

However, despite my surprise, I did not give this issue much thought, due to my mind being preoccupied by my upcoming Post No. 93, until I saw the sub-headline for the news report on the GST increase in today's 《联合早报》/“Lianhe Zaobao”. And that sub-headline was: “政府开源，致力扶贫”, which can be roughly translated into English as “Government increases its income to help the less well-off”.

The reason why this sub-headline caught my eye is that it reminded me of this Chinese idiom of “开源节流”, which can be roughly translated into English as “Increasing income, reducing expenditure”. With this idiom in mind, a series of questions started to emerge in my mind about the GST increase.

With regards to the first half of the Chinese idiom (i.e. “increasing income”), I was thinking: is increasing the GST really the only way through the Government is able to increase its income to finance its increased expenditure to help the less well-off in Singapore? Yes, I am aware that PM Lee said that it is not possible for Singapore to increase direct taxes as it will be detrimental to Singapore's economic competitiveness. And I am also aware that it was reported in today's Straits Times (“Many caught offguard by move to up GST”) that “Tax expert Lam Kok Shang, a director with KPMG, said the gradual move to cut direct taxes such as income and corporate taxes, and raise indirect taxes such as GST, is a global trend and an inevitable one”. Yet, I just cannot help but wonder: is there really no other way for the Government to increase its income besides resorting to increasing the GST?

Anyway, with regards to Mr. Lam's comments (no offence to him, of course), I find it somewhat fallacious to argue that since increasing indirect taxes is an inevitable global trend for countries which want to maintain their economic competitiveness, Singapore should follow suit and increase its indirect taxes. I mean, if it was a global trend for countries to kill off the less educated in their societies so as to maintain their economic competitiveness, should Singapore also just follow suit? Yes, I am aware that this is an extreme example but the point I am trying to make is that it cannot be a case that Singapore just abide by every global trend to maintain its economic competitiveness.

As for the second half of the abovementioned Chinese idiom (i.e. “reducing expenditure”), I can see how the Government is trying to increase its income through increasing the GST but how is it trying to reduce its expenditure in other areas so as to have more money to spend on helping the less-well off in Singapore? For example, is it not possible that the Government reduces the salaries of its senior civil servants & governmental ministers so as to reduce its expenditure? Also, is it not possible that the Government follows the example of the Japanese and reduce its usage of air-conditioners in its public/governmental offices to reduce its expenditure on electricity? Surely there must be some way that the Government can reduce its expenditure so that it will have more money to spend on helping the less well-off in Singapore.

Moving on, though I may perhaps be nitpicking here but it seems to me that the local media has perhaps presented the GST increase as some sort of fait accompli. In other words, the local media, in my opinion, has perhaps presented the GST increase as something that will happen. I mean, just look at the headline for today's Straits Times: “GST will go up to 7 per cent” (emphasis mine). Yet, this does not fit with what I have learnt in my PS1101E (Introduction to Political Science) module this semester. In this module, I was taught that one of the key basic functions performed by countries' legislatures is to examine, debate and approve (or disapprove) the budgetary bills and taxes (or tax changes) proposed by the Government. Hence, with this in mind and considering that PM Lee said that details of the GST increase, together with the package to offset it, will be released in next year's Budget, it would seem to me that this GST increase still need to be debated and approved by Parliament before it can be implemented. Or is there a gap between theory & practice here in Singapore?

Thus, I find myself in agreement with Mr. Zaqy Mohamed, MP for Hong Kah GRC, when it was reported in today's Straits Times (“Many caught offguard by move to up GST”) that he was hoping that “the motion [to increase the GST] will be up for discussion from now till next year's Budget debate, as it will impact many Singaporeans”.

Well, perhaps I am being too pessimistic here but I suppose the GST increase will most likely be approved by Parliament next year. They approved the last increase from 3% to 5%, didn't they? Hmm... I suppose that we can only hope that the GST offset package promised by PM Lee will be a generous and effective one.