Lawrence Wong
Singapore
“Sir, we will provide more information. I see the value of getting Ministries to put out more information, to share more about how their resources are being used and what outcomes they have achieved.”
“Sir, I agree fully with Mr Azhar that human capacity, human capital is critical. In fact, I would say the long-term potential of Singapore, how far we go really depends on us being able to maximise our human potential. That is key and that is why we have long invested in education. And it is not just about the investments.”
“Sir, we have been maintaining that commitment of 1% for some time now. I do not think it is about saying that we just have to do more and spend more. As many have highlighted, we want to ensure good outcomes from our R&D spending as well. So, we will continue if the outcomes are good.”
“This has never been the case. Temasek, when it started, was always very clear about its mandate from the very beginning – commercial, not doing national service, focused on commercial outcomes.”
“Sir, the MOF economists when they look at fiscal projections use Government's forecast of the economy, which is also published. We would typically use the mid-point of the range and then, of course, because these are in nominal terms, you have to factor for that. And the projections are done on those basis.”
“Sir, I was relieved that Mr Loh said he only has one question, but he asked the most difficult question. To answer the question, we will continue to monitor cost of living across all segments of society.”
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“And not to mention that we have not even talked about the more than $40 billion which we have drawn from past reserves so far, for which we are very unlikely for now, to be able to pay back. (b) In reply to clarification [(proc text) The following statement was in the reply given by the Deputy Prime Minister and Minister for Finance (Mr Lawrence Wong) during the Second Reading of the Goods and Services Tax (Amendment) Bill at the Sitting of 7 November 2022: (proc text)]”
“And not to mention that we have not even talked about the more than $50 billion which we have drawn from past reserves so far, for which we are very unlikely for now, to be able to pay back. [Please refer to "Goods and Services Tax (Amendment) Bill", Official Report, 7 November 2022, Vol 95, Issue No 73, Second Reading Bill section.] [(proc text) Written statement by Mr Lawrence Wong circulated with leave of the Speaker in accordance with Standing Order No 29(5): (proc text)] I wish to make the following factual correction to the reply given during the Second Reading of the Goods and Services Tax (Amendment) Bill at the Sitting of 7 November 2022. My reply should read as follows:”
“So, these are nearer-term projections which may be slightly lumpy, a little bit more unpredictable. But the broader trend of increase is very clear and we have start preparing now for that increase. 6.50 pm”
“I forgot to talk about healthcare. I have already talked about the projections for healthcare in 2010. That is a projection that we are able to make on account of our ageing population. [Please refer to "Clarification by Deputy Prime Minister and Minister for Finance", Official Report, 7 November 2022, Vol 95, Issue No 73, Correction by Written Statement section.] Because, remember, the elderly on a per capita spend basis incurs more healthcare spending than the young. Most of our healthcare spending is incurred when we get older, not when we are young. Just the simple mathematics of it, as our population pyramid shifts to an older population, on that simple mathematics, healthcare spending must surely go up. That is why, we have good basis and good confidence to project in the longer term, where the trends are. The only way in which we can avoid that, is somehow magically, we have older folks spending less on healthcare. I do not know how that might even happen. I hope Healthier SG will pay some dividends but let us be realistic. Even if it helps to slow things down, I think the fact that older folks will incur more healthcare spending, I think that is not going to go away. So, the trend is very clear. The upslope is very clear. The only other way to address this again, is, again, if we are honest, let us not spend so much for the elderly. And I am sure, no one in this House wants to take such a position. That structural increase is very clear, but on a year-to-year basis, next year, two years' time, how much more will healthcare spending go up, it is not so clear. Because there will be some lumpy investments, there may be a new hospital here; maybe for pandemic reasons, we need to enhance our infection controls.”
“Third, on the macro inflation risk and the practicalities on tackling profiteering, this is not something we talk about in theory, because we have had experience doing this, through repeated rounds of doing GST increases in previous years. And the Committee Against Profiteering, each time we stand it up, has proven to be effective, has proven to be able to effectively deter any businesses from profiteering and when we catch someone, we have been able to take very quick action. So, we have confidence in doing these sorts of things, not because of theory, but because of practical experience gained from past rounds of GST increases.”
“[Please refer to "Clarification by Deputy Prime Minister and Minister for Finance", Official Report, 7 November 2022, Vol 95, Issue No 73, Correction by Written Statement section.] How can one tell whether or not in the coming years there will not be similar emergencies, pandemics, crises for which we may very well legitimately have to go to the President and ask for permission to use the past reserves. So, in light of all of these considerations, I would say, the Government's position is very much to say today's system, do not change the parameters now. If we need revenues, we find revenues in other ways that we can do, whether through the GST increase or through other revenue raising sources. The second point I would say is in fact, the disagreement on philosophy, is not just on reserves. Because as Mr Murali Pillai has highlighted, WP has consistently, time and again, throughout Singapore's history, basically, opposed the GST increase. So, it is not just a philosophical matter about the reserves. It is also a philosophical matter about the GST. You fundamentally oppose the GST increase, for whatever reasons, I cannot quite fathom, because the way that we have designed the GST in Singapore is very different. I have explained this repeatedly, it does not hurt the poor, it is fair, it is effective, it is a unique system. And yet, WP continues to oppose GST and the GST increase. And that is why I surmise, the only reason you might do so, is because of a political reason, because you know this is unpopular, and therefore, it serves your political interests to oppose GST.”
