REVENUE LOSS ON INTRODUCTION OF GST

Mr Low Thia Khiang asked the Minister for Finance if he will provide the details on how the figure of $8.2 billion in total revenue loss to the Government on introducing GST for the period FY94-FY97 is arrived at.

Dr Richard Hu Tsu Tau: When GST was introduced in April 1994, it was accompanied by a comprehensive package of tax cuts and rebates to offset the impact of GST. The package comprises corporate tax reduction, individual income tax offsets, property tax rebates, reduction/suspension of various indirect taxes and other additional rebates and offsets to assist the low income groups. The revenue loss figure is computed from the taxes forgone arising from the tax cuts and rebates, and also additional expenditure incurred by the Government to implement the other offset measures.

The figure of $8.2 billion for the revenue loss and GST collection of $6.7 billion for the period FY94-FY97 were estimated from figures available as at early February 1998. Based on the latest available figures, the revised estimates of the revenue loss and GST collection for the period FY94-FY97 should be $7.9 billion and $6.8 billion respectively. The breakdown of the revenue loss figure is as follows :

a)the top personal income tax rate was reduced from 33% to 30%, with corresponding reductions in other tax brackets. Personal relief was also increased from $2,000 to $3,000. In addition, an annual rebate on individual income tax of $700 in YA 1994, declining by $50 per year until YA 1998, was also granted. The revenue loss from these changes amounted to $3.91 billion;

b) the reduction in corporate tax by 3% resulted in

revenue loss of $2.55 billion;

c)property tax rebates were granted on a sliding scale for owner-occupied residential properties with annual values less than $10,000. The property tax rebates totalled $310 million;

d)duties on motor vehicles and petroleum products, PUB tax and CESS were all reduced, along with the suspension of entertainment duty, film hire duty and Telecom tax. All these changes resulted in revenue loss of $838 million; and

e)other offsets comprise increases in the Public Assistance granted to single-person or single-parent households and in the Singapore Allowance granted to pensioners; additional subsidies for health and education; rebates on Service and Conservancy charges for Singapore citizens staying in 1-, 2- and 3-room HDB flats; rental rebates for Singapore citizens staying in 1- and 2-room rental HDB flats; and grants to the Citizens' Consultative Committees. These additional offsets targeted at the lower income groups amounted to $306 million.