Singapore must maintain fair and progressive system of taxes and benefits, says Lawrence Wong
By Justin Ong, Political Correspondent, The Straits Times, 2 Mar 2022
Even as it seeks to raise revenues to meet growing spending needs, Singapore must insist on "keeping faith" with both current and future generations through a fiscal structure that is fair, inclusive and progressive, Finance Minister Lawrence Wong said.
This entails a good mix of income, asset and consumption-based taxes - which is why the goods and services tax (GST) cannot be ignored, Mr Wong said in rounding up the debate on Budget 2022 on Wednesday (March 2).
"We have designed our system on the principle of collective responsibility," he told Parliament in underlining why Singapore needs to raise the broad-based consumption levy from 7 per cent to 9 per cent.
"Those who have greater means bear a higher burden, and they draw less on government support… Those with fewer means carry a lighter share, but they still contribute something and, in return, they receive more benefits from the Government," he said.
"In this way, we all do our part to help ourselves and one another, and we strengthen the trust that binds us together as a society," he added in a 1½-hour speech wrapping up three days of debate during which 64 MPs spoke.
The House on Wednesday endorsed this year's $109 billion Budget, including plans to raise the GST rate in two stages - by 1 percentage point on Jan 1, 2023, and by a further 1 percentage point on Jan 1, 2024.
Opposition members objected to these plans. Leader of the Opposition and Workers' Party (WP) chief Pritam Singh recorded his party's dissent, saying "no offset package lasts forever" in reference to a $6.6 billion raft of measures to help cushion the blow of the GST hike.
In their speeches earlier in the week, WP MPs and the Progress Singapore Party's (PSP) Non-Constituency MPs Hazel Poa and Leong Mun Wai had cited disagreement with the GST increase as their primary reason for objecting to the Budget.
On Wednesday, Mr Wong began his response by noting that the Russian invasion of Ukraine would have an impact on the global economy. The Government is monitoring the risk - in growth and inflation - to Singapore's economy, he said.
"If the situation worsens, we will not hesitate to take further actions to protect jobs and to help households and businesses deal with increased costs," Mr Wong said.
He then acknowledged MPs' earlier questions and suggestions on labour policies and the green economy, among other issues, though much of his speech was focused on taxes.
"In many countries, the tendency is for politicians to focus only on the spending side, because it is inconvenient to talk about taxes," said Mr Wong. "As a result, these governments spend beyond their means, they run up unfunded obligations and debt, and they kick the fiscal can down the road. We are not immune to such pressures."
He reiterated that an increase in healthcare and social spending would be necessary and unavoidable, given Singapore's rapidly ageing population. To fund these pressing revenue needs, the GST increase cannot be pushed back any further.
While addressing alternative revenue options raised by MPs, he slammed the WP and PSP for their "simplistic and divisive" proposals to make other groups - such as the wealthy, large companies, and future generations - pay more tax in lieu of raising the GST.
Singapore cannot sustain a system where the bulk of the tax burden is borne by a small group at the end, Mr Wong stressed.
He also said the opposition MPs' criticisms of the GST offsets being temporary and the tax hike disproportionately affecting the poor were "misguided claims", given the schemes to ensure the effective rate for the lower-income remains unchanged.
Mr Wong also promised that the Government would continually review and update its system of taxes and transfers, to mitigate the pressures of social inequalities.
Mr Singh later rose to point out that since the GST hike was first announced in 2018, global events like the pandemic have since pushed inflation to its highest in years. "Is this a reasonable thing to do in these circumstances?" he asked of the tax hike.
Acknowledging that it was a very difficult decision to make in view of concerns over rising prices, Mr Wong said this was why the GST hike was delayed and staggered over two steps.
"If indeed inflation turns out to be more persistent and higher than expected, which may happen, we will deal with that decisively," he said.
Later, in response to questions from WP MP Leon Perera (Aljunied GRC) on rules and the optimal level for the reserves, Mr Wong said he could not understand why the party was willing to touch the reserves, but reject the option of a GST increase.
"I can only therefore ask whether you are taking things too lightly, or whether you are raising this in opposition because of… political reasons, or other things, as opposed to seriously looking at the facts and doing what's right for Singapore," he said.
A move like a GST increase is not the popular thing for him to do, Mr Wong said in his speech. "Certainly not for my first Budget as Finance Minister. But I have a responsibility to do what's right, and what's in the best interest of all Singaporeans. Not what's politically expedient now," he said.