“Sir, let me take these three questions in turn. First, Mr Leon Perera says there is a disagreement with philosophy and the main disagreement is on the slope of the growth in reserves. I would say the main disagreement is this: the Workers' Party basically wants to use more past reserves and leave behind less for our children and grandchildren – just state it honestly. There is no need to have fancy words. "Slow down the rate of growth of reserves". Basically, you are asking to use more of the past reserves and leaving behind less for the next generation. Fine, that is a legitimate position to have, but is this a wise thing to do? Is it a responsible thing to do, considering the new global environment that we are in, the uncertainties that we face, all the challenges that many Members here have spoken about. Is it wise to do it this way? And if you think about it, if our forefathers had taken that same approach, I said in my Budget speech or in my round-up speech during the debate, if our forefathers had thought exactly the same line of thought, take 20% more of NIRC for themselves, today, we will be not just talking about a 9% GST, we will be talking about an 11% GST. So, if we were to do the same, then the next generation – because fiscal needs will continue to grow – they will have to face a greater tax burden, not to mention having fewer resources to cope with crisis, emergencies or anything that can emerge in this uncertain world. And not to mention that we have not even talked about the more than $50 billion which we have drawn from past reserves so far, for which we are very unlikely for now, to be able to pay back.”
“Sir, I have already answered the question on the second point. The basic point is all Government sources of funding, whether from NIRC or from revenue, come into a consolidated fund. We do not hypothecate, which is something that Mr Leong is saying – identify this revenue source, link to this particular spending item. That is not what we do in Singapore. All the revenue sources come in; because monies are fungible, this is a general pot of funding. And then, we spend according to our priorities and therefore there is no point going through and identifying these sorts of linkages. On the first point of whether or not there will be unspent funding, it is the same point. Generally, we do not believe that there will be surpluses, because we are running such a tight ship now, these days. But should it happen, for example, that we have an unexpected windfall, a good year, maybe because of property sentiments, cyclical reasons why revenue has some upside, can it happen? Maybe, from time to time, it can happen. Then, what is the right response for us to do? Well, if there is that surplus, we might very well consider whether there are longer-term needs in the future that would be prudent for us to set aside some of that surplus into these so-called funds. For example, climate change adaptation. We have set aside, I think, $5 billion. Do you think we would only need $5 billion for climate change adaptation? To build sea walls and all? Of course not. So, in a good year, for example, if we have that extra money, we will look at longer-term needs and we will set aside these funds prudently, as we have always done to manage our fiscal and finances in a responsible manner.”
“Sir, there is no unspent NIRC because the Government does not run a surplus anymore. Maybe in the past but nowadays, what surplus are we talking about? We literally are running balanced Budgets, if not deficit Budgets, so there is no unspent revenue. Every revenue we collect, including through the NIRC, is spent. Second, on the HDB grant and Mr Leong Mun Wai says, "We have just discovered". I am not sure how he just discovered this. This has been going on for years since I was a young officer in MOF. We have always financed HDB on its deficit, it is called deficit financing, which means when HDB has a deficit because it has a shortfall, it has to sell the flats at a subsidised price, the selling price is less than the development cost, deficit. And therefore, there is a Government funding to HDB. This has always been the basis of our system, because we want to assure Singaporeans that they will always be able to afford HDB flats in Singapore.”
“And when the studies are overwhelmingly negative, it ought to give us pause to consider, is it even necessary to pursue a pilot for Singapore's circumstances, or should we think of alternative solutions? And that is exactly what we have done. We have developed a different system in Singapore. Also, a multi-tiered system, but I dare say, a more effective multi-tiered system, because the GST is tiered by income and we ensure that we can tax consumption in a way that is fair and effective.”
“Sir, on delaying GST, say, for one or two years, we are doing much better than that. We are delaying for more than five years with the Assurance Package. So, I am not sure why I would want to delay only for one to two years because I can delay for much longer. And with the design of the scheme that we have done, as I have mentioned just now, delaying for the vast majority of Singaporeans but getting those who can pay to pay first. Is that not better? [Applause.] Second, on pausing the second step of GST increase, should there be much higher than expected inflation. I mentioned just now the circumstances under which we might reconsider the second step. And that is really in the event of a very significant change in the external environment, globally and then impacting Singapore. This has to do not just with inflation, but with the economy, with labour markets, for example, if we were to go into a deep recession next year. It is not in our baseline expectations at all, but who can tell in this uncertain world what can unfold? If something like that were to happen, then as I said just now, we will certainly take a pause to review, to take stock of the economic circumstances and consider our position for the second step. Third, on the multi-tier and the pilots. Do not get me wrong. It is not as though we are reluctant to take in new ideas and to consider pilot schemes. We always do and we are always open to experimentation and policy reviews, but on this particular case, it is not for lack of studies. There has been considerable amount of work done to look at the effectiveness of multi-tiered systems all over the world by governments, by independent organisations. We have looked at all of these studies.”
“Look around at all the GST systems in the world, I think ours, we have kept it very, very limited. By and large, most items are taxed on a single-rate GST and if we were to expand the exemption of zero rate to many more items, for that matter, to essential items, food, then we are talking about a large expansion of exmempting of zero-rating in our GST system. All the complications, all the downsides, all the problems, all the ineffectiveness that we have seen in other countries will be experienced in Singapore, too.”
“Sir, on the three questions, on the fiscal outturn, Mr Louis Chua only looked at the revenue side of the house. He has not looked at the spending side, which I mentioned just now. Yes, revenues have gone up in the first half of fiscal year 2022 but spending has gone up as well. As I said just now, overall, the surplus in FY2021 and the better-than-expected outturn – revenue, net of expenditure – in the first half of 2022 have already been fully utilised for the packages this year. What happens in the second half of FY2022 is still to be seen. Yes, there may well be some buoyant revenue sources. We will see. But our spending is also going to be higher in the second half and, net-net overall, as I mentioned just now, we do not expect a surplus in FY2022 at the end of the financial year. But we will, at the end, in the Budget next year, give a firmer estimate, as we always do. On NIRC, I have also explained our position on NIRC. I have said that, going forward, we anticipate that NIRC, which contributes about 3.5% of GDP to our revenue today, we think that is likely, over the longer term, to keep pace with economic growth. NIRC will keep pace with economic growth, we think, but this has not taken into consideration the potential for our expected long-term real rate of return to be reduced because of all these structural challenges that we have just been talking about – climate change, ageing population, geopolitical tensions. So, it remains to be seen. But we will continue to monitor and update where necessary. On GST exemption, yes, there are certain classes of items which are exempt or zero-rated today but they are done for very good reasons, including difficulties in collection and we have kept it to a very, very, very tiny group of items. Very small.”
