INCREASE IN GST

GST INCREASE (2022-2025)

I do not doubt that we would need more tax revenues in the near-future for two reasons.

One, GST increase was already planned as we expect an increase in expenditure from an ageing population, amongst other reasons.

It would be however nice if the Government could give some indication about the details of this increased expenditure.

The second reason is that we have recently drawn down a signifiant part of our reserves for the pandemic.

QUESTION: Is a permanent increase in GST a good way to top up the reserves? Or perhaps a special temporary Pandemic tax on those who prospered during the pandemic be a better way ? For example, stock markets boomed. Perhaps a capital gains tax? The rich also got richer during the pandemic, due to an general asset boom. Perhaps a temporary wealth tax?

Value-added taxes are regressive.

The only reason why it isn’t in Singapore is because our government gives subsidies to the bottom to erase the regressiveness.

GST is also hard to reduce once increased, because of the administrative costs. (Businesses have to adjust all their accounting, invoicing systems ).

This is unlike other taxes such as income tax, or corporate tax, which are more easily administered.

The Government needs to give more information about whether they have considered other forms of taxation instead of raising GST.

QUESTION: Have we considered a capital gains tax? A wealth tax?

These have been sacred cows in Singapore for a long time.

But sacred cows can be slain.

One reason why we have a 0% capital gains tax and a general tax on wealth is because we have always benchmarked ourselves to Hong Kong as a financial hub.

It is my opinion that Hong Kong is no longer a competitor.

Can we increase capital gains tax to say 2-5%?

This is still a lot lower than many developed countries.

We are not a tax haven.