Finance Minister Heng Swee Keat in his speech at the Straits Times Global Outlook Forum 2018 on Tuesday (5 December), said that Singapore must make sure government spending remains sustainable even as needs grow and it becomes tougher to raise revenue as the country ramps up investment in key areas – such as defence and economic development – to develop an adaptable and innovative economy, nurture a caring and strong society and keep the country secure and resilient amid the “unpredictable and complex changes” ahead.
Mr Heng said, “This is about staying responsible and spending within our means. As expenditure increases and revenue growth slows, we must think of ways to manage expenditures and raise revenues.”
The Minister stressed that the ability of the Government to sustain its current spending, tax and other policies in the long run without threatening government solvency or defaulting on its liabilities or promised expenditures, which also means the country must ready herself for revenue risks in light of technological changes and evolving business models.
“Our system must remain pro-growth. Our overall system of taxes and transfers must remain fair and progressive. We must keep our revenue base diversified,” he added.
Mr Heng noted that in the coming years, Singapore will have to invest more in building an adaptable economy, a strong society and a secure home, saying, “These are all major investments for the long term – major investments in our people, and in our future.”
The Minister said that good governance remains crucial in the private, public and people sectors, saying, “We need to maintain a high level of trust, and do so by communicating our considerations, our challenges and our plans frankly and honestly.”
“The consequences if we fail to do so are severe – loss of trust, a divided people, a society that turns inwards from the world and loses its ability to adapt and innovate,’ he added.
During a question-and-answer session, Mr Heng said he would be “very cautious about making statements about how big our reserves are”, when asked about whether to raise taxes because of fiscal prudence instead of using Singapore’s reserves.
“Because at the end of the day, having the reserves gives a long-term stability to our economy and gives us the means to be able to weather a crisis in ways in which many other countries cannot, and increasingly in a world which is more uncertain, I think we better have more firepower than less,” he said.
“In fact when the economy had a downturn, we used the reserves to provide for that buffer. So I say never take it for granted. And if I can, I’d rather leave something for the future generations that their future is more secure,” he added.
The Minister then noted that fifteen years from now, it is going to be a completely different demographic in Singapore.
“If we don’t prepare for that I think we will come to regret it and I want to make sure for whatever I can, I will do the responsible thing,” he stressed.
Mr Heng’s speech on increasing the country’s revenue follows the sentiment of Prime Minister Lee Hsien Loong who in his delivery of speech during the People’s Action Party (PAP) convention held on Sunday (19 November) at Big Box in Jurong, said that raising taxes is not a matter of whether but when.
Mr Lee stressed that the Government needs to prepare for the raise, saying, “Well, before that time comes, we have to plan ahead, explain to Singaporeans what the money is needed for and how the money we earn and we spend will benefit everyone, young and old.”
Since Mr Lee’s speech, the mainstream media has pushed out ideas via commentaries and reports that a hike in the Goods and Service Tax (GST) will be the likely way forward.