“In times of need, such as during the pandemic and during the period of high inflation this year, we have stepped in decisively with measures to support Singaporeans. Now, as part of Forward Singapore, we are now working in partnership with Singaporeans to refresh and update our social compact for the next bound. These are but some examples of how we have progressed together as one people and as a nation. So, to all Singaporeans, I say you have my assurance that this Government will never compromise on our principles and our values, and we will always do what is right for Singapore and Singaporeans. Let us keep this trust in each other going as we chart our way forward together. Thank you, Sir. [Applause.]”
“Even with an increase in the GST rate, lower-income families will not be affected. In fact, GST will be borne mainly by higher-income households, tourists and foreigners in Singapore. Singapore has implemented the GST in a unique way, taking care of lower- and middle-income households. This is the correct and fair approach. I am deeply grateful for the strong trust between the Government and people. Over the years, this has enabled us to implement many policies to improve the lives of Singaporeans. I assure everyone that the Government will uphold our principles and values and continue to do the right thing for Singaporeans. Let us uphold this trust in one another and chart our way forward together. (In English): Sir, the interests of Singaporeans are at the centre of everything we do. No government, no finance minister likes to talk about raising taxes, certainly not a tax like GST. But if we have to raise taxes, we will always be honest, transparent and we will do so in a fair manner and we will always be accountable to Singaporeans that the resources will be put to good use for their benefit. I am deeply grateful for the strong compact and trust between the Government and the people. Over the years, this has allowed us to develop and implement policies to improve the lives for all Singaporeans. Singaporeans have benefited from inclusive growth, particularly through our moves to uplift lower-wage workers' incomes. Income inequality in Singapore has been on a steady downtrend. We have strengthened social security through schemes like Silver Support. We have strengthened healthcare assurance for all by building five new polyclinics and doubling the number of community hospital beds in the last decade.”
“It is, certainly, a more responsible approach than planning on the basis of revenues or surpluses that may not materialise. The unique way we have implemented GST in Singapore reflects the ethos of this Government and the way we have always worked. We do not just go for politically expedient measures that may very well end up being unviable or unsustainable. Instead, we focus our efforts on designing effective policies to benefit all Singaporeans. This may mean that the policies are a little bit more complicated. It may mean that we have to work harder to explain our schemes, but it is well worth the extra effort to get it right and do the right thing for Singapore and Singaporeans. Sir, in Mandarin. (In Mandarin): [Please refer to Vernacular Speech.] Singapore is a rapidly ageing society and for our future healthcare and other needs, we need to raise the Goods and Services Tax (GST) rate. The Government will raise GST in a fair manner and help all Singaporeans. With the help of the Assurance Package, the majority of Singaporean households will be able to offset at least five years of additional GST expenditure. This means that while the GST rate will be raised next year and the year after, most households will only start paying more GST from around 2030. Besides the Assurance Package, lower- and middle-income households can also receive permanent benefits from the GSTV scheme. At the same time, the Government will continue to absorb GST for publicly-subsidised healthcare and education. Through these ways, lower-income households pay a much lower effective GST rate than higher-income households. In fact, on average, after Government support, the bottom 10% of households do not have to pay any GST at all. This includes many retiree households with no income.”
“Sir, the common opposition to the GST rate increase is that this is a regressive move that disproportionately affects lower-income households. I can fully understand the concerns such a move will have on lower-income households. But, again, this is not how we have implemented GST in Singapore. Not at all. I have already explained how after putting together the permanent GST Voucher scheme and GST absorption, we have an overall GST system that taxes consumption in a fair and effective manner. Although we are raising the rate in 2023 and 2024, the majority of Singaporean households will only start to pay more GST nearer the end of this decade or even later. This is because of the Assurance Package. The Government, effectively, pays the additional GST on their behalf during this period. A consumption tax, yes, it is regressive if implemented as a standalone measure. But this is not how we have done it in Singapore. We have worked hard to design a system where GST is implemented together with permanent offsets through the GST Vouchers to negate that disproportionate impact on lower-income households. We have also taken great pains to make sure that the middle-income households are looked after so that they only pay slightly more GST, but the full impact of the GST, the full burden, is borne largely by high-income households as well as foreigners based here and tourists. This is how we get the benefits of the GST system, which is a broad-based consumption tax without its drawbacks. What we have is a much, much better alternative than taking more from future generations or significantly raising property or personal income taxes on the broad middle class.”
“CAP will continue to monitor this closely, and they will be prepared to publicly name egregious businesses, and to take enforcement actions promptly. Mr Speaker, I have heard many suggestions to delay the GST increase, to consider the different alternatives and I have explained why these alternatives do not all add up. The Workers' Party and the PSP’s stance is "anything but the GST". But the question is also to be asked "why not the GST", especially the GST in the way we have designed it in Singapore.”
