Ensure GST increase of 2% truly benefit the people

By Melvin Tan

Wednesday, 13 December, 2006

The impending increase in Goods & Services Tax (GST) by 2%, announced by Prime Minister Lee Hsien Loong in Parliament on 13 November 2006, is not without my expectation.

During the General Elections in April – May 2006 at an election rally speech in Ang Mo Kio GRC, I expressed that “I will not be surprised that by the next elections, GST would have gone up”.

By the next GE, with four to five years from now, GST would stand at 7%, up from the present 5%.

This time round, the PAP government marketed the justifications for the increase in a more appealing fashion and in my view, more digestible compared to the last round when GST was raised from 3% to 5% in 2003 – 2004.

PM Lee said, “… the hike was necessary to finance the enhanced social safety nets needed to help the lower income group…” and he added “… the offset package would more than counter the rise in GST…”.

While no one knows yet as to what this offset package will encompass, expected to be introduced at next year’s Budget, this statement could have caught the attention and interest of those struggling in the midst of Singapore’s high living standards, hoping for some relief.

Setting aside the 2%

I believe the PAP government should allow the benefits of the increase to filter down to those in need in a concrete rather than in an abstract way, as a display of dedication to aid the lower-income.

My idea is to set aside the 2% from the 7% GST into a fund and disbursed to Members of Parliament, factoring proportionately the number of constituents below a certain income bracket, who will channel these funds appropriately based on the needs of residents who see them at Meet-the-People’s sessions.

This will ensure the PAP government is committed to earmarking the added surplus towards truly helping the people.

Without an institutionalised avenue in place, there is no guarantee that the PAP government will not redirect this investment elsewhere at a later time as it deems fit, giving an explanation along the lines that times have changed.

In addition, if the offset package turns out to be nothing more than a one-time NSS, ERS or Progress Package-style measure that probably lasts a needy family no more than six months, the purpose would be defeated.

After all, I believe the GST rate will be a permanent fixture and any form of assistance to those in need should not be one-off.

A couple of other noteworthy points

Firstly, whether the GST increase will be implemented in two phases over two years, similar to what was done the last round after some murmurs of disenchantment, remains uncertain.

Expectedly, the same disenchantment has surfaced again, except this time, an imminent GE is a further distance away.

Secondly, when the PAP government first introduced GST at 3%, a comparison was made between the GST rate of Singapore and that of other countries; back then, it was indeed relatively lower.

However, since the rounds of GST hikes over the last three years, this comparison methodology has ceased to make an appearance.

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About the author:

Melvin Tan recently took part in GE2006 as a Workers’ Party candidate in Ang Mo Kio GRC. Melvin’s blog is here.