INCREASE IN GOODS AND SERVICES TAX (Leakage in collection)

[Mr Speaker in the Chair]

Mr Ong Ah Heng asked the Deputy Prime Minister and Minister for Finance with the increase in the GST from 3% to 5% in January 2003 and with the increase likely to lead to Singaporeans, particularly those living in the North of the island, going to Johor Baru to shop for essentials whether the Government will take any measure to curb this trend.

Mr R. Ravindran asked the Deputy Prime Minister and Minister for Finance how will the Government deal with the leakage of GST collections due to a large number of Singaporeans shopping overseas.

The Deputy Prime Minister and Minister for Finance (Mr Lee Hsien Loong): Mr Speaker, Sir, with your permission, I would answer Question Nos. 1 and 2 together.

Mr Speaker: Yes.

Mr Lee Hsien Loong: The Government does not expect a sharp rise in people going overseas to shop because of the GST increase. The Government is giving a generous offset package to restore each household's buying power. There is no need for Singaporeans to resort to travelling overseas just to shop for daily necessities.

When GST was introduced in 1994, inflation was hardly noticeable. And the 2% increase in GST this time is less than the 3% in 1994.

GST is chargeable on imports. The GST exemption limit per person re-entering Singapore is only $50 if he is away less than 24 hours. This means that he only saves $1 for the 2% increase in GST. These small little savings should generate little incentive for Singaporeans to shop overseas, simply to avoid the increase in GST.

Nevertheless, if against our expectations leakage does become a problem, the Government will consider lowering the exemption limits. GST is an important source of revenue. We should not allow it to be undermined by large-scale overseas shopping.

Mr Ong Ah Heng (Nee Soon Central): Sir, could the DPM consider imposing a cap on the quantity to be brought in, say, similar to the three-quarter tank rule for petrol?

Mr Lee Hsien Loong: Mr Speaker, Sir, I think it will be difficult to decide on the appropriate amount of toilet paper rolls to bring back from Johor Baru - three-quarter roll. The problem is not so much the $50 limit as the difficulty of enforcing the requirement. Because, sometimes, you may come back with somewhat more than $50, and you may not have declared it and the Customs does not check every single vehicle going through. So we will monitor the situation. I understand Mr Ong Ah Heng's problem because the shops and the shopping centres in the northern part of Singapore, in Yishun, also in Woodlands, are affected when the residents go overseas to shop. And if this becomes a problem, we will see what we need to do to tighten up, either reduce the limits or to tighten up on enforcement.