“Those who are not sure of their eligibility may refer to the GSTV website, as well as MOF’s website and the various press releases that we put out for more information. We will certainly continue to review to see how we can make information more easily accessible to Singaporeans. I want to also assure Members that we keep a close eye on improving the administration of the GSTV scheme. Most eligible Singaporeans – about 98% of recipients – today get their cash payouts seamlessly through PayNow or direct bank crediting. Those who remain unbanked were previously paid via cheques which required encashment over bank counters, but we have since moved to using GovCash to make payments to these individuals and we expect the move to help reduce administrative costs and allow the unbanked to receive their payouts more quickly and conveniently. Quite a number of Members had shared concerns about businesses profiteering from the GST rate increase and they raised the need for an effective deterrence. The Committee Against Profiteering (CAP), chaired by Minister of State Low Yen Ling, takes a serious view of unjustified price increases using the GST increase as an excuse. So, it actively monitors and reviews all feedback on such cases. The Committee received around 140 feedback submissions between April and October this year, of which seven involved specific allegations of GST misrepresentation. They followed up swiftly and found that there were in fact legitimate reasons for the price increases, such as higher cost of raw materials. The businesses involved have committed to be transparent in their pricing and communications with consumers, and so far, there have not been any repeat complaints.”
“Unfortunately, I am very disappointed that the Workers' Party has chosen to take a different path. And I wonder if this is because they feel that this approach is the best way to advance their political agenda as they have been over the years – to paint the PAP Government as uncaring and out of touch. Sir, we have gone through this debate in great detail, in the Budget debate and now, I can assure you this that in terms of the process, in terms of thinking about the alternatives, thinking about how best to meet our funding needs, we have left no stone unturned. We have looked at each and every option very carefully and we have decided this is the best way to manage the fiscal gap that we face and make sure that we continue to keep Singapore's fiscal foundation strong and resilient, especially for the future. There were many Members who had supported the increase in GST but had suggested ways to fine-tune our support schemes and I have listened to many of your suggestions. Mr Saktiandi Supaat and Ms Jessica Tan asked about the qualifying criteria and administration of the GSTV scheme. I assure them that we will review the qualifying criteria from time to time to ensure they stay relevant. Ms Jessica Tan also highlighted a situation where individuals in genuine need miss out on the benefits due to the Annual Value of the property they live in. And as we have explained, aside from the regular reviews which we do, such individuals may write in, and we will consider appeals on a case-by-case basis. Ms Foo Mee Har and Ms Joan Pereira suggested making it easier for people to understand our schemes and how they can benefit.”
“But that is completely false. It is completely false because we have gone through this already in the Budget debate. I have explained repeatedly in the Budget debate that we had thought about all the options very carefully, explained why many of these alternatives are not substitutes for GST. I have gone through them again today. In fact, I have said it is not just GST or these alternatives. We have to consider so many different options together given our huge funding gap and I have also explained that we have studied this carefully before we made the decision, the very difficult decision to proceed, both in the Budget and after the Budget. So, this false and simplistic narrative painted by the Workers' Party which, as Mr Murali Pillai has kindly reminded us, is not the first time. A pattern of repeating the same arguments against the GST, time and again. Really, it does not do justice to the commitment and professionalism of the entire team in MOF, including the public officials who are trying so hard to do what is right and to pursue a strategy of fiscal responsibility and discipline for the benefit of Singapore and Singaporeans. To be clear, the Workers' Party is entitled to your own position. By all means oppose the GST, adopt a different position. Fine. But at least be honest and responsible – acknowledge that your alternatives will either end up requiring the middle-income to pay more or will use more of the past reserves therefore, less for the next generation. And at least have the decency to acknowledge that the Government had considered all of these alternatives carefully. We debated them in the Budget – thoroughly and rigorously – before we decided on this move. I would have thought that is what a responsible political party would have done.”
“0 and corporate minimum tax rates of 15%. They are offering very attractive packages to attract these investments back to their home countries. Surely, our jobs and investments will be at risk if we are not able to keep pace and offer equally attractive value propositions in Singapore. So, I have gone through these four different buckets of ideas: fiscal surpluses, use more from past reserves, zero-rating, multi-tiered GST, tap on other revenue alternatives. And I have explained why actually it is very hard to for any of them to replace the GST increase. In fact, as I said just now, the GST revenues alone are not even enough to meet our healthcare funding gap – 1.3 percentage points of GDP is the gap by 2030 but our GST increase only yields 0.7% of GDP. This is healthcare alone. We have not talked about social spending. We have not talked about lower-wage workers, early childhood, all the other meritorious things we want to do. So, really, the question is not GST or these other alternatives. But we need GST and other alternatives. That is why from MOF's point of view, we will continue to study all other fiscal options, all other revenue options and consider how best over time to ensure more resilient and more sustainable revenues for the future. Having explained my position and also gone through all these different alternative ideas, I should say one thing, which is, I also take issue with the way that Opposition Members and especially Members of the Workers' Party have characterised the Government's position. Essentially, they have painted a very simplistic narrative. That Government has not considered these alternatives, that we are on autopilot, we are not open to ideas, we are just stubbornly pushing away at something we decided to do anyway.”
“How much more do you want to get from property tax? We have already raised it significantly this Budget for the high-end properties. You want to get more revenues from property tax, you will inevitably have to cover a wider group of property owners, including the middle-income. Personal income tax – we have raised it in the Budget but if you want to raise more – for example, as I mentioned in the Budget debate – if you want to load all of the GST revenue on personal income tax and push it only for the top marginal rates, the top marginal rates will go up from 22% to 42%. Why would the top earners stay in Singapore and pay 42% tax? So, again, inevitably when you talk about personal income tax, any way to get more revenue, will inevitably mean higher rates for a broader group of income earners. Or corporate income tax for that matter. Yes, there is BEPS 2.0 which may yield more revenue, according to some estimates . But it is really too early to determine how much we will get from the changes in BEPS 2.0 because as I keep saying, there are two pillars in BEPS 2.0 – Pillar One, Pillar Two. Pillar One would definitely impact us. Pillar Two is where you talk about minimum corporate tax globally of 15%. We may get some revenue there, but we have to look at the combined effects of Pillars One and Two. And even after looking at all that, even if we do get additional revenues, the reality is that global competition for investments will only get more intense in this new environment. With geopolitical tensions going up, countries are talking about reshoring, friend-shoring, onshoring. What does that mean? "Investments come back to my country." And governments are offering very generous subsidies and grants to attract these investments back. Never mind BEPS 2.”