"I have confidence that Singaporeans can instinctively sense if any Budget is not worthy of them and fails to renew their trust in the Government, in each other, and in the future," Mr Wong concluded.
"They can decipher whether the Budget reflects our shared vision of a fair and just society, whether this Government is one they can trust to manage our resources in a way that is in line with our values, and whether this Government is keeping faith with them and their children."
Budget debate: Opposition's claims that GST hike disproportionately hurts the poor are misguided, says Lawrence Wong
By Goh Yan Han, Political Correspondent, The Straits Times, 2 Mar 2022
Opposition MPs' objections to raising the goods and services tax (GST) rate due to offsets being temporary and because the tax disproportionately impacts the poor are "misguided claims" that ignore the way the GST is implemented in Singapore, said Finance Minister Lawrence Wong on Wednesday (March 2).
With the enhanced GST Voucher scheme, the effective GST rate for the bottom 30 per cent stays unchanged, he said during his round-up speech at the end of three days of debate on the Budget.
"So it is not true that the GST increase hurts the poor - not in the way we have designed it," he said.
In his maiden Budget speech on Feb 18, Mr Wong had announced that the planned two percentage point GST hike would come into force in two phases in 2023 and 2024, at one percentage point each time.
Another effect of the GST results in the well-off carrying a heavier part of the load, said Mr Wong. As a consumption tax, the GST allows the Government to tax those not earning an income in Singapore, but who are in fact well to do and therefore consume more.
"The GST ensures that such people, those who have greater means, will contribute their fair share of taxes."
He added that lower-income households pay a much lower effective GST rate than higher-income households, noting that, on average, households at the bottom 10 per cent - including many retiree households without income - do not pay any GST at all after offsets.
For the next lowest 10 per cent of families, the effective rate is very low, and even for middle-income households, the effective rate is well below the headline 7 per cent rate due to how GST expenses are offset on a continual basis, said Mr Wong.
Non-Constituency MP Leong Mun Wai from the Progress Singapore Party had during the debate said that based on his own calculations, those who are middle-income will bear a disproportionate burden of the GST increase.
Mr Wong said that is not so, as after the GST rate increase, it is the top 20 per cent of citizen households who pay a greater share of GST, after accounting for GST Vouchers and absorbed GST.
Their share of GST goes up from 40 per cent to 42 per cent after the increase, while for the middle 20 per cent of households, their share decreases from 19.2 per cent to 18.6 per cent.
Timing of the GST hike
The GST rate increase cannot be continually delayed, given the country's pressing revenue needs, and the timing of the hike had been considered very carefully, said Mr Wong.
He said that he fully understood the concerns of inflation and cost of living, which MPs had raised during the debate. Some had asked what would happen if inflation turned out to be higher and more persistent, and if it would be better to wait till after inflation eases to raise the GST.
"If inflation turns out to be persistent and higher than expected, we will deal with this separately through other tools," said Mr Wong, such as through monetary policy and direct help for firms and households.
Apart from managing inflation, Mr Wong on Wednesday also noted that Mr Chong Kee Hiong and Mr Saktiandi Supaat (both Bishan-Toa Payoh GRC) had expressed the need to see local wages rising faster than prices.
Mr Wong said that Singapore had done well on this front in the past 10 years, as median wages in real terms had risen by about 3 per cent a year, faster than other developed jurisdictions such as the United States, Britain, Japan and Hong Kong.
"We will continue to work hard to ensure that such real wage increases are sustained in the coming years across all segments of our workforce," he said.
Mr Wong also said he noted Workers' Party (WP) chairman Sylvia Lim's (Aljunied GRC) suggestion for more diverse and inclusive household archetypes used in Budget materials as examples to show how the measures affect Singaporeans, and that the ministry would bear her points in mind for future illustrations.
On having a tiered GST system
WP MP He Ting Ru (Sengkang GRC) had on Monday suggested making the GST system less regressive by exempting certain essential items from the tax, which some other countries, such as Australia and Japan, do.
Mr Wong said that while it sounds like a good idea, such a tiered system leads to highly arbitrary distinctions between products and a lot of "creative efforts" by businesses to get their products classified into the lower tiers.
"It is administratively costly and onerous to implement... If we were to go down this path, it will significantly and unnecessarily complicate our GST system," he said.
The experience of other jurisdictions is also that such a system does not effectively target support to those with greater needs, said Mr Wong.
"Such an exemption for a basket of goods tends to benefit the well-to-do because they spend more on everything, not just luxury items, but basic necessities as well," he added.
