TODAY: Some MPs still questioning GST hike

Concerns over whether Govt can afford Workfare

Loh Chee Kong

EVEN as they lauded the Government's "historic" move to boost the income of low-wage workers through a permanent Workfare scheme, some Members of Parliament were still unconvinced over the need to raise the Goods and Services Tax (GST).

Noting that the Workfare Income Supplement (WIS) scheme would cost the Government some $400 million each year, Opposition MP Low Thia Khiang said it should be able to afford this even if it did not increase GST by 2 percentage points to 7 per cent.

Suggesting that the Government's coffers would be boosted substantially when the integrated resorts are up and running by 2009, Mr Low said: "By citing the rationale to help the needy as a reason to raise the GST, the Government is merely hitching a free ride. Similar handouts to the GST offset package have been given out in the past. The Budget last year, before the elections, is a good example. Even if the Budget was in the red, it didn't need to raise GST nor tap into the reserves."

Ang Mo Kio GRC MP Inderjit Singh called on the Government to dip into the reserves - rather than depend on GST revenue - to fund the country's growth.

Said Mr Singh: "Should we just depend on GST to fund these (expenditures)? If so, I can see GST going up to 15 per cent in the next 10 years. Is it fair then to shift and continue to shift the burden of paying for these investments onto the man in the street who pays the GST?"

In tandem with the increase in GST, the Government had also reduced corporate tax by 2 percentage points to 18 per cent. Such a move, it said, would increase Singapore's competitiveness.

However, some MPs questioned if this would necessarily give Singapore a competitive advantage over Hong Kong, which plans to reduce its already low corporate tax rate.

Nominated MP and lawyer Siew Kum Hong cautioned the Government against engaging in "a race to the bottom", citing the fact that Hong Kong need not worry about its defence expenditure.

Said Mr Siew: "Just as we have long ago decided that our economy cannot compete on the basis of low costs, we also cannot keep competing on the basis of low tax rates. We will need to sell Singapore on our other strengths as well."

Straits Times: Low Thia Khiang praises Workfare, slams GST hike

BY LYNN LEE

OPPOSITION MP Low Thia Khiang (Hougang) did the unexpected in Parliament yesterday. He supported a government policy.

He praised its decision to make Workfare, an income supplement for older low-wage workers, a permanent scheme.

But true to his credentials, he trained his fire on another government move: the hike in the goods and services tax (GST).

Accusing the Government of fleecing the people, he dismissed its reasoning that the hike could pay for more help schemes and make Singapore competitive. There was no need for the hike, he said. The nub of his argument: the Government had enough in its coffers to help the low-wage workers.

He also questioned the timing, as the hike was being effected soon after last year's General Election. 'The first step you have taken is to hurriedly...increase GST and at the same time, raise the banner of helping the poor.

"I'd like to point out whether the Government is fleecing the people," he said in Mandarin.

Mr Low began his speech by giving kudos to Workfare: "This permanent feature to help the lower-income as a part of our safety net scheme has my support. It will help to reduce the income gap with globalisation and help them to meet the cost of living."

Still, he wondered why workers, especially those with irregular incomes, had to contribute to the Medisave account before they could receive any Workfare. "(This) is not so attractive and in some way shows a lack of sincerity of the Government," he said.

Turning his sights then on the GST hike, he said the Government's suggestion that the extra funds raised could be used for help schemes for the needy was a "convenient excuse".

"I believe that for this Workfare income scheme, even without an increase of GST, the Government should be able to afford it," he said.

After all, low-wage workers had always been receiving help, such as the cash handouts and rebates in last year's Progress Package.

Then, there was the GST offset package to cushion its impact. But it would not need to spend on such offsets if it did not raise the GST, he argued. It was also "not clear" how raising GST would give Singapore an economic advantage.

As it was, Singapore's strong economic performance meant more funds could be reaped from corporate tax, he said. And he had read that the GST could be a turn-off for companies, he added.

He also felt that with two casinos due to open here, the Government would get "an endless and constant stream of income".

The People's Action Party (PAP) side was quick to return fire, as the next speaker, Mr Hri Kumar (Bishan-Toa Payoh GRC), chastised Mr Low for asking for fiscal policy to be based on such "speculative future income".

"Mr Low is getting a head start because he is truly gambling with our future," he said.

On Mr Low's point that lower corporate tax alone would not attract businesses here, the PAP MP said that this was not the only strategy involved. Mr Low, he said, had ignored the other measures, such as the investment in infrastructure, and upgrading workers' skills. "These require spending by the Government," said Mr Kumar.

On Mr Low's point that there was no need to raise GST during good times, he dismissed it as "illogical", as it implied that taxes should be raised when the economy was plummeting.