“So, let us not try to come up with ideas that sound good on paper, sound attractive, but in the end, we know, not just because we do not like the idea, not just because we are not open to new ideas, but we know from independent analyses done by other countries, done by the OECD, that these ideas, these alternatives, do not work. They are not effective. In fact, we have designed a different system in Singapore, which is, as I described in my first speech just now, also multi-tier, but it is multi-tiered by income and it is a far more effective system. Assoc Prof Jamus Lim said it was a patchwork of offsets. Well, I think he does not give Singapore enough credit. If you look around the world at any GST system, I dare say we are one of the few, if not the only country with such an effective system of GST that has taxed consumption fairly and effectively. Certainly, not a patchwork, but a thorough, deliberate design of the GST system to make it fair and effective. The fourth idea to why not alternatives to GST is, let us look at other revenue alternatives. Whether it is property tax, personal income tax, corporate income tax. Look at sin taxes. Let us look at all these other revenue alternatives. Sir, we have been through these arguments. We went through them in great detail at the Budget debate. I will go through them again. The problem with these ideas, not because we are not open to them. We have considered all of them carefully and, in fact, in the Budget, we did raise property tax, we did raise personal income tax as well. But the problem with these ideas, as a substitute for the GST, is that simply the sums do not add up. Why? Let me explain. Again, if I may say. Property tax on residential property yields only $1 billion in annual revenue, today.”
“You look around the world, multi-tier GST systems have lots of problems, huge difficulties trying to distinguish between the products. The system is so costly, it is onerous to implement and it becomes very, very cumbersome. This is not talking in the abstract. More recently, I saw a BBC article about the Indian system. Pizza toppings are now deemed not to be classified as cheese. Why? A fifth of the toppings are made by vegetable oil and vegetable oil is not considered cheese. So, they charge GST at a higher rate of 18% for what they deem as "edible preparations" rather than at 12%, which is the rate for cheese. And this had to go through the Courts and it was determined by the Courts. No end to this sort of challenges. That is what we have seen everywhere and the bigger problem behind this is just that besides the administration, the cumbersomeness, the complication, it is just not effective. It sounds good on paper but it is not effective because when you exempt a basket of goods like essential items, in the end, you benefit the well-to-do because the well-to-do will spend more on everything, not just luxury items, but basic necessities as well. And this is a conclusion not just made by us. It is a conclusion reached by studies, based on studies by numerous governments as well as organisations like the OECD. So, we have more than enough evidence to show that this multi-tier system does not work effectively. In fact, according to the BBC report I read, 80% of countries which introduced GST after 1995, have opted for a single-rate system – like us, for good reason.”
“Mr Derrick Goh had asked about the process to determine the long-term expected real rate of return, given these structural trends, and I assure him that we have a robust process in place. Basically, before the start of each financial year, the investment entities – MAS, GIC and Temasek – will calculate the expected long-term real rate of return for the assets they each manage. This has to be certified by their respective boards and then they will submit it to the Government. The Government would take these inputs to propose the overall long-term expected real rate of return to the President. The President will consult with the Council of Presidential Advisors before deciding whether to agree with the Government's proposal. So, it is a very robust system with a few layers of checks in place. Given the trends that we expect over the coming years, it may well be that the expected long-term returns will have to come down – just based on these professional inputs and the assessment of these structural challenges we face. And if so, the right approach and certainly the approach that the Government will take, is to accept the lower NIRC and either adjust our spending accordingly or we will have to find other forms of revenue. So, that is the second broad range of suggestions – to use more from the past reserves. I heard just now from Assoc Prof Jamus Lim, the third area of suggestion which is to fine-tune the GST system to have exemptions for essentials. That is something that Ms He Ting Ru had suggested during the Budget debate as well and Assoc Prof Jamus Lim has reiterated that proposal. It is, again, one of those things that sounds like a wonderful idea. But the road to perdition is paved with many good intentions. And this is not just from our analysis.”
“And there, you have different variants, including tweaking the formula for NIRC from 50% to 60% or changing the definition of land sales revenues so that all the revenue from land sold attributable to the first 10 years of lease goes into current reserves as opposed to past reserves. Basically, whichever the suggestion, the point is, these suggestions are asking the Government to use more from the past reserves. That is what it comes down to. The Workers' Party have said that what they are suggesting is not to raid the past reserves, but it is really just to slow down the accumulation in reserves. It sounds very attractive, but it essentially means that we are leaving our next generation with fewer resources. This will just make it harder for them to meet future needs at a time when things are going to be more challenging, as Ms Foo Mee Har and many others have highlighted. At a time when our economy will be maturing, our population will be ageing rapidly and the uncertainties in the world are only becoming greater and greater. Surely, this cannot be the responsible thing to do. So, let us not succumb to the temptation of taking this easy way out and making things worse for our children and grandchildren. In any case, as Mr Derrick Goh has highlighted, the growth of the reserves is already expected to slow, given the significant headwinds in the global investment environment, long-term structural changes that we can see happening in the world, including the rise in geopolitical tensions, climate change, ageing populations, lower productivity growth. All this will affect future long-term returns. Geopolitical tensions, in particular, might not only reduce investment returns but could even result in conflict or war, which can impact the value of our investments.”
