How should the Govt collect and spend funds for various needs?

Raising revenue — be it via a hike in GST or personal and corporate income tax, or tapping more of investment income — has been an issue dividing parties.

- Tay Hong Yi

In November 2022, Parliament debated the necessity, timing and extent of the hike to the goods and services tax (GST), after the Government first gave notice in 2018 that it intended to do so.

The WP and PSP both opposed the increment of the GST from 7 per cent to 9 per cent, citing the inflationary environment, and suggested alternative ways of raising revenues, such as using more past reserves and proceeds from land sales.

The PAP, however, said the opposition's proposals were politically more attractive but would be to the detriment of future generations of Singaporeans.

At the 2022 debate to amend the GST Act, then Deputy Prime Minister Lawrence Wong, who is now prime minister, said the GST had to be raised to close the gap between revenue and expenditure until 2030, given projected increases in healthcare and social spending.

While the Government had looked at various other revenue alternatives, such as property tax, personal income tax and corporate income tax, the sums simply did not add up to an alternative to a GST hike, which would raise $3.5 billion each year.

For instance, to make up the revenue through personal income tax instead would have required top marginal rates to go up from 22 per cent to 42 per cent, or higher tax rates for a broader group of people, he said.

Alternatively, the headline corporate income tax rate would have to be raised from the current 17 per cent to more than 22 per cent to generate $3.5 billion a year, a move that would have a major impact on Singapore's competitiveness, Mr Wong, who is also Finance Minister, said in reply to a 2022 parliamentary question from Non-Constituency MP Hazel Poa.

COMPETING IDEAS ON USE OF RESERVES, GST

To delay the effect of the tax hike by at least five years for most Singaporean households, an $8 billion Assurance Package was set aside, on top of the permanent GST Voucher scheme and other transfers.