Straits Times: Workers' Party slams proposal to raise GST

The Workers' Party (WP) has slammed the proposal to raise the Goods and Services Tax (GST) from 3 per cent to 5 per cent, saying that this will hit the poor hardest and is merely a means to ensure that the Government has a steady source of revenue.

While Mr Low Thia Khiang, the party's chief, noted that the proposal would help offset the revenue lost through proposed cuts in personal income and corporate taxes, he also asked: "Is the loss in revenue from the cuts so significant that GST must be increased?"

"And should this be done at a time when people are already facing hardship?"

The Economic Review Committee, which suggested the hike in GST, has suggested bringing the corporate tax rate, now at 24.5 per cent, and top marginal income tax rate, now at 26 per cent, down to 20 per cent within three years.

This is to make Singapore more attractive as a place to do business and work, and create more jobs.

But Mr Low noted yesterday that with tax rebates of 15 per cent, the effective top marginal tax rate has already been cut to 22.1 per cent in the last calender year.

The cuts in corporate and personal income tax benefit only businesses and high-income earners, not the two-thirds of workers in Singapore who do not pay these direct taxes, he said.

While rebates to cushion the impact of the increased GST have been promised, they are only temporary measures, he argued.

He suggested that the Government look at other ways to reduce costs. One way would be by reviewing its own expenditure on projects and buildings, which are sometimes "even more posh than five-star facilities".

He also asked if the Government's objective in raising the GST was to ensure a steady income for itself, to make up for the loss in revenue caused by lower corporate and income taxes, regardless of the state of the economy.

"The GST is therefore a tax instrument to ensure that the Government will continue to have a source of income from the people regardless of whether the economy is doing well or badly; it is a weapon which does not bother with whether our people are facing hardship or not."

Mr Tharman Shanmugaratnam, Senior Minister of State (Trade and Industry, and Education), who announced the tax proposals on Thursday, described the WP statement as "not unexpected" last night.

"We need to ask ourselves why we are proposing to cut taxes, why we are proposing to raise the GST. Why would we want to do something unless it was in the interest of Singaporeans?"

Singapore needed bold action or jobs will go and wages decline, hurting the lower-income most, he said. "We've got to address the issue forthrightly, not shrink from it or get caught up in a divisive argument of whether this is to benefit one group more than the other."

As for the WP's claim that the GST increase was a merely a tool to ensure a "steady income" for the Government, he said: "It is a predictable response and ignores the very grave situation we are in, and the grave responsibility that we have in getting Singapore going again."