PAP wrong to say WP's proposed alternatives to GST hike draws down on reserves principal: Leon Perera

Senior Minister of State for Finance Chee Hong Tat wrote a Nov. 22 commentary that compared the differences between the PAP and the WP on the GST debate.

Nigel Chua | November 24, 2022, 02:57 PM

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Goods and Services Tax (GST) is set to increase from the current 7 per cent to 8 per cent in 2023, and to 9 per cent in 2024, after the government passed the GST (Amendment) bill in Parliament on Nov. 7.

The Workers' Party (WP) has taken the position that there are alternatives to raising GST, and its Members of Parliament (MP) spoke about their suggestions as part of the debate on the GST hike, and registered their dissent by voting against the bill.

The debate over GST continues however, outside parliament.

WP MP Jamus Lim and Senior Minister of State for Finance Chee Hong Tat wrote forum letters in Chinese media Lianhe Zaobao.

On Nov. 18, Lim wrote to rebut a forum writer who contended that WP's GST hike alternatives would harm future generations, saying WP's suggestion to slow the rate of growth of the national reserves would not be "raiding" the reserves.

On Nov. 21, Chee wrote to rebut Lim, saying that the WP's suggestions basically entailed using more of Singapore's past reserves.

On Nov. 22, Chee also wrote a commentary on both sides' points of view in the People's Action Party (PAP)'s party newsletter

Chee's commentary in Petir

In his commentary, Chee said the PAP government believes that we should spend within our means and safeguard Singapore's reserves for future generations. Chee said the PAP's position on GST comes from a "prudent and pragmatic" fiscal approach that "reflects the PAP’s values to build a fair and just society".

On the other hand, Chee highlighted that the WP's position on GST was to consistently oppose, and that it had opposed "every increase before" as well as "the very adoption of GST in the first place."

He said the WP supported spending proposals and called for more spending, while opposing funding proposals, and "only proposing we raid the reserves instead."

Chee elaborated on the differences between PAP and WP in terms of the GST debate:

"For the PAP, a vote for the GST increase is to accept our moral and social responsibility of caring for our ageing population today, without taking away resources from or borrowing against future generations. And we must do it at a time when we have the ability, even if conditions are less than ideal, accepting that there is no ideal time for tax increases.

For the WP, they ought to be providing policy alternatives that are workable in practice and cater not only for our immediate needs but also Singaporeans’ needs in 10, 20, or even 50 years. And they must explain clearly to Singaporeans the details of their proposals and the associated trade-offs."

Chee also said it was ironic that the WP spoke of political courage in its newsletter while supporting spending and opposing funding.

Perera's response to Chee's commentary

WP MP Leon Perera, who is also the Media Team Head in the WP's Central Executive Committee, wrote to counter Chee's commentary on Facebook, on Nov. 23.

In his post, Perera said:

"The Workers' Party proposals do not amount to 'raiding the reserves.' The assertion in this article that says we are proposing to 'raid the reserves', or in other words drawing down on reserves principal, is incorrect."

He said some of the WP's proposals on GST hike alternatives involved "slowing the rate of growth our reserves".

Perera also pointed out that we have "a very high absolute amount of reserves relative to GDP today," compared to past decades, and that despite tapping on the reserves amid Covid-19, "it would appear from our questioning in Parliament that our reserves grew during this period."

He said there was a need to "invest sufficiently in the current generation", as this would then generate benefits for future generations, in the areas of economic growth, tax revenue, and fiscal savings.

"The interests of Singapore and Singaporeans should not be sacrificed at the altar of fiscal ultra-conservatism," Perera contended.

In an apparent response to Chee's comment on political courage, Perera said,

"Political courage means recognising that the facts and assumptions that supported an earlier decision have changed, as is the case with the current inflationary pressures. Political courage means being able to recognise that contrary arguments have merit, even if those arguments come from one's political opponents."

He pointed out in his post that inflation was not at its current high levels when the GST hike was first proposed, and that this creates a risk of inflation worsening due to the GST hike.

Perera said it was "irresponsible to press ahead" with raising GST before inflation has been tamed.

"The government's decision to press ahead with the GST hike at this time does not embody the political courage that Singapore needs," he concluded.

Top image via WP Facebook