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."