The Business Times (16 Apr): Various ways to raise revenue for long-term needs being studied16 Apr 2021
Various ways to raise revenue for long-term needs being studied
I THANK Mr Hng Zhan Peng ("Yes to raising GST rate, but later; other alternatives exist", BT, 13 Apr 2021) for sharing his views.
The government announced the GST rate increase in Budget 2018, two years before the Covid-19 pandemic struck Singapore in 2020. The need to raise the GST rate remains, to meet the long-term needs of our fellow citizens, especially in healthcare, and not for recovering the unprecedented draw from our reserves. The reserves have afforded us the facility to tap this crisis fund without having to resort to any one-off special tax measures that other countries have had to consider.
Our collective wish to care for our seniors and meet other needs would require us to make medium- to long-term revenue plans. We share Mr Hng's concern on the timing of the GST rate increase. As mentioned in Budget 2018, and reiterated in Budgets 2020 and 2021, the government would take into account the state of the economy and our spending needs, in deciding when to raise the GST rate to 9 per cent.
The incidence of any tax - whether it is GST, income or wealth tax - is on individuals in their capacities as consumers, employees or business owners. We therefore have a diversified revenue base, collecting from economic activities of various kinds and in a progressive way. Those who earn or own more pay higher taxes.
When we eventually increase the GST rate, we will continue to support Singaporeans, especially the lower- and middle-income households:
*We will enhance our permanent GST Voucher scheme.
*We will continue to absorb GST on publicly-subsidised education and healthcare.
*The GST Assurance Package will offset the additional GST payable for at least five years for the majority of Singaporean households, and about 10 years for the lower-income households.
Mr Hng has raised suggestions on other sources of revenue such as raising the top marginal personal income tax rate to 24 per cent, increasing corporate tax rate to 19 per cent and enacting an "automation tax" on businesses that adopt technology to transition to a new post-Covid world.
We are studying various options on how we can raise revenue to meet our long-term fiscal needs, including some of the suggestions provided by Mr Hng and other members of the public. We have also moderated the growth of public-sector spending.
Any measure to raise revenue will need to ensure that our system of taxes and transfers continues to support a competitive economy and help build a fair and just society.
Director, Fiscal Policy
Ministry of Finance