The issue of whether the Government has enough fiscal revenues or not was brought up again in the April Parliament session that just ended yesterday. This is a very important issue because if there is enough revenues, there is insufficient justification to raise taxes, especially the regressive and controversial GST.
Minister Indranee Rajah’s statement in Parliament as reported in the ST article linked below was confusing to Singaporeans and inaccurate from a financial point of view. I had wanted to point out the inaccuracies but again the “rushed” pace of the Parliamentary proceedings did not give me the opportunity to do so.
From a financial point of view, the following conclusion of the Minister is untenable: “… it is not correct to suggest that because we have a certain amount of cash surpluses, that …. our fiscal position is better than we have stated ….”. In finance, a cash position is always a more accurate reflection of a company’s financial health than a profit and loss statement, 𝘱𝘦𝘳𝘪𝘰𝘥.
𝗖𝗮𝘀𝗵 𝗶𝘀 𝗰𝗮𝘀𝗵! You cannot have different versions of your cash position. Whereas, a profit and loss statement can come in different versions depending on the accounting principles you use. The same applies to our budgeting process – the cash surplus being the most accurate indicator while the budget depends on how the Government accounts for the cash, ie., what cash to include or exclude from the revenues of the budget.
So MP Louis Chua of WP is absolutely correct to focus on the Government’s cash flow surplus position of $𝟯.𝟱 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 for FY2021 instead of the reported budget deficit $𝟭𝟭.𝟬 𝗯𝗶𝗹𝗹𝗶𝗼𝗻.
Our Government has always under-reported revenue by not including a substantial amount of cash generated every year in the budget. For completeness sake, apart from the land sales revenue, 50% of the NIR or Net Investment Return derived from investing the national reserves is also not accounted for in the revenues of the budget. Adding the 𝟱𝟬% 𝗡𝗜𝗥 𝗼𝗳 $𝟭𝟵.𝟲 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 to the net cash surplus of $𝟯.𝟱 𝗯𝗶𝗹𝗹𝗶𝗼𝗻, the net surplus fiscal resources will actually be $𝟮𝟯.𝟭 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 for FY2021.
𝘚𝘰 𝘤𝘰𝘯𝘵𝘳𝘢𝘳𝘺 𝘵𝘰 𝘸𝘩𝘢𝘵 𝘵𝘩𝘦 𝘔𝘪𝘯𝘪𝘴𝘵𝘦𝘳 𝘩𝘢𝘥 𝘵𝘳𝘪𝘦𝘥 𝘵𝘰 𝘢𝘴𝘴𝘦𝘳𝘵, 𝘰𝘶𝘳 𝘤𝘰𝘶𝘯𝘵𝘳𝘺’𝘴 𝘧𝘪𝘴𝘤𝘢𝘭 𝘱𝘰𝘴𝘪𝘵𝘪𝘰𝘯 𝘪𝘴 𝙞𝙣𝙙𝙚𝙚𝙙 𝘮𝘶𝘤𝘩 𝘣𝘦𝘵𝘵𝘦𝘳 𝘵𝘩𝘢𝘯 𝘸𝘩𝘢𝘵 𝘪𝘴 𝘴𝘵𝘢𝘵𝘦𝘥.
It is also inaccurate to compare the land owned by the Government to the land owned by a family. When a family sells its land, the land is indeed lost until it decides to repurchase the land with cash again. However, when the government has sold its land for cash, it can resell the same piece of land again after 99 years under the 99-year leasehold system. Families and individual Singaporeans have to worry about the 99-year lease but to the Government, land sales are a 𝗰𝗼𝗻𝘀𝘁𝗮𝗻𝘁 revenue source.
The Government should first acknowledge the 𝗲𝘅𝗰𝗲𝘀𝘀 fiscal resources it commands before we can move on to discuss how much to keep for future generations and how much we can spend for this generation. The debate cannot be restricted to a particular set of budget figures put up by the Government. The debate must cover also the assumptions behind the set of budget figures.
This latest episode in Parliament is another GST test balloon sent out by the Government. We hope that when the GST Bill is tabled in Parliament, a thorough debate is allowed so that all the economic, financial and moral arguments are addressed properly. The opposition MPs and NCMPs should be given sufficient time to question all the assumptions and present alternative solutions.