As an example, if GST were to be exempted for uncooked food, basic food services such as hawker centres, foodcourts, and coffee shops, telecommunications services and utilities, there would be an expected loss of about $1.2 billion in tax revenue, according to an exercise conducted by the Ministry of Finance.
Of this, only $185 million - or 15 per cent - of the tax not collected would benefit the bottom 20 per cent of resident households, said Mr Wong.
This is the conclusion of not just the Ministry of Finance, but also other governments and organisations such as the Organisation for Economic Cooperation and Development, said Mr Wong.
"This is why, in fact, it is fairer and more effective, for us to have a single GST rate across the board and to directly help lower-income and middle-income Singaporean families through the GST Voucher (scheme), which is what we are doing," said Mr Wong.
Mr Wong assured Parliament that his ministry had studied and carefully considered every tax option, adding that he appreciated WP MPs' suggestions on alternatives to the GST hike but that there are limitations to the different proposals.
"Every tax move we make is carefully considered. So that we have in the end a balanced, effective and fair set of tax measures in the Budget," he said.
"More importantly, a progressive fiscal system does not and should not mean that each and every tax is progressive, let alone highly progressive. What ultimately matters is the overall system of taxes and transfers to ensure that that overall system is progressive."
He said opposition MPs may think that alternatives such as making the wealthy or large companies pay more in taxes may be politically more attractive, but instead they are "too simplistic and divisive" and will end up creating more problems for society.
He said: "The bottom line is that we cannot sustain a tax system where the bulk or all of the burden is borne by a small group of people at the top end.
"It will not be possible to hold our society together if only a small group of people are required to pay more taxes all the time, while the rest simply get to piggyback on their contributions to enjoy more benefits."
Singapore has designed its tax system based on the principle of collective responsibility, where everyone contributes towards the cost of delivering services, and everyone benefits from these services but to different degrees, he added.
Simplistic and divisive to tax the rich, big firms instead of GST hike, says Lawrence Wong
By Hariz Baharudin, Assistant News Editor, The Straits Times, 2 Mar 2022
Making various groups in Singapore pay more tax instead of raising the goods and service tax (GST) is "simplistic and divisive", said Finance Minister Lawrence Wong on Wednesday (March 2).
He was responding to Workers' Party and Progress Singapore Party MPs who said that Singapore does not need to raise the GST and that groups such as the wealthy, large companies and future generations can afford to pay more in taxes.
"I can understand why they think these alternatives are politically more attractive options to offer. But I'm afraid they are too simplistic and divisive and will end up creating more problems for our society."
Rounding up the debate on the Budget speech on Wednesday, Mr Wong said that Singapore's fiscal system is fair, provides support for all, but is tilted towards those who need it more.
He noted that Singapore cannot sustain a tax system where the bulk of the burden is borne by a small group of people at the top end.
"It will not be possible to hold our society together if only a small group of people are required to pay more taxes all the time, while the rest simply get to piggyback on their contributions to enjoy more benefits," he said.
A broad-based tax like the GST is vital because it makes a direct link between the demands of Singaporean voters and their responsibilities as citizens, said Mr Wong.
Breaking this link would encourage irresponsible lobbying and playing to the gallery. This is akin to having someone else "pay for good things in life", he warned.
Singapore has a system of collective responsibility where everyone contributes towards the cost of delivering services, which in turn benefits everyone, but those who have greater means bear a higher burden, as they draw less government support while still enjoying some benefits, said Mr Wong.
At the same time, while those with less means carry a lighter share, they still have to contribute, but they will receive more benefits compared with how much they put in, he added.
"In this way, we all do our part to help ourselves and one another, and we strengthen the trust that binds us together as a society. This is a fair and inclusive system," he said.
In his speech, the minister laid out the benefit-to-tax ratios for Singaporean households. The bottom 20 per cent of households receive $4 in benefits for every tax dollar they pay, while the middle 20 per cent receive $2 in benefits. The top 20 per cent of households receive 30 cents in benefits for every dollar in tax.
Achieving these ratios is "no mean feat", said Mr Wong, who assured the House that the Government will continue to work hard to maintain this principle in the coming years.
Singapore’s system of taxes and benefits continues to be fair and highly progressive said the Finance Minister, pointing out that retirees, on average, receive $6,900 in net benefits per member.
The net benefits are significant among Singaporean employed households, at $5,900 per member for the bottom decile, he added.
This means that for a typical household, the benefits amount to about 90 per cent of their household income.
