Straits Times: Two-point GST hike in the spotlight

BUDGET DEBATE – DAY 1

Low Thia Khiang urges Govt to bring it back to 5 per cent; others question timing

BY CLARISSA OON

Scrap the two-point increase in the goods and services tax (GST) and bring it down to 5 per cent again, opposition MP Low Thia Khiang said yesterday.

He gave two reasons when he made the call in Parliament during the debate on the Budget for the coming year.

One, the record Budget surplus of $6.45 billion which far exceeded last year’s projection.

“In the previous fiscal year, the Government raised this GST by saying money is tight, we need to get some back from the people.

“But now we have the huge surplus, so by right, the Government should cancel the 2 per cent increase in GST,” he said, speaking in Mandarin.

Two, rising inflation is a heavy burden on many low-income earners.

Mr Low accused the Government of using the poor as an “excuse” to raise the GST.

The Government had said the GST hike last July was needed to fund new payouts to low-wage workers. This became the Workfare Income Supplement.

“Maybe our Government doesn’t know that while last year’s economy seemed very good, not all the industries benefited. Some people received no bonuses,” Mr Low said.

To underscore the struggles of low-income families, he read aloud a letter from one of his Hougang constituents.

The man had written about his 69-year-old father who, after being retrenched, worked for over a year as a security guard.

Despite speaking English and Mandarin and passing the relevant medical and other tests, the old man is paid only $45 a day for working 12-hour shifts, with the occasional overtime allowance.

He does not receive any CPF payment, holiday pay or medical benefits, said Mr Low. The Government should do more to help people like him get access to Workfare payouts, he said.

Income gap aside, the MP questioned the “huge difference” between the $6.45 billion surplus and the Finance Ministry’s original projection of a $700 million deficit.

Such unreliable projections could “affect the Government’s credibility”, he added.

Two PAP MPs, Dr Amy Khor (Hong Kah GRC) and Mr Seng Han Thong (Yio Chu Kang GRC), disagreed with Mr Low.

Why should the Government be “embarrassed” about the unexpected windfall, Dr Khor retorted.

“Far from it, I think we should all be happy and commend the Government for doing such a good job and bringing about such a large surplus,” she said.

Mr Seng said in Mandarin that “a lot of people blame the GST rise” and fail to realise that inflation is currently a worldwide phenomenon.

He also took issue with Mr Low’s point that withdrawing the GST increase could significantly help the poor.

A more lasting solution, he said, could be found through a combination of Workfare payouts and training schemes to help them find better jobs.

Other MPs, however, also did not look kindly on the GST hike in a climate of healthy economic surpluses.

Nominated MP Gautam Banerjee urged the Government to reduce GST back to 5 per cent “and hold it at that level until such time that there is a real need to increase government revenue from indirect taxation”.

Mr Inderjit Singh (Ang Mo Kio GRC) and Nominated MP Eunice Olsen both felt the Government had been too hasty in raising the GST.

The Government could have held it off for a year or two “in the light of the booming economy which should have been visible by mid-2007”, said Mr Singh.

Ms Olsen said the wide gap between the Budget surplus and the earlier projection of a $700 million deficit is a cause for concern.

“There are worrying voices on the ground that say it would be hard to believe the Government the next time it says more revenue is needed for spending,” she said.

However, Singapore is not alone in its poor “budget marksmanship”, she noted, citing Hong Kong.

The Chinese territory is expected to report this week a budget surplus of four times the amount it forecast last year.

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