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On the final day of the Budget 2022 debates on Wednesday (Mar. 2), Minister for Finance Lawrence Wong and Progress Singapore Party (PSP) Non-Constituency Member of Parliament (NCMP) Leong Mun Wai engaged in a verbal kerfuffle, after which Wong told Leong that they should not continue the debate if Leong was unable to accept the figures that Wong was presenting to him.
Leong had asked Wong for clarification on how the S$3.5 billion "tax burden" brought upon by the GST hike — S$1.2 billion of which he claimed would be shouldered by the "middle class" — will be spread across different income groups.
He also proposed an "easy" alternative avenue for generating revenue: a 3 to 4 per cent increase in personal income tax on the top 10 per cent of earners, and asked if Wong would still choose a 2 per cent GST hike over this.
Income tax hike "will never get anywhere close" to revenue from GST hike
Responding to this, Wong said that the sums do not compute, and that a 2 to 3 per cent increase in the top personal income tax rate "will never get anywhere close" to the revenue that a 2 per cent increase in GST would generate.
He pointed out that the government is already raising the personal income tax rate.
This increase is expected to affect the top 1.2 per cent of personal income taxpayers and will raise S$170 million of additional tax revenue per year.
This amount is "not enough", Wong said, which is why the GST hike is also necessary.
Wong later explained that the increase in GST will generate S$3.5 billion of revenues.
Wong also emphasised that the GST hike, supplemented by other government schemes, would not affect the lower-income section of society, calling objections based on that claim "unfounded":
"You may disagree with the GST — fine, but do not use that (emphasis ours) as a reason for disagreeing with GST. There is no basis for that in Singapore. So stop pretending that this is the reason."
Upper-middle and top income earners will bear increase in GST: Wong
In his Budget Debate speech previously, Leong claimed that "middle-class" Singaporeans will have to bear an additional GST burden of S$1.2 billion per year.
When asked by PAP MP Saktiandi Supaat where he got the figure of S$1.2 billion from, Leong said he made his own calculations.
In his clarification on Wednesday, Leong once again brought up the purported S$1.2 billion tax burden from the GST on the middle class.
Wong responded that he has shown in his own Budget speech and in a chart a "different way of showing it", by laying out the share of GST paid by the different groups.
"Effectively, what it means is that the increase in GST — the S$3.5 billion of revenues that GST generates, a 2 per cent [increase] of GST generates — will be borne by the upper-middle and the top income earners."
He said that while the rest of the population pays the GST rate, the impact of the GST expenses is offset on a continuing basis. This is done through the enhanced Assurance Package and the enhanced GST Voucher scheme.
"And that's why we can have the confidence of implementing a consumption tax in Singapore that is fair, that is effective, and doesn't hurt the poor."
There is an increase in tax burden
Following up on Wong's responses, Leong expressed that he felt that Wong hadn't answered his questions, saying:
"After all, someone have to pay for the S$3 billion — or S$3.5 billion — GST. So I'm asking you, what is the tax burden on the different groups of Singaporeans? You cannot say there is no increase in tax burden."
Wong objected to Leong's characterisation of him as saying that there would be no increased tax burden:
"I did not say that there is no increase in burden. Please do not take, you know, distort what I said. Listen to what I said carefully: I said the burden is borne by the upper-middle and top end."
He said that this fact is reflected in a chart, which will be circulated and published on the Budget website, after which Leong "can have all the time in the world to analyse the figures and internalise them".
What's the point in continuing debate if Leong won't accept figures?: Wong
Leong also repeated that his proposed increase of personal income tax of the top 10 per cent of earners would yield S$3 billion, and asked Wong to share what the total taxable income of the top 10 per cent of earners is.
Wong said that he did not wish to continue the debate further if Leong was unable to accept the figures provided by Wong.
"I do not intend to get into a debate on figures with him. If he thinks that me and all my MOF officers know less about revenues than him, that's his... you're entitled to take that view. I do not wish to entertain or continue the debate further when we are not even able to...
And if you are unable to accept facts which I have put out and you say that that's wrong, I don't know how to debate any further. Because then what are we debating about?
You're unable even to accept an authoritative fact from the Minister of Finance. And you say it's wrong. So, what's the point of continuing the debate on facts and data if you do not accept the figures which I've put out on the personal income tax?"
Wong added that he had already explained that an income tax hike would not yield the amount of revenue that Leong claimed:
"Just look at the revenue generated from the tax change we have just introduced in this Budget — it's nowhere in the region of billions. Nowhere!
So I can only say the facts that you have are wrong, and it should not form the basis for public policy."
Sharp hike in personal income tax needed if GST hike is stopped
Leong did not reveal where he derived the data for his calculations for the S$3 billion in revenue generated from raising personal income tax.
In his Budget speech, Wong had said that if the GST were to be kept at 7 per cent, the personal income tax of the top marginal rate — which applies to taxable income above S$320,000 — would need to be raised from 22 per cent to 42 per cent.
He said that such a sharp increase would be "untenable" and would badly damage Singapore's competitiveness. It would also impact investments and jobs for everyone, including lower- and middle-income earners.
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Top photos via CNA.