What Singaporeans say about GST and WP’s proposal to use more NIRC for today

Taxation is an intrinsic part of nationhood. It is unpleasant for the government. It is also unpleasant for the ones being taxed. But, it is an inevitable necessity.

The Workers’ Party has called for more to be used from the NIRC (Net Investment Returns Contribution) instead of a GST hike – as much as 60% to 70% instead of the current 50%.

What are some of the responses of Singaporeans to WP’s proposal?

Low Suang Leng is in full support of the WP’s proposal.

Mr Low must be unaware of the fact that currently, half of working Singaporeans do not pay any personal income tax. Of the other half who do, 80% of them pay a tax rate of less than 4%. It can be seen that income taxes are very low in Singapore.

The effective GST rate paid by the bottom 30% of households is less than 3% after factoring in inflation and the enhanced GST Voucher Scheme.

Indeed, policies and decisions cannot be made on the assumption that there is a ‘bottomless’ pocket to tap into or that the ‘rich’ can pay for all. Our taxation system must be fair to all and sustainable or our country’s future will be at risk.

Swee Keow is among many Singaporeans who understand the need for a GST hike. Our population is growing older, the needs are growing. How do we pay for these needs if we spend without thinking of ways to replenish our reserves?

The Assurance Package will absorb the 2% hike for 5 to 10 years, and the full impact of the GST hike will be borne by tourists and foreigners.

Couldn’t agree more. As a small country without a hinterland or natural resources, all we have are our reserves as our strategic resource for national defence.

We need the firepower to defend our economy which stands at more than $500 billion. Otherwise, we may end up with no economy and no jobs in the aftermath of the financial crisis if investors flee.

We need to be able to defend the Singapore dollar from a speculative attack. Just to give you an idea of the firepower that will be needed to defend the Sing dollar, in normal times, on average, the Sing dollar is traded with a daily turnover estimated at US$37 billion globally (or an annual turnover of US$9.5 trillion.)

War can happen. If a war takes place, we will need money for weapons and ammunition and money to rebuild the country after the war.

With global warming, more diseases and pandemics are assured.

And finally, we must expect the unknowns. There are the known unknowns, and there are the unknown unknowns.

Mr Tan Sek Khee said that the debate on specific public spending or revenue should not be viewed from a ‘narrow budgetary perspective’. In the long run, Mr Tan said sustainable public finance is critical because our population is aging rapidly. This is a fact the younger generation must take a serious note, he said.

Sustainability in public finance means meeting our needs without compromising the ability of future generations to meet their own needs.

Tan Sek Khee

“In the broadest sense, sustainability refers to the ability to maintain or support a process continuously over time,” he wrote.

Mr Tan cautioned that we should be careful about which political party to be elected to form the next government because we live ‘in times of great Volatility, Uncertainty, Complexity and Ambiguity (VUCA).

Which party is able to ‘offer Outstanding Leadership – Be Visionary, Understanding (the complexity and challenges), Credible, Capable and Capacity to deal with known unknowns and unknown unknowns, and Adaptability.

Under the NIRC Framework, the government uses 50% of the NIRC for today and leaves 50% to be reinvested for the future. This is a fair and equal use of NIRC for all generations of Singaporeans.

To ask for more for today and less for the future is to take from future Singaporeans.

Mr Jing Kok Teo wrote about the swinging seventies.

The seventies proved to be a tumultuous decade that saw high and volatile inflation in Singapore. Barely one year after MAS was established in January 1971, strains on the Bretton Woods system of fixed exchange rates emerged. Amid the turmoil in foreign exchange markets over the next two years, the OPEC cartel of oil-producing countries engineered an embargo in October 1973 that led to a quadrupling in oil prices.

Higher oil prices led to cost-push inflation and drove Singapore’s headline inflation to 20% in 1973 and around 30% y-o-y in the first half of 1974.

Despite inflation, our pioneers without NIRC accumulated the reserves.

In some countries, the millionaire politicians buy votes with their money by giving toaster ovens or bicycles. In Singapore, we have political parties that is buying your votes with your children’s money.

Imagine we have an aging population and our children has to pay more tax to pay for services needed by the aged. If we continue to build up our reserves, the 50% NIRC will help them ease their burden.

The more we grow our reserves, the more NIRC we will have.

In 2009, NIRC was $7 billion.

It more than doubled in 9 years to $15.9 billion for FY2018.

It tripled to more than $21 billion for FY2022 in little more than a decade.

The more we grow our reserves, the more we have in NIRC to spend, the more we are able to keep taxes low.

Without the NIRC, we would have to raise $21 billion through taxes.

Current income tax rates raise a sum that is a few billions less than $21 billion.

This means to raise an additional $21 billion, our current income tax rates will have to more than double.

So why would anyone want to slow the growth of reserves? Unless they think only of the here and now, and believe that tomorrow will not come?

If we slow the growth of our reserves as suggested by Leon Perera and WP, the cumulative effect of reinvesting less and less each year is to reduce the NIRC.

Eventually, YOU will have to pay taxes much higher than a 2% GST hike.

Today, the effective GST rate for the bottom 30% of households is LESS THAN 3% after the Enhanced GST Voucher Scheme.

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What Singaporeans say about GST and WP’s proposal to use more NIRC for today

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