| 68. |
The PM announced yesterday
that the one percentage point increase in
GST scheduled to take place on 1 January 2004
will proceed as planned. Let me explain why
we cannot delay this increase. |
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| 69. |
The GST increase is to raise
revenue to compensate for the cuts in the
corporate and personal income tax rates. MOF
planned the income tax cuts on the basis that
the GST would be raised to 5% on 1 January
2003. The phasing in of the GST increase has
already created a significant revenue shortfall.
A 4% GST rate is not enough to offset the
lower income tax collection. We need to remedy
this as soon as possible. |
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|
| 70. |
Our budget this year is very
tight. We are likely to run a much bigger
deficit this year than anticipated. Revenues
have come down in the first half of this year
due to the income tax cuts and slower economic
growth. In the Straits Times yesterday, one
letter writer asked how the Government is
going to spend its savings arising from the
CPF changes. To put the numbers in perspective,
the Government is saving about $175 million
a year from the CPF changes. This year in
the Budget Statement, I had already projected
a deficit of $1.2 billion. Now, with lower
tax revenues than expected and this new help
package, even if we take into account the
CPF savings, we still expect to run a deficit
of $2.3 billion. Next year we are projecting
an even larger deficit. Deferring the GST
will make the deficits even worse. |
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| 71. |
I understand the visceral reaction
of Singaporeans against any GST increase.
At this time, any additional burden must be
unwelcome. However, we should try to understand
the problem rationally. Deferring the GST
increase is actually the least effective way
to help low-income Singaporeans. By design,
the GST covers almost all types of goods and
services, consumed by all income groups. Hence
the benefit of a lower GST is spread widely
and evenly. Only a small part of the revenue
lost actually benefits our target groups,
namely the low-income families, unemployed
Singaporeans, and older workers. It is far
better to proceed with the GST increase so
that the Government will have more resources
to help these deserving groups. |
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| 72. |
We will therefore proceed with
the GST increase and give out the second tranche
of ERS shares on 1 Jan 2004 as planned to
help low-income families with the transition.
The ERS shares will amount to $900 million
compared to the extra $650 million that will
be collected in GST in 2004. So pressing on
will actually make nearly all households better
off in 2004. |
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