Starting later than the scheduled time of 7pm, the P65 Dialogue – GST Implications took place at NTUC Centre Jan 23rd, 2007. Chaired by the post-65 PAP MPs Teo Ser Luck, Michael Palmer, and Zaqy Mohammed, the event was a rather scaled-down affair. There were no tv cameras, no media present (as far as we can tell) and none of the “glamour” which we would normally associate with a PAP event.

80 chairs were first set up for the audience – but was later cut to 60 chairs (30 on each side of the small room) as there really weren’t that many people. When the dialogue finally kicked off at about 7.30pm, Michael Palmer asked for a show of hands from YP (Young PAP) members, three-quarters of the audience put up their hands. Indeed, most of the audience were young people – including a few students from Hwa Chong, RJC and NJC. All in, about 50 people were there.

The dialogue was to address 4 issues: The reason for the GST hike, the use of the raised amount, the comparison with other countries and the implications of the rise.

The main issues

Zaqy Mohammed addressed the first 2 questions but there was nothing really new in what the MP said – we have a greying population, we need to prepare for the future, cost will be incurred to build the infrastructure for our ageing population, etc. An increase of 2% in the GST is not sifficient and thus the govt will be looking to release more money from the Net Investment Income (NII) to supplement the amount collected through GST.

After the brief run-down of the four issues, the MPs opened the dialogue to the floor. Although it got off to a slow start, questions from the audience started flowing in soon after. Questions such as: How is the money collected going to be used? How do we ensure that the offset package will be effective? Why not tax rich people more? Can we have a steeper ‘elevator’ in our tax structure?

Competition with Hong Kong

A lengthy period was dedicated to the macro issue of competition, particularly with regards to Hong Kong. A few members of the audience brought up this topic, questioning why we are competing with Hong Kong on corporate tax rates. A young businessman reminded the panel that Hong Kong has a totally different form of governance, for example they do not have to spend on defence and foreign affairs, compared to Singapore. Thus saving costs. Competing with them on tax cuts is therefore not a viable thing for Singapore to do. “We will always lose. Are there other ways to compete?”

MM Lee’s revelation that corporate tax will most likely be cut by 1% in next month’s budget sitting in parliament also drew some questions. “Is cutting it by just 1% going to make any difference? Aren’t we already lower than many other countries? The fact is that investors who come to Singapore already are enjoying the benefits,” says one student.

MP Teo Ser Luck, who is also parliamentary secretary to the Ministry of Communications, Youth and Sports (MCYS), replied to these questions. He agreed that cutting corporate tax rates in order to compete with Hong Kong is not and should not be the ”main” way we compete with them.

A multi-pronged approach to competition

Emphasising that he is expressing his own views, he explained that Singapore needed a multi-pronged approach to this issue from all fronts – and ”be good or better than good” than others in all fronts. These included political stability, being a regional hub for education and the services, and being a global hub for life sciences, for example.

“Lowering corporate tax is one advantage we can offer to FDIs”, he said. “A 1% drop (in corporate tax), to be honest, there’s not much impact. It has to be all-front to be effective.”

Elaborating on the competition with Hong Kong further, Mr Teo said, “We cannot deny the fact that whoever puts his money in Hong Kong is actually looking at the mass market there, in China… We do not have this advantage, unless ASEAN comes together as a big block market. Thus, we need to find our own competitive advantage.”

Do we really not have enough money?

Returning to the government’s claim of not having enough money to help poorer singaporeans, a member of the audience asks why this is so. “Just less than one year ago, hundreds of million of dollars and billions of dollars were declared for upgrading projects. Yet, now we are being told that the govt does not have enough money. Is this because all the money was spent on upgrading?”

Mr Zaqy Mohammed clarified that ”the PM did not say we do not have enough money now“. He went on to explain that with a greying population, the govt is actually looking to the future and trying to prepare for the future and thus the raising of the GST is a step in making sure the government has enough money to cater to future needs of the ageing population too.

Mr Teo also said that he has recommended or looking to recommend a tiered GST system, where certain basic goods are exempted from the GST. But he emphasised that he is not promising that it will be implemented and that it is just a recommendation.

On the question of the government sending out a mixed message about the GST hike to the people of Singapore, or at least sending out a rather confusing message, Mr Teo agreed that the government can do better.

Conclusion

One has to say that the MPs were friendly and tried their best to answer the questions. But perhaps because of time constraints or because of the nature of such dialogues, some answers were not probed further – for example, why did the govt had so much money to promise for upgrading less than one year ago, but now is saying they do not have enough. Even taking Mr Mohammed’s answer that the govt is looking to cater to future needs into consideration, the question still remains: Why are we spending so much now if we know we are not going to have enough for the future?

All in all, the dialogue was a nice departure from the usual glamour and glitz affairs of the PAP. The small room made it an intimate setting. And the MPs, to their credit, handled the session well – by and large.

A discomforting presence

The only complaint perhaps, is the rather discomforting presence of so many YP members. As mentioned, they filled up 3/4 of the chairs. I can only wonder what it would have been like if the YP members were not there.

We would only have a handful of members of the public present.

And perhaps that is where the irony and where the issue lies – the PAP preaching to their own choir – despite Mr Teo, Mr Palmer and Mr Mohammed’s best efforts to engage Singaporeans.

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