GST will go up to 7 per cent

The GST is raised to 7% to help the PAP government better fund schemes to help the needy. PM Lee (may MM Lee be pleased with him!) has already stated that social packages for low income groups will fully offset the increase in GST. So the net result is that the more well-off in society (like scholar888 for instance, whom all of you like to vilify, for some strange reason I cannot fathom) are taxed at a higher level and the extra revenue given to the poor.

I am in full support of this policy, which is yet another enlightened step taken by the PAP (may the PAP progress!) to help the less fortunate in society. I simply cannot comprehend why all of you are hurling abuse at this policy which will be a social leveller tilted in favour of the poor and lower income groups.

Nov 14, 2006

GST will go up to 7 per cent

PM pledges more help in several areas, and more regular Workfare bonuses

By SENIOR POLITICAL CORRESPONDENT, Lydia Lim

THE Goods and Services Tax (GST) will go up from 5 to 7 per cent to pay for more government spending to help the lower income.
Mapping out his government's plan for the next five years and beyond, Prime Minister Lee Hsien Loong yesterday pledged to 'tilt the balance' of public spending in favour of lower-income Singaporeans, who are not benefiting as much as other groups from economic growth.
New social measures include more help in education, housing and health care and more regular Workfare bonuses - a shift from a once-off measure - for the lower-income workers.
To foot the bigger bills, Mr Lee announced two new measures to raise government revenue.
The first is the GST hike, the details and implementation date of which will be revealed in the Budget, on Feb 15 next year.
The second is a plan to spend more of the returns from investing the nation's reserves. Right now, the Government can only spend half of such returns, or 'net investment income', defined to include dividends and interest. The definition will be broadened to include realised capital gains. The move is significant, requiring an amendment to the Constitution and 'working out' details with the Elected President.
In his first speech to the new Parliament and rounding up the debate on the President's Address, Mr Lee sketched out how globalisation had changed the environment for workers and widened the gap between incomes at the top and bottom.
'It's essential for us to tilt the balance in favour of lower income Singaporeans because globalisation is going to strain our social compact. That's why we are doing all this,' he said.
'But I would like to caution members that we should proceed with care...it is a real slippery slope. And many, many social welfare schemes which have ended up in serious trouble have started off with good intentions.''
Mr Lee made a firm pledge that the Government would put in place a comprehensive package to fully offset the impact of the GST hike. It would be weighted in favour of the middle- and lower-income and the elderly needy.
'It's not just a GST increase, it's a package which will fully offset the impact of the GST for these groups and begin to strengthen the social safety nets and tilt the balance in favour of the lower income Singaporeans,' he said.
As for the timing, Mr Lee said: 'I think it's better to do this now when the economy is doing well. Then we can manage the adjustments, we have the flexibility to adjust our programmes depending on how things turn out.'
Later, to opposition MP Low Thia Khiang's remark that the GST offset package would only be for a few years, Mr Lee replied: 'He has not seen my offset package. It is not just an offset package to deal with the GST.
'It is the whole set of measures which we are taking in order to tilt the playing field in favour of the lower income groups, which is what you have to add and tally in the balance.'
He message to them: 'Don't worry. You will be all right.'
The GST was first introduced in 1994, at 3 per cent, and raised to 5 per cent in 2004. Yesterday, Mr Lee said that even at 7 per cent, it is still lower than that in nearly all countries with GST or value-added tax.
Singaporeans enjoyed a 'high quality but cheap government', Mr Lee said. Public spending stands at 14 to 15 per cent of the country's total output, or GDP - among the lowest in the world.
He also made clear that Singapore would not go down the route of Scandinavian countries, with generous welfare funded through high taxes that sap the incentive to work. Singapore would instead stick to its current social model based on wealth creation, self reliance, and individual savings and spending within one's means.
Moving ahead, the Government will work to strengthen the social safety nets to benefit all income groups. How? By building on key pillars of the system - Central Provident Fund (CPF) savings, health care and housing.
The CPF will be enhanced, to help workers earn better long-term returns. There will also be improvements to the 3M schemes through which Singapore pay for health care: Medicare, MediShield and Medifund. Health Minister Khaw Boon Wan will speak on this issue in Parliament today.
And the Government will find ways to help Singaporeans unlock the value of their homes.
Lower-income families will receive extra help. Mr Lee promised 'more Workfare schemes in future', through which low-wage workers get income top-ups.
Such families will also get more support for their children's education and additional housing grants of up to $20,000, with the sum going up over time.
Despite the challenges ahead, Mr Lee urged Singaporeans to also remember to celebrate all that was right about their country. 'Our prospects have never been brighter, our overall environment is positive, our economy is vibrant, our people are well-educated and equipped to excel in a globalised world,' he said.