No exact timing yet for GST hike, says Heng in Budget debate wrap

Finance Minister Heng Swee Keat said in Parliament yesterday that Budget 2019 reflects the "Singapore way" of putting people at its core, planning for the long-term and working in partnerships.

Wrapping up the three-day Budget debate, Mr Heng said it was not just about how the Government spends, but also how it funds this spending.

Workers' Party chief Pritam Singh said his party supported the Budget, but reiterated its opposition to the two percentage point goods and services tax (GST) hike announced last year, which is slated to kick in anytime between 2021 and 2025.

During his speech, Mr Heng defended the GST hike and the Merdeka Generation Package (MGP), explaining, clarifying and rebutting points raised by MPs on issues such as tax and government surplus.

On delaying the GST hike

Mr Heng said the Government has not yet decided on the exact timing of the hike.

It will monitor prevailing economic conditions, expenditure trends and revenue buoyancy before raising the tax.

The hike is needed to support structural increases in spending on healthcare and other important needs like security.

Mr Heng said this rising base spending is of a completely different scale and nature from one-off cohort-based packages like the MGP, which are over and above this expenditure.

Mr Heng said the GST hike is expected to raise about 0.7 percentage points of gross domestic product (GDP) in revenue.

He contrasted this to the estimated 6.5 percentage points of GDP in additional revenue that a median government from the Organisation for Economic Co-operation and Development will require by 2060.

The Health Ministry is expected to spend $6.1 billion this year alone to subsidise patient bills through permanent schemes that benefit Singaporeans of all ages and incomes.

On healthcare packages for future generations

This was mooted by Mr Singh (Aljunied GRC) on Tuesday.

Mr Heng said the Pioneer Generation Package and the MGP are custom-made to meet the needs of the specific generations.

He reiterated the MGP is not linked to the election cycle, nor the unexpected surplus accumulated in this Government term.

He said younger cohorts will be in a better position to look after their own healthcare needs when they reach retirement, and the Government will tailor future policies and programmes to their specific needs.

With a responsible and long-term approach, younger Singaporeans need not fear that they will end up paying a disproportionate share of the cost.

Mr Heng said: "But if we lose this discipline and make rash promises, like universal benefits regardless of circumstances, I would worry for our future generations."

On surpluses, the NIRC and borrowing

Mr Heng said the unexpected surpluses accumulated in the last few years were due to volatility in revenue and expenditure, like the suspension of the high-speed rail project, and not because of the introduction of Temasek Holdings into the Net Investment Returns Contribution (NIRC) framework as Mr Singh had suggested.

On borrowing to finance major, long-term infrastructure projects, Mr Heng said borrowing will not free up new revenue for recurrent spending.

Borrowing to spend on recurrent needs like healthcare and security is irresponsible as it shifts the burden onto future generations, he added.

Other taxes and transfers

Mr Heng said a GST tiered according to different types of goods, as suggested by Mr Saktiandi Supaat (Bishan-Toa Payoh GRC), would be less efficient in helping those in the lower income bracket, compared to a flat rate.

He added that Singapore's system of taxes and transfers is progressive and fair when taking into account schemes like GST vouchers and others that help the less well-off.

Ms Cheryl Chan (Fengshan SMC) had called for a net-wealth or inheritance tax for the super-rich, while Mr Yee Chia Hsing (Chua Chu Kang GRC), Ms Jessica Tan (East Coast GRC) and Mr Lim Biow Chuan (Mountbatten SMC) had asked for changes to the eligibility criteria for Government benefit schemes.

In response, Mr Heng said the Government will continue to regularly review the eligibility criteria for its benefit schemes, and will continue to monitor how to reduce the growing wealth gap.