“Put another way, government benefits will nearly double the amount of resources for these households. It is a significant and tangible form of support,” he said.
As people earn more, such net benefits are correspondingly reduced, and the higher-income are net contributors who give more than they receive.
But they benefit as well, reaping gains from Singapore’s political stability, social cohesion and the overall environment the country provides, said Mr Wong.
Noting that some MPs have asked if enough was being done for the sandwiched middle-income group, Mr Wong said that those in the 40th to 60th percentiles of household income continue to receive more benefits than their taxes.
For those in 60th to 90th percentiles, they pay some taxes after taking into account the subsidies and transfers they receive.
Mr Wong acknowledged that this group faces pressures, highlighting how the caregivers among them bear a heavy burden financially, emotional and physically.
This is why the Government has expanded its broad-based support in areas such as education and healthcare, he said.
“We have also increased healthcare and caregiving-related subsidies and support, to relieve the load on these families, especially for those who care for young ones and elderly parents,” said Mr Wong.
Extra care has also been taken to make sure that the middle-income continue to have a low tax burden - one that is currently significantly lower compared with other cities.
Said Mr Wong: “For the relatively low amount of taxes they pay, they enjoy many benefits in Singapore – affordable public housing and healthcare, beautiful parks, excellent infrastructure, quality pre-schools, schools and tertiary institutions with highly subsidised fees.”
Singapore has no issue with people doing well and achieving success. Its tax system must never discourage hard work, but at the same time, stark income inequalities or social stratifications have to be avoided, said Mr Wong.
It is for these reasons that the system of taxes and transfers here will be continually reviewed to achieve a balance between rewarding enterprise, innovation and work, and reducing social inequalities.
The Budget has something for everyone and has been designed to provide opportunities for all in Singapore to succeed, said Mr Wong, adding that a significant part of social spending will go towards ensuring access to important social provisions, such as quality housing, healthcare and education, which will support the aspirations of all Singaporeans.
"We will continue to review our eligibility criteria and schemes, so that support is sufficient and targeted towards those in need," he said.
"So we are continuing with this emphasis in the Budget to provide generally for all, but to tilt the support towards those who need them more."
Lawrence Wong rebuts proposals by Workers' Party to raise revenue in lieu of GST hike
By Choo Yun Ting, Business Correspondent, The Straits Times, 2 Mar 2022
Singapore needs a good mix of income, asset and consumption taxes to ensure its revenue base remains diversified and resilient, but also fair and progressive, said Finance Minister Lawrence Wong.
In a speech to round up the Budget debate on Wednesday (March 2), he rebutted alternative proposals by the Workers' Party to raise revenue, and said the options were not feasible to replace the upcoming goods and services tax (GST) hike.
"We cannot just ignore consumption taxes and put the entire burden on income and wealth taxes," he said.
Mr Wong noted that all jurisdictions rely on these three forms of taxation and pointed out how the OECD (Organisation for Economic Co-operation and Development) jurisdictions have much higher value-added tax rates - the equivalent of GST here.
The GST increase from 7 per cent to 9 per cent by 2024 is expected to generate an additional $3.5 billion of tax revenue annually.
On the suggestion to raise personal income tax rates, the minister said Singapore would have to increase the tax rate for top earners from 22 per cent to 42 per cent to generate the same amount of revenue from raising the GST.
This higher rate would apply to everyone with chargeable income of $320,000 or more, he said, adding that this is assuming the number of people paying taxes remains unchanged.
On Feb 18, Mr Wong had announced that those with chargeable income in excess of $500,000 and up to $1 million will be taxed at 23 per cent, while chargeable income above $1 million will be taxed at 24 per cent.
This is up from the current 22 per cent tax levied on chargeable income above $320,000.
Don't use global tax rule changes 'as reason to avoid raising GST'
Mr Wong reiterated that it is hard to be definitive at this juncture about the overall tax revenue impact from changes to the Base Erosion and Profit Shifting initiative or BEPS 2.0, a landmark deal that provides the framework to reform international tax rules.
He noted how Workers' Party MP Louis Chua (Sengkang GRC) had said that the impact of Pillar One of BEPS 2.0 - which seeks to reallocate profits of the largest and most profitable multinational enterprises (MNEs) from where activities are conducted to where consumers are located - will be limited because it covers only around 100 companies.
But this is a premature conclusion, Mr Wong said, adding that while the number of MNEs affected is small, these are the largest and most profitable enterprises.
"Any reallocation of profits away from Singapore will have a significant revenue impact."
