The GST debate reveals fundamental differences between the PAP & the WP

By Senior Minister of State for Finance Chee Hong Tat

The GST Bill was  debated vigorously in Parliament.  Both the PAP and the WP presented impassioned arguments for and against the GST increase.  The differences in political values and attitudes towards fiscal discipline between the two parties could not have been more sharply defined. It is important to  consider these differences especially since the WP has grown in strength over the years and is now positioning itself as the government-in-waiting.

Both parties agree on the need for higher government spending in areas such as healthcare, infrastructure and programs to help look after our seniors in an ageing society.

The PAP government believes that we should spend within our means – if expenditure increases, so must tax revenue.  We also believe that every generation must do its part to safeguard Singapore’s hard-earned reserves, to ensure it can continue to generate resources for the future and to provide a rainy-day fund for subsequent future generations to tackle any emergencies.

The WP believes that we should avoid unpopular broad-based taxes like the GST and fund our higher expenditure by taking more from the reserves, thereby leaving future generations of Singaporeans with less money and a weakened financial position.

The PAP Position

During the Budget Debate in February 2022, Deputy Prime Minister and Finance Minister Lawrence Wong carefully explained the case for the GST increase, and why this increase is necessary to sustain Singapore’s long term spending needs with a rapidly ageing population.

The PAP government and the Finance Minister have also provided repeated assurances that the way we implement the GST will not hurt the poor, and that lower- and middle-income families will be cushioned from the impact of the GST increase for at least five years (five years for middle-income households and 10 years for low-income households).  There is also permanent support for lower- and middle-income families through measures such as GST Vouchers, U-Save rebates and Service & Conservancy Charges rebates, as well as the GST absorption for publicly subsidised healthcare and education.

This is what it means for a Government to care for its citizens – judiciously and responsibly, with practical solutions that help Singaporeans from all walks of life, especially lower- and middle-income families. 

The fiscal approach of the PAP government has always been prudent and pragmatic. The PAP government does not adopt a blanket ideology for or against any ideas or policies; it seeks out what works in practice and does what is necessary to ensure and secure Singapore’s continued success. 

Any decision to increase taxes, especially a broad-based tax such as the GST, is only taken after the Government has carefully explored and considered all options.  The Government understands the financial burden on Singaporeans, especially at a time when inflation is high.  Besides the assurance package, which has been enhanced to S$8 billion to cushion the impact of the GST increase, the Minister for Finance had also announced more than S$3.5 billion of support measures to help Singaporeans cope with higher inflation this year, with more assistance for lower and middle-income families and retirees. 

Our approach reflects the PAP’s values to build a fair and just society, supported by a fair and progressive tax and benefits system.   In his Budget roundup speech this year, Deputy Prime Minister Lawrence Wong explained how the principle of collective responsibility is a key feature of the Singapore system.  He said, “Everyone contributes towards the cost of delivering services, and everyone benefits from these services, but to different degrees. Those with greater means bear a higher burden, and they draw less on Government support, but they still enjoy some benefits from the Government. Those with fewer means carry a lighter share, but they still contribute something, and in return they receive more benefits from the Government – more than they put in, and more than the better off.”

The WP position

The WP has consistently opposed the GST. It is not only this increase from 7 per cent to 9 per cent that they oppose. They opposed every increase before; they opposed the very adoption of GST in the first place. There isn’t a spending proposal that WP didn’t like – only asking for more of it; and there isn’t a funding proposal that WP didn’t oppose – only proposing we raid the reserves instead. And yet, it spoke of political courage in its newsletter — an irony not lost on PAP MP for Bukit Batok Mr Murali Pillai

He gave his take on the real definition of political courage during the debate on the GST Bill in Parliament.

“We ask this at this difficult time, because we truly believe that it will give us a fairer and more progressive way of financing our Government, and build a stronger foundation for our nation. That is political courage.”

That said, the WP is not without suggestions.  As the main opposition party that hopes to take over as Government one day, it is important for Singaporeans to scrutinise the WP’s policy proposals and see if they pass muster.

One alternative that the WP has been championing is to spend 60 per cent or even 70 per cent of the Net Investment Returns Contribution (NIRC).  Another proposal from them is to use proceeds from land sales to fund current expenditure.  Both measures mean using more from the reserves, and leave behind less for future generations.

The PAP Government prefers to maintain the 50-50 ratio on spending our investment returns from NIRC, as this strikes a fair and necessary balance between the needs of today and tomorrow, and between current and future generations. 

If earlier generations of Singaporeans had done what the WP proposed and spent more of our reserves and investment returns in previous years, we will have less reserves and NIRC today. 

This means we would then have to increase taxes even further to fund our current and future spending needs. We would not be looking at an increase in GST from 7 per cent to 9 per cent, but a bigger increase to 11 per cent or perhaps even 13 per cent to fund our higher expenditures.

Trade-offs and difficult choices

In the 2011 Budget debate, (then Finance Minister) Senior Minister Tharman Shanmugaratnam said in response to WP’s former chief Mr Low Thia Kiang in the 2011 Budget debate that there are trade-offs in everything the Government wants to do.

“The arithmetic is simple. You have to balance your budget. If you are taking out less revenues, you also have to put back less expenditures, and you have to decide what to cut. So, what we are doing is having a broad-based tax system with the GST, and that therefore allows us to have much lower GST rates than most developed countries,” he said.

“So that’s the basic trade-off we have to address. And these are trade-offs not just for Government to address, but for any responsible Opposition to address. That is what first-world government, and in fact first-world opposition, has to be about – addressing the real trade-offs in every public policy.”

Our Moral and Social Responsibility

For the PAP, a vote for the GST increase is to accept our moral and social responsibility of caring for our ageing population today, without taking away resources from or borrowing against future generations.  And we must do it at a time when we have the ability, even if conditions are less than ideal, accepting that there is no ideal time for tax increases.

For the WP, they ought to be providing policy alternatives that are workable in practice and cater not only for our immediate needs but also Singaporeans’ needs in 10, 20, or even 50 years.  And they must explain clearly to Singaporeans the details of their proposals and the associated trade-offs. 

For a Better Singapore

We believe that every Singaporean aspires to work towards a better and successful Singapore, regardless of political creed or membership.  Singapore’s political journey since our country’s independence has been marked with several key inflection points.  At each of these crossroads, both Singaporeans and our political leaders have, so far, been able to make the right decision even when it was painful and tough. 

Singapore’s ability to do the right thing even when it is difficult to do so defines the core strength of all Singaporeans.  It has enabled our country to beat the odds and thrive since 1965.  It has contributed to a stable and responsive political system based on integrity, pragmatism and accountability to voters.  And this high level of trust in our society has enabled Singapore to overcome crises, plan long-term and improve the lives of successive generations of Singaporeans.