“Next, let me talk on the second set of questions around why not consider alternatives to the GST? Here, several alternatives were offered. Assoc Prof Jamus Jerome Lim and Mr Louis Chua suggested that there was fiscal surplus or fiscal slack, which would enable us to delay the GST. I wish that were so. I wish that were so, but unfortunately, we do not have any surplus. Assoc Prof Jamus Lim said that the Government is shielded from inflation because when inflation goes up and prices are higher, we will automatically collect more revenues in nominal terms. He is right. But do not forget, and he did not mention this, Government spending must also go up correspondingly. Public servant salaries must go up surely. Are we going to deny them wage increases? Support schemes must go up surely, to keep pace with inflation. So, on both sides, yes, we may collect more in nominal terms, but we will also have to spend more. In FY2021, we did enjoy higher than expected revenue and we had a surplus of $1.9 billion in FY2021. But we have already used this surplus, as well as the better-than-expected fiscal outturn for the first half of FY2022 to fund the June and October support packages this year. At this stage, it is still too early to determine the eventual fiscal outturn for the second half of FY2022. But for now, we are not expecting a surplus for the year and we will provide a firmer update, of course, at next year's Budget. But the bottom line is, any surpluses that you can think of are imaginary. They are not there and will not allow us to delay the GST. The second set of suggestions of alternatives are largely to use more from the past reserves.”
“That is why, having considered this so carefully before the Budget and after the Budget, even in the last few months when the global economic environment had deteriorated, we felt that there was no possibility for us to delay the GST increase any further. But what we can and what we will do is to delay the impact of the GST increase. That is done through the Assurance Package for the majority of Singaporean households for at least five years. In the meantime, as Members noted, we can then start to benefit from the recovery in tourism and collect more GST from tourists, foreigners and those who are better-off. That is the reason why we are doing it like that, because people say, forget your Assurance Package. I do not do the Assurance Package, do not do GST, we square off and we will just do GST later. But do not forget, when we do it the way we have designed, revenues start flowing in. From who? From foreigners, from the better off people, from tourists. So, we are already getting benefits from revenue sources from these groups through the way we have designed the system. Mr Saktiandi Supaat also asked whether we would proceed with the second step of the GST rate increase if there were a sharp deterioration in the economic conditions next year, like a major global downturn. If indeed such downside risks were to materialise and our economy is severely impacted, we will need to take a careful review and we will consider whether to proceed with the second step of the increase in 2024. For now, this is not our baseline expectation. Barring a severe downturn in global economic circumstances, we will proceed with the second step of the increase to put our public finances on a much stronger footing and we will ensure that households are well-supported through the transition.”
“This is why I had announced in the Budget that we will be spending over $9 billion over the next five years, on the enhanced Workfare and the Progressive Wage Credit Scheme, and I announced further enhancements to the Progressive Wage Credit Scheme earlier this year. We will continue to closely monitor the progress of our efforts to uplift the wages of lower-wage workers and we stand ready to do more if needed. Ms Yeo Wan Ling also highlighted concerns about SMEs and self-employed persons and we are also looking at how we can do more to help them. Today, public housing is a key concern for many and we are ramping up our BTO supply to ensure accessibility and affordability of public housing and to address the backlogs due to COVID-19 amid higher construction costs, and all that will, again, cost more. We also need to spend more to strengthen our social compact. This is an exercise we are undertaking now through the Forward Singapore conversations, and we are considering further policy shifts to do more for disadvantaged and vulnerable groups. These moves will certainly require additional resources. So, healthcare already, you can see where the spending needs are going to be, it is very clear, because of the ageing population. Then, you add up all of these other needs. It is a few billion here and a few billion there – they all add up. None of these needs have become less urgent because of the global economic situation. On the contrary, we must do more, especially in an uncertain and volatile environment. If we do not deal with this huge spending gap now and decisively, the problem will only snowball and very soon we will ourselves be unable to fund programmes that Singaporeans need.”
“No, we must continue to learn from countries' experience, but let us make sure we get the right lessons. In fact, there are no end of international examples, including recent ones, where governments have weakened their foundations of their fiscal systems and they have ended up paying a very major price. So, let us never, ever be tempted to go down that route. While there are considerable uncertainties in the economic outlook, there is certainly nothing uncertain about Government expenditures, especially in the area of healthcare, which many Members have cited, including Mr Liang Eng Hwa, Mr Sharael Taha and Ms Joan Pereira. Our population is ageing with every passing year. Government support and spending on healthcare has been rising over the past decade, tripling from $3.7 billion in FY2010 to $11.3 billion in FY2019. Since then, we have continued to age, and our healthcare needs have become only more acute. I have said this before, we expect the Government's healthcare spending to go up, from 2.2% of GDP to 3.5% of GDP. That is 1.3 percentage points of GDP, much more than the revenues we get from the GST increase. And this is on healthcare alone. So, even as we deal with healthcare spending, we have to resource many other spending needs. For example, we want to invest more in early childhood education, to give every child the best start in life. Annual spending there is expected to double to over $2 billion in the next few years. We also want to do more to uplift our lower-wage workers. Surely, there is unanimous agreement in this House to do more here. Mr Desmond Choo and Ms Yeo Wan Ling spoke passionately about this, and I assure them this is also a key priority for the Government.”