Mr Chua had also suggested that raising the corporate tax rate to the proposed global minimum effective tax rate of 15 per cent, under Pillar Two of BEPS 2.0, could also potentially generate $71.5 billion of revenue - seven times the corporate income tax paid by profitable non-SMEs (small and medium-sized enterprises) currently.
To this, the minister said: "Mr Chua should have paused at this huge number for a reality check. He says it is purely hypothetical. But he should have said it is wishful thinking."
The purported figure of $71.5 billion is the total amount of revenue Singapore collects from all taxes, Mr Wong said.
While implementing the minimum effective tax rate would mathematically mean higher tax revenue, the eventual impact of the BEPS 2.0 initiatives will depend on how governments and companies respond, he added.
With tax incentives less of a factor post-BEPS 2.0, Singapore will need to find other ways to stay competitive, he noted. This means that even if the country can generate additional revenue overall from the tax rule changes, these would need to be reinvested to ensure its competitiveness and to attract investments, he said.
"I would therefore caution against jumping to conclusions or believing wild guesses on how much more revenue we can get from changes in global tax rules and use that as a reason to avoid raising the GST."
Sharp increase in personal income taxes would be untenable
On generating additional revenue through personal income taxes, Mr Wong said there is a limit to how much Singapore can raise personal income tax rates for the top income brackets without touching tax rates for the income brackets below.
The top 10 per cent of income taxpayers currently account for about 80 per cent of total personal income tax revenue, he said, adding that at 24 per cent, Singapore's future top marginal personal income tax rate would be higher than Hong Kong's top tax rate of 17 per cent and closer to the Asian average of a top marginal tax rate of 28 per cent.
Elaborating, he stressed that a sharp increase in personal income tax rates to raise the equivalent revenue to a GST hike would be untenable and badly damage Singapore's competitiveness and jobs for its people.
The reality is that to match the revenue from a GST hike, personal income tax rates would need to be raised for a broader group including the middle income and upper-middle income groups, Mr Wong said.
He referenced Nominated MP Hoon Hian Teck's observation that as Singapore's economy matures and population ages, a bigger share of the population will become economically inactive. In turn, Singapore's tax base for income-based taxation will shrink.
"So we cannot rely only on income-based taxes alone if we want to maintain a resilient and future-proof revenue base."
Property and other wealth taxes
Mr Wong noted how WP's Mr Chua had said more could be done on the wealth taxes front, especially on property taxes.
In contrast, other MPs such as Mr Chong Kee Hiong (Bishan-Toa Payoh GRC) had raised concerns about the impact of higher property taxes on retirees and senior owners of private residential properties.
"So again, we have to find a balance. In fact, the changes we've made to property taxes this time around are not insignificant at all. But we have structured it in a highly progressive manner."
He pointed out that all owner-occupied Housing Board flats, as well as two-thirds of private residential properties such as condominiums in suburban areas and lower-value landed properties, are not affected by property tax rate increases announced at the Budget.
Rather, the changes affect higher-end properties and investment properties, with increases more significant for the upper end.
If Singapore wanted to raise property tax revenue to eliminate the need for a GST rate increase, it would have to tax all non-owner-occupied residential properties at a significantly higher rate, Mr Wong said.
And as taxing all non-owner-occupied properties at a flat 36 per cent would still not be enough, tax rates would need to be substantially increased for owner-occupied properties as well, including HDB flats, he said.
In a pointed reply to Mr Chua's characterisation of the property tax changes - which will generate an additional $380 million a year - as "tokenism", Mr Wong noted that the total property tax revenue from all residential properties is about $1 billion.
"To raise another $1 billion from just property tax alone, property tax rates may very well need to be doubled across the board. I suppose that's what the Workers' Party is proposing."
Replying to Mr Saktiandi Supaat's (Bishan-Toa Payoh GRC) suggestion of estate duties, which was abolished in 2008, Mr Wong said this tax had disproportionately affected middle and upper-middle income individuals compared with the wealthy, who found ways to avoid it through tax planning.
He also addressed Mr Chua and fellow WP MP Jamus Lim's (Sengkang GRC) suggestions of a net wealth tax, reiterating that this would be very challenging to do in practice, as many forms of wealth are mobile.
In response to Prof Lim's proposal to raise sin taxes, such as for tobacco and gambling, Mr Wong pointed out that taxes like that on tobacco are regressive, with lower-income groups paying a bigger share of it.
