Yesterday (27 Feb), Workers’ Party Member of Parliament Pritam Singh told Parliament that WP is “unable” to support the recently announced increase of GST from 7 to 9% by the PAP government.
Pritam added that instead of raising GST, the government could consider tapping into the money raised from land sales. At present, money earned from land sales are excluded from spending and would go straight into the reserves.
He further proposed that a cap on the amount of earnings from land sales that could be used for spending. That is to say, one does not need to put the full amount of the land sales into our reserves. He suggested a portion could be put into the reserves while the rest used to augment government spending so as to avoid increasing taxes.
Indeed, once earnings from land sales are included together with the government operating surplus, the amount going into our reserves every year is humongous. Followings are total budget surplus including earnings from land sales as well as investment receipts acknowledged by the government (it is hidden somewhere inside singstat.gov.sg website):
The reason why the government has to include land sales as well as investment receipts into surplus in the above table is because it has to submit the data by international standard yearly to IMF. That is why at the bottom of the table, the Singapore Dept of Statistics (DOS) added a qualifying statement:
“Presentation format of the table follows that of the National Summary Data Page for Singapore, which disseminates the data prescribed by the International Monetary Fund’s Special Data Dissemination Standards. Data in the table represent a broader definition of Government revenues and receipts than what are permissable for Government spending as presented in each year’s Budget Statement. This is because some revenues and receipts accrue to the Government’s past reserves, which cannot be drawn on without the approval of the President.”
Lim Biow Chuan tries to pull a fast one
PAP MP Lim Biow Chuan then immediately stood up to oppose Pritam’s suggestion for including a portion of land sales in Government spending. He said, “Once the land is sold, the asset is gone.”
WP MP Sylvia Lim then asked Lim to clarify and noted that land in Singapore is sold on leasehold terms by the government and that it will eventually revert back to the state anyway.
In response, Lim did acknowledge that state land is sold on 99-year leases, meaning that after a sale, a land parcel can be sold again only after the lease expires in 99 years’ time.
Indeed, all of our HDB flats are now sitting on 99-year lease land, which Minister Lawrence Wong said last year that for most HDB flats, their leases will eventually run out and the flats will return to HDB. HDB, in turn, will surrender the land which the flats sit on back to the State.
Lim did not address Sylvia’s question and instead, went about saying that income from land sales invested as part of the reserves is now already able to be spent through the Net Investment Returns Contribution (NIRC) framework, which allows the spending of up to half of the returns from investing the reserves.
In response to this, Pritam countered that separating land sales income from the other reserves for investment avoids “co-mingling”, allowing for “greater transparency” and guarding against “consequences of poor investment decisions”.
He added that it is unclear how the Government plans to spend its future Budget when the GST goes up. This “lack of clarity” and insufficient information regarding the potential to tap on the reserves has made the WP “unable” to support the increase in GST, he reiterated.
Said Pritam, “GST may well have to rise, but Singaporeans could be more likely to accept it if the Government considers the pros and cons of moving from the establishing orthodoxy and considers new approaches that improve social protection thresholds for all.”
Associate Dean of LKY School: No need to increase GST if use 10% more from investment returns
Meanwhile, academic like Donald Low, who is the Associate Dean of LKY School of Public Policies, has made the point that by using 10% more from the investment returns on our reserves, GST increase can be avoided.
Currently, under the Singapore’s Net Investment Returns (NIR) framework, the government can spend up to 50% of the long-term expected real returns on our reserves, which are managed by GIC, MAS and Temasek.
Mr Low, wrote on his Facebook page on 19 Feb, showing that by increasing the current NIR spending limit of 50% to 60%, there would be no need to increase GST.
“Why can’t we tap more of the net investment returns to finance increasing needs, instead of resorting to a GST increase?” Mr Low asked. “After all, what or who are we saving for, considering that future generations of Singaporeans are likely to be better off than the current generation of Singaporeans entering retirement.”
The PAP government has argued against using 100 percent of the NIR. Heng said that if we did this, “the principal sum of reserves will stagnate over time, and the NIRC as a share of GDP will consequently fall as our economy grows”.
However, just because 100 percent is not prudent doesn’t make 50 percent right either, Mr Low argued.
He said, “There’s nothing scientific about spending just 50 percent of the investment returns. Why not 60 percent, or even 70 percent? We’d still be adding to the principal of the reserves.”
The NIR contribution is estimated to be $15.9 billion for this coming FY. Mr Low calculated that if the spending limit was raised to 60 percent, presumably the NIR contribution this year would be just over $19 billion.
“The additional $3 billion every year, increasing at the rate at which the reserves are growing, is almost exactly what the 2 percentage point increase in GST would yield—in perpetuity,” he explained.
“So even if we accept that the projected increase in spending after 2021-2025 would require a revenue increase equivalent to a 2 percentage point increase in GST, the question is why doesn’t the Govt increase the NIR spending limit from the current 50 percent to, say, 60 percent instead?”