Clarifications on Higher Taxes on Tobacco and the GST Hike

MP Gerald Giam

Mr Gerald Giam Yean Song: Sir, the Minister accused Workers’ Party of double standards by calling for higher taxes on tobacco, because that is regressive. But would he not agree that more taxes on tobacco and gambling are acceptable, if they can help discourage that behaviour? Because the effects of that behaviour have far higher health and family costs on the low-income and therefore are more regressive.

Secondly, the Minister said that those with fewer means will bear a lighter share the GST increase, but they get more benefits from the Government and more than what they put in. That was what he said just now in his speech. He said this makes a fair and inclusive system and he repeated that point in his Chinese speech as well. And he just said just now that the burden is all borne by the upper-middle and the top deciles of income earners. 

Sir, if those with fewer means really get back more than what they pay, by the Minister’s logic, how will they feel that they are contributing?

And to be clear, Workers’ Party is not against the lower-income getting back more, if this is indeed the case. But can the Minister clarify whether or not the GST hike will make the lower- and middle-income pay more in net taxes over 20- or 30-year period.

Mr Lawrence Wong: Sir, I did not say that I was opposed to sin taxes or to tobacco taxes. I was simply highlighting that the Workers’ Party made a big issue of regressivity in one case, but not in another case. So, I did not understand why there was inconsistency there. But we have never made a big issue of it and, in fact, we do not look at fiscal systems like that. As I said, it is not appropriate to consider item by item. We look at the system as a whole. And where sin taxes are concerned, externality tax, we do it not for revenue-generating purposes. Yes, it generates some but not a lot. But really more for curbing consumption, which we think is necessary. And that is why we will continue to review these taxes from time to time as we have been doing.

On the second point, the burden of GST increase and how our system works. I think Mr Gerald Giam is saying, well, you want everyone to contribute, but with GST, the low-income do not end up paying, net-net, they do not have to pay, so, how do they contribute? But the point is this. With the GST, yes, they may get back something in terms of continuing offsets, but they do pay. There is a price. If there were no price to pay, we will not be having this debate. Everyone will happily say, “GST goes up and there is no opposition to it”.

But I think the Workers’ Party and the PSP know that this is something not very popular on the ground and therefore they are objecting to it. But because people have to pay for it, then they feel that they are contributing to the system. Everyone contributes. With GST, we bring that about. It is a broad-based consumption tax, which impacts everyone and everyone feels it, but it is also the way they can contribute and chip in to the system.

What we have done is do it in a fair way by offsetting the impact. And because the GST Vouchers are permanent, they are conjoined with our GST system. It is together, permanent. Therefore, we have confidence to say that on a continuing basis, the charts that I have described, how we can offset the impact on the low-income groups. That is something we can do, not just today and not just five years, but on a continuing basis.

2 March 2022

https://sprs.parl.gov.sg/search/sprs3topic?reportid=budget-1841

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