GOODS AND SERVICES TAX INCREASE (Deferment of implementation)

Mdm Halimah Yacob asked the Deputy Prime Minister and Minister for Finance whether the Government will consider deferring the date of implementation of the Goods and Services Tax (GST) increase from 3% to 5%, in view of the still uncertain economic outlook for next year.

The Second Minister for Finance (Mr Lim Hng Kiang) (for the Deputy Prime Minister and Minister for Finance): Mr Speaker, Sir, since the Budget Statement in May this year, external conditions have been more difficult, and Singapore's economic recovery less vigorous than we had hoped. This uncertain environment makes it more urgent and crucial for us to restructure and reinvigorate our economy. We cannot delay reducing our direct taxes, in order to boost businesses, retain talent, and generate economic growth and jobs. We have already lowered corporate and top personal tax rates to 22% this year, and committed to lowering them further to 20% within three years.

The increase in GST on 1st January 2003 is an integral part of this tax restructuring package. If we cut direct taxes now, but postpone raising the GST until later, the Government will not be able to balance its budget, or adequately provide Singaporeans with key public services, such as education, healthcare and defence. Hence, we cannot defer the increase in GST.

For households, the additional GST that they have to pay will be fully neutralised by the comprehensive package of offsets, including the Economic Restructuring Shares (ERS), rebates for service and conservancy charges and rentals, and increased subsidies on state education and healthcare. The value of the assistance package will be enough to offset the increase in GST for all households for at least five years. For lower-income households, the package is worth up to 10 years of increased GST. A few households may find the standard offset package inadequate, but they can turn to their Citizens Consultative Committees (CCCs) for additional help through the CCC Assistance Scheme.

We are proceeding with the tax changes while buffering their impact on Singaporeans, in order to strengthen ourselves to compete in this very difficult environment. I understand and empathise with Singaporeans' worries over the economic and regional outlook, especially in the wake of the recent terrorist attack in Bali. We cannot, however, avoid tightening our belts and cutting back on less essential spending. But I assure Members that the Government will do everything necessary to help Singaporeans tide over this difficult period, especially lower-income families in genuine need.

It is difficult to predict with any certainty now what next year will bring. By the time of the Budget Speech next February, we will reassess the position and decide what fiscal measures will be necessary.

Mdm Halimah Yacob: Sir, when the GST increase proposal was made, I think one of the assumptions was that the economic situation will be much better next year. In view of the scenarios that have just been painted and the fact that the economic situation and outlook next year will still be quite uncertain, will this not form the basis for the Government to consider deferring the GST for at least a few months?

Mr Lim Hng Kiang: When the Deputy Prime Minister raised the issue of the GST in Parliament this year during the May Budget speech, we made it very clear that we face very difficult times. And it is because of these very difficult challenges that we need to restructure the overall tax regime of Singapore. As it turns out, the situation is indeed very difficult, more difficult than we have envisaged, and, therefore, I think it makes it all the more urgent that we pursue with this tax restructuring. 2.00 pm

Mr Speaker: Order. End of Question time.

[Pursuant to Standing Order No. 21(3), Written Answers to Question Nos. 8-13, 18 and 19, 21-24 and 27-29 on the Order Paper are reproduced in the section, "Oral Answers To Questions Not Reached" (Cols. 1451-1470). Question Nos. 14-17, 20, 25 and 26 have been postponed to the sitting of Parliament on 25th November 2002.]