"The Workers' Party had expressed such strong concerns about the regressivity of the GST, but does not appear to be least concerned about regressivity here, why the double standard?" he said.
"In any case, we do not levy sin taxes for purposes of generating revenue but for deterring consumption, and we will review and adjust these taxes from time to time."
GST rate needs to go up because of necessary and unavoidable spending on healthcare, says Lawrence Wong
By Linette Lai, Health Correspondent, The Straits Times, 2 Mar 2022
Singapore needs to raise its goods and services tax (GST) rate because of necessary and unavoidable government spending on healthcare, said Finance Minister Lawrence Wong on Wednesday (March 2).
This is driven by the country's rapidly ageing population, where more seniors will live longer and require more medical care, he told Parliament in his round-up of this year's Budget statement.
In 2010, Singapore had around 10,000 people aged 90 and older. This figure has more than doubled to 22,000 today, and is set to grow further by 2030.
Older people require more medical care, including hospital stays - which tend to last longer for them than they do for younger people. They also need elective operations, such as cataract surgery, to help them live more fulfilling lives, Mr Wong said.
"Just the demographic effect of having more seniors alone will already push up healthcare spending significantly," he added. "Further increases will happen as better and more costly treatments become available, and with the medical inflation that is inevitable even with the best organised healthcare system."
While rising healthcare costs are the main driver of Singapore's social spending, there are other needs too, the minister said.
Social needs are getting more complex, with government agencies often having to tailor their approaches to meet the unique challenges faced by individuals and households. And funding is needed to ensure strong coordination between organisations within and outside the public sector, as well as to train people in the sector.
All these are highly resource-intensive and will invariably cost more, he said.
In his speech, Mr Wong also addressed statements made by Progress Singapore Party (PSP) Non-Constituency MPs Leong Mun Wai and Hazel Poa, who had urged the Government to spend less in certain areas.
"They have conveniently neglected to mention that they and the PSP have made requests on multiple other occasions for the Government to spend more," he said.
"For example, funding of insurance premiums for MediShield Life and CareShield Life, hiring more teachers, reducing class sizes - all of which cost a lot of money. So you can't have it both ways."
Drawing a comparison with other developed economies, Mr Wong noted that Singapore runs an extremely lean and tight ship - and has managed to achieve good outcomes even so.
Government expenditure has gone up from 15 per cent to 18 per cent of Singapore's gross domestic product (GDP) over the last decade, mainly due to spending on healthcare, public transport and social service programmes, he said.
"If we are able to keep government expenditure at 20 per cent of GDP in 2030... that would already mean a slowing of the rate of increase compared to a decade ago," Mr Wong added. "I think that would be a good achievement."
Singapore must not let anti-foreigner sentiments take root or become inward-looking
By Calvin Yang, Assistant News Editor, The Straits Times, 2 Mar 2022
Singapore must never let anti-foreigner sentiments take root or give the impression that it is becoming more inward-looking, cautioned Finance Minister Lawrence Wong.
Staying open and connected to the world is a critical aspect of the country's competitiveness, he stressed in his round-up speech on this year's Budget. "This is not just an option. This is essential, even existential, for us."
If global investors conclude that Singapore is closing itself and becoming less welcoming of foreigners, the Republic "will become less attractive to them, and it will be ordinary Singaporeans who suffer the most", said Mr Wong in Parliament on Wednesday (March 2).
He was replying to points raised by Nominated MP Cheng Hsing Yao and labour MPs Chee Hong Tat and Patrick Tay on the need to remain connected.
The minister said the latest tweaks to foreign worker policies announced in this year's Budget are careful, calibrated adjustments made over the years.
"This is not a sudden change in policy. We made our intentions very clear in the Economic Strategies Committee report in 2010," he said.
"We recognise that tightening too quickly will hurt our small and medium-sized enterprises, but moving too slowly will lessen the incentive for firms to upgrade. So it is really about maintaining that careful balance."
The latest changes will ensure that foreign workers coming in are of the right calibre, for areas where they are needed and to complement the local workforce.
"We are not closing ourselves to the inflow of foreign workers and professionals," Mr Wong emphasised.
"They are and will remain integral to our economy and our competitiveness. They are a valuable complement to our Singaporean core at all levels of the workforce."
Singapore will continue to welcome committed foreigners who have the capabilities and share the same values, "to stay on and help us build the next phase of the Singapore story", he added. This would give the country the best chance of success amid intense global competition, he noted.