“At the same time, we will press ahead with our economic restructuring and transformation plans because when we make ourselves more productive and competitive, our workers will be able to earn more and this can more than make up for the higher prices and ensure that we are better off in real terms. Mr Saktiandi Supaat asked if the GST rate increase is the right macroeconomic stance to adopt in the face of higher inflation and a slowing economy. Sir, in calendar year 2023, the additional GST support going to households is expected to be comparable to the additional GST revenue we receive. We have designed our assistance packages to start flowing support early, ahead of the GST rate increase. As a result, the combined impact of the GST increase and the offset schemes we have put in place is broadly fiscally neutral. Furthermore, we are targeting our support at the lower- to middle-income households rather than doing it in a broad-based manner. This will minimise any additional inflationary pressures. In sum, we have designed the overall package to ensure we neither stoke inflation inadvertently nor choke aggregate demand. This is an appropriate macroeconomic stance to adopt at this juncture. Assoc Prof Jamus Lim cited what happened in Japan when they increased the GST rate as a warning of what might happen. But surely as a professional economist, Assoc Prof Lim must know better. Context matters. Japan was in a low inflation environment. They raised GST and their inflation doubled, yes, but from a chronically low 1% to 2% and, even then, temporarily. So, let us avoid raising these alarmist examples that may not be so relevant to our context. Does that mean there is nothing to learn from overseas?”
“Both globally and in Singapore, the "new normal" may well be a higher rate of inflation than what we were used to. That is why where inflation is concerned, the Government has extended comprehensive support to Singaporeans, especially lower- and middle-income families, through three packages this year totalling more than $3.5 billion. On average, as I have explained, these measures will fully offset the inflation-driven increases in spending for lower-income and retiree households – fully offset the increase in spending for lower-income and retiree households due to inflation. For the typical middle-income household, the Government support provided will offset more than half of the inflation-driven increases in cost of living this year. If you take the example of a middle-income family – which I think Mr Louis Chua highlighted just now in his speech – inflation is coming in at 6% this year, their annual expenditure will go up by – Mr Louis Chua estimated – around $2.700. Our estimates are not very different. So, yes, there is an increase in spending because of inflation, but the support they are getting this year is around $1,500. So, it will, again, keep to our commitment to offset more than half of the inflation-driven increase in cost of living this year for middle-income households. This does not take into account wage increases for individuals, which many of whom are very likely to enjoy. This is what we are doing this year. Next year, we will continue to monitor closely the inflation situation and we will assess what additional support measures might be needed.”
“The key issues are how we go about doing so and these issues can be summarised into two broad questions. First, why raise the GST now; and second, why not alternatives to the GST? Let me take them in turn. First, why raise the GST now? I fully understand and appreciate Members' concerns about doing so in such a challenging economic environment. This was a very difficult decision for me and the MOF team. We had considered this very carefully, leading up to the Budget, as I explained in the Budget speech and in our Budget debate and subsequently, even after the Budget when we saw conditions deteriorating. But eventually, we decided that it was still necessary to move. For now, our economy and labour market are still holding steady. Our GDP growth is projected to come in at 3% to 4% this year. Our resident unemployment rate has also recovered to pre-pandemic levels. Sectors such as aviation and tourism that were badly affected by the pandemic are continuing to recover. There are some indications of weaker growth in some sectors and we are monitoring this closely. More importantly, the economic challenges we face are not just near-term or cyclical in nature. The ongoing war in Ukraine, disruptions to energy and food supplies as well as rising geopolitical tensions and more fragmented supply chains – these are the realities that we have to deal with not just in the near-term but very possibly for a more prolonged period. In other words, international economic conditions have fundamentally changed. While we expect inflationary pressures in Singapore to ease in the second half of next year, according to MAS' latest forecast, inflation rates are unlikely to go back to what they were over the past decade.”
“Therefore, section 62C addresses this by introducing a new two-tiered approach to prosecute offenders based on their level of culpability and through enhanced penalties. Providing for this under the GST Act will also empower IRAS to investigate and prosecute these offences more effectively. As Mr Louis Ng highlighted, there is a clear distinction in the penalties between tiers one and two. The distinction between tiers is based on the presence of criminal intent. Where a person knows or has reasonable grounds to believe that his participation is for a fraudulent purpose, he will be prosecuted under tier one, regardless of whether he has full oversight of the entire operation. Where there is no such criminal intent, and yet a person's business entity is eventually used in a specified arrangement, he will face the lesser, strict liability charge under tier two. This will apply when business owners do not exercise the reasonable care and due diligence expected of them. Establishing criminal intent, like for all criminal offences, is a question of fact that will need to be proven in Court. The eventual sentencing of cases will be determined by the Courts. IRAS has provided guidance on its website and through an e-tax guide on how businesses can avoid being drawn into a Missing Trader Fraud arrangement. Whistle-blowers who report such fraud to IRAS may also receive rewards under IRAS' whistle-blower programme if conditions are met. These are the technical and operational issues, which I hope I have clarified. Next, let me move on to the questions on the GST rate increase itself. Members – from the speeches I have heard – broadly agreed that our structural needs are rising and we do need to raise the revenues to fund them.”
“Mr Speaker, I thank all Members who have spoken on the Bill. There were broadly two categories of questions. The first relates to the technical and operational aspects of the GST regime – I think not so many people spoke about that – but the other set of questions relates to the GST increase itself, which many more Members spoke about. Let me first address the technical and operational clarifications. Mr Derrick Goh suggested that we do more to help small businesses register for GST voluntarily. I completely agree and we will do more. Today, seven in 10 businesses that newly register for GST already do so voluntarily. We will continue to help businesses who wish to register for GST to do so. There are support schemes under Enterprise Singapore. We will do more to engage SMEs on this. On the GST transitional rules, Mr Saktiandi Supaat was concerned that smaller businesses might find it difficult to understand these rules. Again, we likewise share the concerns. We have been very mindful of their needs. That is why since early this year, IRAS has been helping businesses prepare for the GST rate change by conducting monthly live webinars, publishing e-tax guides and FAQs on its website, as well as launching a YouTube video. Businesses that require more clarifications on the transitional rules can approach IRAS for more assistance. Mr Saktiandi Supaat also asked how offenders will be prosecuted differently under the new Missing Trader Fraud section 62C. Currently, perpetrators of Missing Trader Fraud can only be prosecuted under non-tax Acts like the Companies Act, but as I mentioned just now, these provisions may not be able to cater to the specificities of Missing Trader Fraud, which is a very complex tax crime.”
