Senior Minister of State for Finance and Law, Indranee Rajah, responding to questions in Parliament.
SINGAPORE: The increase in goods and services tax (GST) was not the only option considered for raising revenue, but it is the most sustainable source of income over the long-term, said Senior Minister of State for Finance and Law Indranee Rajah.
“There are a few other things we have explored as well … But GST is the one that will give you, over the long term, a sustained revenue of sufficient amount that will take care of our expenditure needs, for healthcare, infrastructure, security and education,” Ms Indranee said on Tuesday (Feb 20) on 938NOW’s Talkback call-in programme.
Calling the changes that Singapore faces “unprecedented”, Ms Indranee highlighted the country’s greying demographic, saying that “the number of people who are getting older, in the next five to 15 years, is not something that Singapore has seen before”.
“So, the need to spend more is going to jump. And that is the reason why we have to look at the GST. Because what you really want is long-term sustainable revenue. Cutting expenditure will help, and that is something we must do and have done. But in and of itself, it will not take care of the increased expenditure that we will need,” she added.
Ms Indranee acknowledged the impact of the GST on low-income groups, but she also explained to a caller why it was not feasible to exempt some basic goods and services from the tax.
“Let's just take rice, for example. Rice is eaten by not only the low income, but also the high income. So if let's say we exempt rice, then you're also exempting the high income from paying GST on rice. And then, do you say you'll have GST only on white rice and not on brown rice? How about organic rice? So, firstly, it's going to be very difficult to administer. But if you say you'll exempt all rice, actually, given that the higher income are the ones who can afford to buy more, they are likely to benefit more,” she said.
Another listener asked if the government would consider bringing back the estate duty - or taxes collected on wealth inherited after an individual’s death - which was abolished in February 2008.
“As Deputy Prime Minister Tharman Shanmugaratnam explained in Parliament (at that time), it's the middle income who are more affected by it. The ones who are wealthier are able to do their estate and tax planning and figure out how to get round the worst of it,” Ms Indranee said.
Ms Indranee added that the government also decided against having a wealth tax, because it wants Singapore to be a place for wealth management.