Addressing concerns raised by Nominated MP Janet Ang and Mr Edward Chia (Holland-Bukit Timah GRC) on manpower availability, Mr Wong highlighted that the current shortage of work permit holders is partly due to the Covid-19 border restrictions.
As Singapore progressively opens its borders, priority will be given to hiring workers that businesses urgently need, especially those in the construction, marine shipyard and process sectors.
“We should be able to clear the shortages within the next few months,” he said, urging firms to tap various schemes to redesign jobs and raise productivity.
In his speech, Mr Wong also said keeping the cost of employing foreigners low would mean depressing the wages of local workers over time.
“Our focus, therefore, is not to hold down labour costs indefinitely but to support efforts by our firms to be more productive and innovative. So that they can be competitive and successful even as labour costs gradually increase. That’s why we are redoubling our efforts to invest in new capabilities,” he added.
Singapore, for instance, has been investing heavily in research and development and technology to boost the competitiveness of its economy.
Mr Wong highlighted that the country has been doing better in its knowledge and technology outcomes over the years.
“These investments have a long gestation period,” he noted, adding that the links between research institutes and industries can be strengthened so firms can access frontier technology and quality research.
“They take time to bear fruit, but we are seeing positive results. I am confident we will continue to see more positive results in the years ahead.”
Singapore will not change approach to reserves as it has to think of next generation, says Lawrence Wong
By Linette Lai, Health Correspondent, The Straits Times, 2 Mar 2022
Singapore will stick to its current approach of husbanding its reserves because it has to consider the needs of the next generation, said Finance Minister Lawrence Wong on Wednesday (March 2).
He warned against the temptation to take the easy way out by spending more of the country's reserves, stressing that Singapore must ensure it has the resources to protect itself if need be.
"It begins with something small; let our standards slide a little, just tweak the parameters a little. What harm does it do?" Mr Wong said in a speech to round up the debate on this year's Budget, where he rebutted points made by MPs from the Workers' Party (WP) and Progress Singapore Party (PSP).
"But over time, these small things add up. Then it becomes politically very challenging to roll back any benefits and to raise taxes, or even to talk about it. And the country ends up quickly in a downward fiscal spiral."
The WP and PSP had called on the Government to adjust the Net Investment Returns Contribution (NIRC) framework to recurrent spending to be raised to 60 per cent from the current 50 per cent, and include a proportion of proceeds from land sales into recurrent revenue.
These would be alternatives to raising the goods and services tax (GST) from 7 per cent to 9 per cent, they said.
In response, Mr Wong said it is not responsible for MPs to push for changes in the rules at the first sign of need, taking the easy way out to avoid raising taxes.
If Singapore's NIRC had been 20 per cent less than what it is today, the GST rate would need to go up to 11 per cent - instead of 9 per cent - to meet the funding gap, he said. In other words, drawing more NIRC now means the next generation would have to pay more in taxes.
He also reiterated that the Government does not publicise information on the full extent of Singapore's reserves for strategic reasons. But it will put out as much information as possible on fiscal projections, including key expenditure drivers.
"I can't help but feel that the persistent requests for more information are red herrings. They are distractions from the key problem at hand," he said, adding the main issue is that of increasing revenue through taxes to meet future expenditure needs.
He also set out the Government's approach to proceeds from land sales, which are currently ploughed into Singapore's reserves. Half of the overall expected long-term real returns are then spent through the Net Investment Returns framework.
This is done because land sales do not involve the creation of new wealth, but represent the conversion of a physical asset to a financial one, Mr Wong said. By not directly spending proceeds from land sales, Singapore thus avoids several pitfalls.
First, land prices move in cycles and can be volatile, creating too much uncertainty for the Government to plan long term. And if a government becomes too reliant on land sales to fund spending, it will have a vested interest in keeping land prices high - which will ultimately hurt the economy and Singaporeans.
In contrast, the current strategy provides a stable and sustainable income stream over time, he said.
Mr Wong reiterated the importance of saving up for future generations, noting that Singapore has tapped about $37 billion from its reserves over the past two years and will continue to draw on them to keep up the fight against Covid-19.
"We are not out of the woods yet, and I would say that we will not be able to put back what we have drawn down from the past reserves any time soon," he said.
It is especially important to ensure that Singapore has sufficient resources to deal with whatever lies ahead, he added, given that the world is likely to become less hospitable for small countries.
"I say we continue to husband our reserves, keep faith with the generations after us, and ensure that they too will always have access to this rainy day fund to meet any emergencies - and importantly, a steady stream of income for their future needs."
