Singapore’s Goods and Services Tax (GST) is certain to increase next year after Parliament passed the Bill on Monday (7 Nov).
A majority of MPs passed the Goods and Services Tax (Amendment) Bill after a five-hour debate.
However, all opposition MPs recorded their dissent by voting no.
Following the passing of the Bill, people in Singapore will have to pay 8% GST on their purchases from 1 Jan 2023.
Then, from 1 Jan 2024, GST will increase by a further 1% to 9%.
The Bill was turned down by all MPs from the Workers’ Party (WP) who were present, plus Non-Constituency MPs Leong Mun Wai and Hazel Poa from the Progress Singapore Party (PSP).
Among the opposition MPs who opposed the Bill was Sengkang MP Jamus Lim, who said inflation had hit Singaporeans hard.
Source: MCI Singapore on YouTube
Instead, he suggested that the GST hike be temporarily postponed for essential items.
These categories have been subject to the greatest price volatility in recent months, he pointed out.
Thus, it’s reasonable to offer “temporary, targeted relief” as spending on these items is seldom optional, and they command an “enormous pocket share” in the average household.
He also feared that a GST hike would “further feed this inflation monster” as our inflation is “stubbornly persistent”.
It’s been observed, he said, that inflation would actually increase after value-added taxes like the GST are introduced.
For example, Japan has increased its GST three times over the past 25 years, but each time, the inflation rate doubled for up to a year.
Though Singaporeans do accept that inflation is happening all over the world, he added,
The reality is that inflation has inadvertently become a tax on our people.
Mr Louis Chua, also a Sengkang MP, expressed his disappointment that the Government had decided to push through with the GST hike, maintaining the WP’s stance that it isn’t necessary.
He said this would be “the straw that breaks the camel’s back” for Singaporeans already struggling with the cost of living, adding,
Do we really want to fan the flames of inflation, and contribute an additional unnecessary one-percentage-point increase in the cost of living? Are we contributing to inflationary pressures?
Mr Chua then used an analogy that might interest football fans, asking the House that when a team is five–nil down, “does it make sense to respond by scoring an own goal”?
When the hike was mooted in 2019, “circumstances couldn’t be more different”, he also said, as there was no Covid-19.
That means commodity prices were half, and inflation rates were 1/10th, of what they are today.
Thus, the GST hike’s timing “could not be any worse”, said Mr Chua, adding that it was irresponsible to proceed.
However, Deputy Prime Minister Lawrence Wong rebutted the Opposition in his closing speech.
Mr Wong, who is also Finance Minister, said he was disappointed that the WP had taken a different path after the Budget debate earlier this year.
Source: MCI Singapore on YouTube
He also took issue with the way that opposition MP had characterised the Government’s position, saying they had painted a “false and simplistic narrative”, adding,
At least have the decency to acknowledge that the Government had considered all of these alternatives carefully. We debated them in the Budget thoroughly and rigorously before we decided on this move. I would have thought that’s what a responsible political party would have done.
The minister wondered whether the WP took this path because “they feel that this approach is the best way to advance their political agenda” of painting the PAP (People’s Action Party) Government as uncaring and out of touch.
Earlier, Mr Wong announced that the Government’s Assurance Package to help households cushion the impact of the hike would increase to S$8 billion, from S$6.6 billion previously.
This is due to a boost of S$1.4 billion.
As household expenditure is expected to increase with higher inflation, the size of the support package would therefore need to be correspondingly increased, he said in Parliament on the same day.
Mr Chua recognised that the support packages were “the right thing to do” given Singapore’s fiscal position.
However, the support packages are merely transient, he pointed out, while the hikes will be permanent.
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Featured image by MS News.
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