They say land sales, with other income, are enough to fund more social spending
BY GOH CHIN LIAN
AGAINST: Ms Sylvia Lim thinks the GST hike is unnecessary as the Government has enough money from other sources for social spending.
TWO opposition MPs and one Nominated MP yesterday questioned the need for an increase in the goods and services tax (GST).
The Government had not put forward a convincing case for it, they said.
Workers’ Party chairman and Non-Constituency MP Sylvia Lim and Singapore Democratic Alliance leader Chiam See Tong (Potong Pasir) said the Government had enough money to pay for increased social spending without having to raise the GST from 5 per cent to 7 per cent from July 1.
This is especially so if revenue from the sale of state land and Net Investment Income (NNI) were included.
And the cut in corporate tax from 20 per cent to 18 per cent could well pay for itself without having to raise GST, added Ms Lim.
Mr Chiam noted that land sales raised about $4 billion a year – more than enough to cover any loss of revenue from the lowering of the corporate tax rate and with enough to finance Workfare.
“If the Government is not obsessed with having a Budget surplus on every Budget day, but aims only for a balanced Budget, there is no need for a GST hike,” said Mr Chiam.
“It only has to use cash generated by land sales to balance the Budget.”
The current practice of excluding revenue from land leases from the Budget is seen as overly conservative and not in line with international accounting standards, noted Ms Lim, citing the International Monetary Fund and the Organisation for Economic Cooperation and Development.
If there was any fear on the Government’s part of banking on such volatile revenue, Ms Lim suggested counting, say, just half of it for the Budget.
The MPs also wanted more information on the proposal to include capital gains as part of the NNI from reserves which may be used by a current term of government.
Some economists have said that profits from selling assets or realised capital gains may be included, and estimated that this may boost NNI by some $2 billion to $3 billion.
Nominated MP Eunice Olsen said: “How do we know the income is not enough to preclude the need for a 7 per cent GST or even a 6 per cent GST?”
Also challenged: The argument that GST has to increase to make up for the cut in corporate tax rate.
Ms Lim said analysts have noted that if firms do well, tax collections need not suffer because of a cut in corporate tax.
And in countries like Ireland, a corporate tax cut stimulated growth and attracted foreign capital and talent, she added. If growth is boosted and companies made more, corporate tax revenue may even go up. “The data suggest that the Government may end up better off,” she said, a point that her party’s secretary-general, opposition MP Low Thia Khiang (Hougang), also raised on Tuesday.
Questioning the need for the GST to go up to raise revenue, she said revenue from personal income tax and statutory board contributions are expected to increase by close to $1 billion in the coming financial year.
And come 2010, the integrated resorts could add more revenue to the taxman’s coffers – US$1 billion (S$1.5 billion) to US$2.5 billion a year, according to some estimates.
With these other sources of revenue, there is no need for a GST increase now, she said.