PM Wong says GST hike didn’t ‘turbocharge’ inflation, urges against being ‘carried away by hyperbole’

Inflation actually fell after GST hike was imposed, says PM Wong

Prime Minister Lawrence Wong has responded to accusations that the Goods and Services Tax (GST) hike of the past few years has “turbocharged” inflation.

He denied that was the case, pointing to external factors that drove prices up.

Photo for illustration purposes only.

Inflation already taking place globally before GST hike: PM Wong

PM Wong was speaking in Parliament on Friday (28 Feb) while wrapping up this year’s Budget Debate.

He said prices were already going up across the world even before the GST hike was imposed.

Source: MDDI Singapore on YouTube

As a small and open economy, Singapore’s inflation was “driven primarily by global factors” such as wars, supply chain disruptions and rising energy costs, he added.

Inflation dropped after GST hike

Mr Wong also pointed out that the Monetary Authority of Singapore had assessed that the GST hike would have a “transitory” impact on inflation.

Inflation was 6.1% in 2022, before the hike, he noted.

After GST went up by 1% in Jan 2023, inflation dropped to 4.8%. After another 1% GST hike in Jan 2024, inflation again dropped to 2.4%.

Thus, Mr Wong asked where the “turbocharging” was, adding:

Look, I know elections are approaching, but this Chamber is not an election rally. Let’s not get carried away by hyperbole and have a debate based on facts.

Pritam said GST hike fanned the ‘flames of inflation’ further

The PM was responding to a speech made by Leader of the Opposition Pritam Singh on Wednesday (26 Feb), where he accused the Government of “poor fiscal marksmanship”.

Source: MDDI Singapore on YouTube

He questioned the need for the GST hike, saying that even as imported inflation contributes to price rises in Singapore, there was no need for the People’s Action Party (PAP) government to “add fuel to the fire and fan the flames of inflation further”. He also added:

Why the PAP went headlong and headstrong into raising GST and thereby turbocharging inflation further, is something only the PAP itself can answer to Singaporeans for.

‘Unpredictable’ fiscal projections might lead to cynicism: Pritam

Mr Singh described Singapore’s fiscal position as “exceedingly healthy”, noting that 2024’s fiscal surplus was revised “massively” upwards from S$778 million to S$6.4 billion.

Deficits estimated for financial years 2021 and 2022 turned out to be surpluses instead, he pointed out.

The overall surplus from this term of government is set to hit S$14.3 billion, he also noted.

Thus, the Government’s “unpredictable” fiscal projections might lead to cynicism among the public when future tax increases are needed, he said

Singaporeans would not be out of place to ask – why is there a need to collect so much money when the Government’s fiscal projections are so unpredictable, but somehow always so healthy when elections have to be called?

Non-Constituency MP Hazel Poa, chief of the Progress Singapore Party, agreed, saying the Government could have reformed the corporate tax regime instead of raising GST.

Singapore would’ve been weaker without GST hike: PM

But on Friday, Mr Wong said Singapore is in a strong fiscal position because the Government took the necessary steps to raise revenues.

Singapore would have ended the last financial year on a deficit if there had been no GST hike and the unexpected corporate income tax collections, which came in the last two years, had not ensued, he said, adding:

The projected balance in FY2025 would also have been a deficit, and that would have meant less funding for essential services, less support for our seniors, and fewer resources to invest in our future. Basically, Singapore and Singaporeans would have ended up in a much weaker position.

Also read: S’pore School Canteen Vendors Increase Prices By Up To S$0.50 Due To GST Hike

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Featured image adapted from MDDI Singapore on YouTube and MS News. Photo on right for illustration purposes only.