Clarifications to the Minister of Finance on Reserves

MP Leon Perera

Mr Leon Perera: Thank you, Mr Speaker, Sir. I thank the Finance Minister for his wrap-up speech. There are three clarifications. Before that just a very short sort of response or preamble.

I think the Minister talked about how much the personal income tax would have to rise, would the property tax would have to rise to fill the hole with GST if it was not hiked. I want to clarify that when my colleague Assoc Prof Lim outlined different proposals for revenue generation, that was never the intent that the entire burden of plugging that hole fall onto personal income tax or onto property tax.

So, with respect, Sir, I think the view that is being putting forth, proposals that soak the rich, is a mischaracterisation. In fact, it is a caricaturisation of what we have put forward. The bulk of revenue generation in those proposals actually fell on the changes to the land sales, the changes to the NIRC and also the net effect on corporate tax, take from compliance with the BEPS regime. Not a discretionary increase in corporate tax, but how that would impact the overall corporate tax taken. I think our point there is that —

Mr Speaker: Mr Perera, please come to your clarifications and questions, please.

Mr Leon Perera: Alright. Let me move to my first clarification, which is: I had an exchange with the hon Minister Lawrence Wong in this House in 2018. I asked the Minister at that time what would be a reasonable time interval when we review these rules, governing the reserves. They were amended in 2008, they were amended again in 2015. So, what is reasonable time, are we saying that you know, it is set in stone and we will never amend it. And the hon Minister’s reply to me at that time was, “you never say never” and these things do have to be reviewed at a certain point. So, my question is, what does the Minister think is a reasonable point in time when we review these rules, as we have suggested.

The second clarification is on the concept of an optimal level of reserves. I would invite the Minister to agree with me that as the absolute level of reserves increases in dollar terms and as a proportion of GDP, we must accept that it is legitimate to bring into place, policies that slow the growth of that reserve without depleting it. On that note, would it be the case that the Minister rejects altogether any notion that there is an optimal level of reserves and we keep adding to the reserves, ad infinitum, without any regard to the absolute level and its relation to GDP?

The last clarification is, the Minister alluded to the fact that, you know, when we make suggestions about the reserves, the land sales, the NIRC, there is a certain cavalier mindset involved in doing so. I would like to ask him, the PAP Government in this House did exactly that, in 2008 and they did it again in 2015. Was that cavalier? And if that was not cavalier, why is it cavalier when the Workers’ Party now suggests doing that?

Mr Lawrence Wong: Mr Speaker, on the three points. The first I recognise that the Workers’ Party’s suggestions for revenue alternatives could entail mix and matches as they have highlighted, a bit from here, a bit from there. But I still say, as I have highlighted, the sums will not add up. Why? Basically, you are asking to tax more from three possible groups as an alternative to GST: the wealthy and the better-off, large companies, and future generations. So, that is what it comes down to.

The future generations would mean land sales and NIRC, these sorts of changes. And I have explained why we do not think it is financially prudent make those changes.

Large companies, I have highlighted. This is contingent on the evolving rules around BEPS 2.0 and even if we were to get some additional revenue, we are very likely to have to reinvest back to strengthen our competitiveness.

This leaves me with the third group – the wealthy. And that means wealth taxes, which I have explained can be difficult to do or property tax or personal income tax. And, if you were to hone in on property tax, I have explained, if you want to get another billion dollars of revenue from property tax, you probably would have to double property tax rates across the board. 

That is just $1 billion. GST is $3.5 billion. So, where does the money come from? And that is why I highlighted the sums still do not add up.

I appreciate and I take these in good faith that there are these different options that the Workers’ Party has offered as alternatives. We have studied all of them before the Budget. During the Budget debate when these options were raised, we went into them again with my team, but we still are not able to make the sums add up.

The next two questions I will take them together – when is the next reasonable interval when we might review our reserves rules and is there an optimal level of reserves? It is very hard to answer these questions, because I do not have a crystal ball. Really, who knows what will happen to the world in the next 30 years or more? Really. Can anybody predict? It is almost impossible. 

So, what would trigger us to change? I think it will have to be something really very disruptive. Not just once off, but on a permanent basis and we will have to study the options very, very carefully at that point in time. Because there are deep, deep implications if we were to change anything on the reserves rules. Deep implications for inter-generational equity, essentially resulting in our next generation having to pay more taxes, as I said, and having less to deal with any emergencies in the future.

That is why I would say not something we will do today because we have other options. We have the GST which we can implement in a fair way. We have other tax options.

That is the reason why I ask, well, I wonder, maybe this is taking it a little bit too lightly. Because why turn to the Reserves when we have all these options and why make the GST into the last resort? But reserves – okay. Future generations – never mind, let us do it. But GST – cannot touch.

Why? Why take that approach? Especially when the way we have implemented the GST is not the way the Workers’ Party has characterised it. It is not and you know it too. I have shown the charts. I have explained it. We have explained it before, multiple times and we have reiterated our explanation. 

So, if you understand this, then why are your proposals anything but GST increase? Even Reserves can be touched, but not GST increase. That part, honestly, I cannot understand. It makes me wonder why.

The Workers’ Party cites that the GST will hurt the poor. It does not, I have explained it. And on that basis, they cannot support the Budget. Really? Do you know what you are saying then? You do not want to support all the things we have in this Budget? To uplift the wages of lower-income workers, Workfare, progressive wages, to help vulnerable families with KidSTART. You are rejecting all of that?

I find it hard to understand, frankly, on the misguided view that GST hurts the poor, which it does not. I can only, therefore, ask whether you are taking things too lightly. Or whether you are raising opposition because of other reasons, political reasons? Or other things? As opposed to seriously looking at the facts and doing what is right for Singapore. 

The Workers’ Party is entitled to their views and to not supporting the Budget. But it will not stop me as the Minister for Finance from doing what is right and it will not stop this Government from continuing with all our efforts to build a better Singapore.

2 March 2022

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