If you have no time to read the speech, here are the most harmful parts:
"I think it is quite clear that the government has chosen to raise the GST from 5 to 7% last July without compelling reasons, and this increase has compounded the inflation pressures on the people."
Our esteemed PM Lee has already said the GST hike is to help the poor. Isn't that a compelling enough reason to hike the GST?! Given Sylvia is from the Worker's Party which claims it is concerned about the poor, can't she see that the GST helps the poor and removing the GST will hurt the poor.
"Adding on another 2% on a higher base price has increased the cost of some items by more than 20%. Only very few people’s incomes have risen by 20% since last year."
We should be glad that our elites and ministers have received pay hikes of more than 20%, preventing a painful sacrifice by them that is caused by inflation. Does it matter at all for ordinary citizens that prices have increased? Probably not! Our leaders have already come up with innovative solutions to beat the price hikes. Eat at hawker center instead of restaurant. Take bus instead of taxi. Buy Sunny1 bread instead of Gardiner and so on. Our brilliant leaders have already found the solution for inflation for the ordinary folks so it doesn't matter if their wages have not risen 20% to catch up with inflation. Inflation can be solved by substitution.
"he other reasons cited were the hike in GST, and the revision of annual values of HDB flats. Both these reasons were not external but were the government’s policies."
Is Sylvia trying to blame the PAP govt policies for inflation? Oh come on, this is so ridiculous. The PAP govt has already explained the need for these price hikes. Raising taxi fare is to help Singaporeans by improving the availability of taxis. Revising the HDB prices upwards will help to shorten the HDB queues. GST is to help the poor. ERP hike is to smoothen traffic during peak hours. All the price hikes by the govt is done for the benefit of Singaporeans. The PAP has the interest of ordinary citizens close to its heart it is doing everything it can to help them.
“Singapore’s budgetary accounting system is among the most conservative in the world, as the fiscal balance is obtained by subtracting both operating and development expenditure from the government’s operating revenue alone."
What is wrong with that? Having surplus is a happy thing for the PAP govt. We should be happy for our govt when they make a surplus. Many people doing back of envelop calculations believe that CPF Life will also generate a surplus for the govt. Surpluses are a good thing - they help to fund investments in troubled banks, investments in troubled childcare businesses, and so on. ...Singaporeans get to work harder and longer as they service their mortgages for the most expensive public housing in the world while generating a surplus for HDB. Surpluses help to motivate Singaporeans to work harder and not become lazy.
NCMP Sylvia Lim's Speech in Parliament
Mr Speaker Sir,
In last year’s Budget debate, the Workers’ Party was criticised for asking the question of whether the GST hike of 2% was needed in the first place. We had highlighted that, according to the government’s own estimates for FY 07, there would be enough alternative sources of revenue to fund the additional social spending of $2 - 4 billion per year.
At last year’s Budget debate, I had pointed out that based on the government’s estimates for FY 07, increases were already projected in personal income tax and statutory board contributions. I noted that it was also likely that stamp duty collections would rise due to recovery of the property market. The prospect of the Constitutional amendment to broaden the definition of Net Investment Income (”NII”) would also yield additional funds. I had asked if the corporate tax cut would result in revenue loss of $700 m as the government claimed, because the experience elsewhere showed that such cuts “paid for themselves” as they were stimulative in nature, resulting in more business activity which would yield higher tax collections. The question of whether land sales should be included as revenue to fund expenditure was also raised.
In short, the indications were already there last year that the GST hike was probably not needed.
Today, we see that the government estimates can hardly be called “estimates”! The government coffers are bulging at an estimated $6.4b surpluses, revised from a deficit of $0.7b projected last year. That’s off by more than $7b. Indeed, commentators have noted that the surplus estimate of $6.4b is still a provisional figure, which will only be finalised after FY 07 ends, after Mar 08. There is expectation that the surplus will “almost certainly” be more than that. This is because the government has provided for a large deficit for the final quarter of FY 07, which in their view is probably an over-provision. (BT 16-17 Feb 08, PK Basu). It should be noted that the overall budget surplus was achieved without the benefit of the broadened NII definition which is still not ready. Neither does it include land sales, which in FY 2007 is a whopping $10.5b.
Leaving aside the higher than projected GST collections, significant under-projections were seen in Corporate Income Tax, Personal Income Tax, Statutory Board Contributions, Asset Taxes and Stamp Duty. Without the additional 2% GST, conservatively, the surplus would still have been about $4b.
In a Citigroup report released on 28 Jan 08 (ST 29 Jan 08), Citigroup economist Kit Wei Zheng noted euphemistically that “the fiscal year 2007 assumptions were overly conservative”. He went further: “In hindsight, the GST hike may have been unnecessary or could have been delayed or staggered…the GST hike has contributed to the unexpected bulge in government revenues, while exacerbating inflation pressures”. Finally, Mr Kit expected that the government would probably not reverse the GST hike in any way “as it would be tantamount to admission of a mistake”.
Both the Prime Minister and the Finance Minister have cited 3 reasons for the rising inflation. Global price hikes in food and oil was only one of the 3 reasons. The other reasons cited were the hike in GST, and the revision of annual values of HDB flats. Both these reasons were not external but were the government’s policies.
Sir, with prices of food, transport and other essentials rising, Singaporeans have found that the addition of increased GST has had exponential effects. Adding on another 2% on a higher base price has increased the cost of some items by more than 20%. Only very few people’s incomes have risen by 20% since last year.
Going forward, should GST be at 7% in the coming years? We must assess whether there is a need and the impact on the people. Here, we come again to the government’s budgeting policies and practices.
For FY08, the government has once again projected a deficit of about $0.8b. In a commentary in the Business Times Weekend Edition 16-17 Feb 08, Chief Economist at Daiwa Institute of Research (Singapore), PK Basu, wrote a Commentary entitled: “Deficit Next Year? Just Don’t Bet On It”. It was observed that “Singapore’s budgetary accounting system is among the most conservative in the world, as the fiscal balance is obtained by subtracting both operating and development expenditure from the government’s operating revenue alone. The government’s ample investment income is not counted as government revenue, (though) in recent years (it has made) a “small concession” by using up to 50% of investment income to fund special transfers”. The writer also notes that since the government is starting FY 08 with a larger surplus as a base, next year’s fiscal balance will also be stronger, assuming budgeted increases in revenue and expenditure. Coming back to his initial question of whether there would actually be a deficit in FY 2008, he writes: “A betting man could do worse than place a large wager on actual revenues comfortably exceeding the Budget’s projections next year too!”
I note that there are signs that the government expects the economy to still do well in FY 2008. It has projected increases in statutory board contributions and personal income tax. It has even projected an increase in corporate tax collections, when the cut in corporate tax would have kicked in. It also expects strong collections from land sales, projecting land sale receipts to be nearly $10b.
Sir, I think it is quite clear that the government has chosen to raise the GST from 5 to 7% last July without compelling reasons, and this increase has compounded the inflation pressures on the people. Given that the increase was not necessary, the government should do the following to alleviate the suffering of the people:
a)Reverse the GST rate back to 5%.
b)Additionally, since food inflation is exceptionally high, zero-rate GST on essential food as other countries have done.
If the government did these, the people would appreciate it. They would be better off than having to live with ever increasing prices, long after the one-off giveaways have been spent.