A GST Hike Hurts Low-Middle Income Singaporeans, Why Can’t the Finance Minister Clarify This?

I called my first budget debate last year a “rushed debate”, this year a “disappointing debate”.

I was still allowed little opportunity to ask questions even though I have told the Speaker from the beginning I had more questions to ask in this budget debate.

The greatest disappointment was Lawrence Wong’s responses to the only two questions which I was allowed to ask. Following his promise at the Feb 28 sitting that he would clarify what is the tax burden on middle-class Singaporeans at today’s wrap-up debate, I have expected him to throw more light on the question I raised previously. I have asked him how is the $3 billion or $3.5 billion additional GST revenue borne by the top 20%, the GST voucher beneficiaries and the middle-class. (The middle-class does not receive the voucher or at least not permanently). Instead of giving the figures outright which should be very easy to do, he resorted to some charts showing that GST is mainly borne by the upper-middle-income and rich Singaporeans and thus avoided answering my questions.

Few Singaporeans would believe that GST is not an additional burden on the low- and middle-income Singaporeans in the long term because of the government’s liking to spread the tax burden over a large base rather than just the top 10% or 20% of Singaporeans in terms of income and wealth.

While I am not advocating raising taxes because my main interest is in making better use of the investment income from the growing reserves, I have asked Lawrence Wong what would be his choice if a 3% to 4% personal income tax hike on the top 10% income-earner yield the same revenue as a 2% GST hike. His first response was that it was not possible to raise $3 billion from personal income tax. When I further pressed Lawrence Wong for a figure on the total taxable income of the top 10% income-earner, he actually invoked the “fallacy of authority” argument that I should believe him as the Finance Minister??? (See video below)

Isn’t this ridiculous when a debate is supposed to be conducted based on data. He should give me the taxable income figure and we can debate from there. By the way, in response to my parliamentary question in the past, he had provided a figure of $84 billion total taxable income accruing to the top 10% income-earner. Wouldn’t a 4% income tax increase yield $3.4 billion additional revenue as a result?

Even if there is a sliding scale effect, we should be able to raise $3 billion from the high income earner without raising the personal tax rate to 30%. It is a matter of policy choice of whether the government wants the middle-class to bear the burden or the top 10%. By the way, 30% is the top personal income tax rate in 1994 before the introduction of the GST. There is absolutely no justification (except to benefit the rich) to lower personal income tax from 33% in 1994 to 20% in 2007 when the GST was raised from 3% to 7% in the same period. The top personal income tax was raised only slightly to 22% about ten years later in 2016 and left unchanged until today.

There are just too many rules laid down by the government that do not make sense from the country and ordinary people’s perspective. I will share more of those in due course. Stay tuned to the Committee of Supply debates and get a better picture of what’s going on in Parliament and our country. A clear understanding of our country’s financial governance is important for all Singaporeans.

Singaporeans deserve better.

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