WP MP Leon Perera (Aljunied GRC) then asked when it would be reasonable to review the rules governing Singapore's national reserves, and if there is an optimal level of reserves that Singapore is aiming to accumulate.
He also took issue with Mr Wong's use of the word "cavalier" to describe the opposition's suggestions to change the rules, noting that the ruling party has itself changed these rules in the past. The rules were amended in 2008 to create the NIRC framework, and again in 2015 to add state investment firm Temasek to the framework.
"And if that wasn't cavalier, why is it cavalier when the Workers' Party now suggests doing that?" Mr Perera said.
Mr Wong replied that Singapore would likely have to experience a very disruptive event with permanent effects in order to once again relook rules on the use of its reserves.
At that point in time, the Government would very carefully study its options because there are deep implications for inter-generational equity in changing the rules, he said, adding: "Essentially, resulting in our next generation having to pay more taxes."
Mr Wong asked why the WP feels it is acceptable to turn to the reserves to raise revenue when Singapore has other tax options, including raising the GST while offsetting its impact on the less well-off.
"Why turn to the reserves when we have all these options, and why make the GST into the last resort?" he said. "Reserves - OK. Future generations - never mind, let's do it. But GST - cannot touch. Why take that approach?"
Mr Wong said the WP chose not to support this year's Budget based on a "misguided view" that GST hurts the poor, even though the Government has explained why it does not. He asked if the party was opposing the Budget because of political reasons, instead of looking at the facts.
"The Workers' Party is entitled to their views and to... not support the Budget," he said. "But it will not stop me, as Finance Minister, from doing what is right, and it will not stop this government from continuing with all our efforts to build a better Singapore."
Budget 2022 reflects Singapore's ethos of a shared compact in building a better future: Lawrence Wong
By Hariz Baharudin, Assistant News Editor, The Straits Times, 2 Mar 2022
Budget 2022 is not just about dollars and cents, but also encapsulates the Singapore spirit, both in planning for the future and not leaving anyone behind.
Rounding up the three-day debate on the Budget statement, Finance Minister Lawrence Wong told Parliament on Wednesday (March 2) that the Government's financial plans reflect as well the trust it has among people, as he pledged to do what is in the best interest of all Singaporeans.
Mr Wong, who gave his first Budget statement as Finance Minister on Feb 18, said the Government discusses and debates the "design of policy parameters or schemes in monetary terms" in every Budget.
"But the Budget is much more than that. It reflects something deeper: our ethos and our values. It's an expression of our shared compact to tackle our challenges together, to never stop thinking of tomorrow, and to never cease building a better Singapore," said Mr Wong.
The Budget is also about the conviction of Singaporeans to build a better society for all. The minister revealed that at engagements on the weekend after the Budget announcement, he came across an individual who told him he was happy to pay more taxes, as "it is the right thing to do".
And at a dialogue he attended, one of the participants volunteered that she did not need the money from the Assurance Package, which is meant to help cushion the increase in the goods and services tax (GST), and asked if she could donate her portion.
Mr Wong said he was cheered by this, and that an online portal would be set up in "the coming months" to allow Singaporeans to do so.
The Budget and its many announcements all boil down to trust - that between the Government and its people, that people have in one another, and across generations, he said.
Such trust is fragile and precious, taking effort and time to build up, but quickly destroyed, he stressed.
Mr Wong said that in his Budget statement, he set out "plainly" the challenges and opportunities that lie ahead for Singapore.
He also explained the need to move on difficult measures like the GST increase. While this may not be a popular thing for him to do, especially in his first Budget as Finance Minister, Mr Wong said he had a responsibility to do what was right and in the best interests of all Singaporeans, instead of what was "politically expedient now".
"I am convinced that the measures in the Budget are necessary and will put us in a stronger position - to strengthen the self-reinforcing system of trust we have now and to ensure that every citizen contributes their fair share to building our common enterprise, which is Singapore," he said.
Mr Wong called on MPs to always work on strengthening the trust in Singapore's institutions, and in each other, no matter their views on the Budget, or the differences they may have on policy issues.
"That means debating the issues based on facts and not biased soundbites or worse, half-truths and lies," he said.
"It means being honest and upfront with Singaporeans about what we need to do together; not sugarcoating realities or pretending that there are quick and painless remedies available."
Related
Singapore Budget 2022: Charting Our New Way Forward Together
Budget 2022 Debate Round-Up Speech by Mr Lawrence Wong, Minister for Finance -2 Mar 2022