“These persons typically incorporate entities which are then used by syndicates for fraudulent purposes. Tier 2 offences carry a maximum imprisonment term of one year and/or maximum fine of $50,000. The proposed sanctions are proportionate to the severity of the offences and are aligned with the sanctions for similar offences under other Acts, like the Penal Code and Companies Act. Clauses 6, 10, 11, and 18 of the Bill provide for this amendment. The last amendment, provided by clause 9, empowers the Comptroller of GST to extend the filing deadline for GST returns. This allows the Comptroller the flexibility and authority to administer the GST regime efficiently, by extending the deadline for filing GST returns where necessary, such as during COVID-19. A similar amendment was earlier passed under the Income Tax (Amendment) Bill 2022, to empower the Comptroller to extend all filing deadlines in the Income Tax Act as well as the Property Tax Act. Mr Speaker, the amendments proposed in the GST (Amendment) Bill 2022 are needed to make our revenue structure stronger and more resilient. These changes will put us in a better position to fund our common aspirations and to build a fairer and more inclusive Singapore. Mr Speaker, Sir, I beg to move. [(proc text) Question proposed. (proc text)]”
“This is provided the overseas vendors are on the “pay-only” regime where they do not make any claims for refund of GST they incur on their purchases. The next amendment relates to our efforts to counter Missing Trader Fraud. Missing Trader Fraud is a fraud scheme used by syndicates, where the seller absconds with the GST he has collected on his sales without paying the GST to IRAS, while businesses further down the fraud chain continue to claim refunds from IRAS on input GST paid on their purchases. In 2020, we introduced several measures to deter Missing Trader Fraud schemes. This included denying input GST refund claims to businesses who knew or should have known that their purchases were part of a fraudulent arrangement, as well as introducing a 10% surcharge to be applied on the amount of input GST denied. These measures targeted businesses that did not conduct the appropriate due diligence when entering into business arrangements. To directly target the perpetrators of Missing Trader Fraud, criminal sanctions based on a two-tiered approach are now proposed to be introduced from 1 January 2023. Tier 1 offences apply to Missing Trader Fraud masterminds, co-conspirators and syndicate members who participate in such fraud schemes. Tier 1 offences carry a maximum imprisonment term of 10 years and/or maximum fine of $500,000. This is a step up from the maximum imprisonment term of seven years for the offence of fraudulent trading, which such offenders are currently prosecuted under, and is intended to convey a strong deterrence message. Tier 2 offences apply to current or former sole-proprietors, partners or directors of business entities that are used in Missing Trader Fraud schemes.”
“For example, if the contractual customer of the service belongs in Singapore, then GST will be charged at the standard rate. This amendment will also ensure consistent GST treatment for travel arranging services, regardless of whether they are rendered by local or overseas providers. Today, overseas providers of travel arranging services already have to charge GST when providing services to Singapore-based customers, irrespective of where the underlying travel product such as accommodation is. Let me now touch on the remaining four amendments in the Bill, which arise from our regular reviews to clarify tax rules and improve administration. Clauses 8, 12, 13, 14 and 15 update the Transitional Rules in the GST Act. These Rules are to be applied during a change in GST rate or treatment. Based on the Rules, taxpayers will determine whether the old or new GST rate or treatment applies to their supplies. The amendments provide greater clarity in the application of the rules, particularly for more unique supplies made, such as supplies which spans both a change in GST rate and the effective date of GST registration of a business. Next, clauses 2, 3, 5, 16, 17, 19 and 20 refine the rules for taxing low-value goods and imported services under the Overseas Vendor Registration (OVR) and Reverse Charge (RC) regimes. The refinements seek to prevent double taxation, provide tax certainty, and ease the compliance burden of businesses. For example, to prevent double taxation, the refinements clarify that where overseas vendors procure services already charged with GST from Singapore suppliers and subsequently onward supply these same services to their own customers in Singapore, they need not charge GST on these onward supplies.”
“Sir, we have designed our GST system carefully to achieve these outcomes. And as the inflationary outlook evolves, we will continue to monitor our scheme parameters to ensure that we uphold and maintain these objectives. The GST is therefore a key part of our fair and progressive system of taxes and transfers that takes care of the less well-off and ensures that those who are better off contribute their fair share in revenues. The second amendment updates the GST treatment for a supply of travel arranging services. Examples of such services include the arranging and facilitation of international transport, accommodation and travel insurance. Currently, the basis for determining whether a supply of travel arranging services is zero-rated or standard-rated depends on factors like the location of the accommodation or whether the transportation being arranged is international in nature. For example, for the arranging of accommodation, if the accommodation is located in Singapore, today GST applies. But if the accommodation is located abroad, then the supply of arranging the accommodation today is zero-rated, which means that it is not subject to GST. But today's treatment does not accurately reflect the place of consumption of such travel arranging services. Such arranging or facilitation services are in fact consumed by the Singapore-based consumer at the point of booking, rather than at the eventual place of consumption of the underlying travel product. We are therefore updating the GST treatment of travel arranging services under clause 7 and with effect from 1 January 2023, the GST treatment for a supply of travel arranging services will be based on where the person who contracts for the service and where the person who directly benefits from the service belong.”
“Yes, but they do not fully understand that there is also another important design feature of GST which is a permanent GSTV scheme and the absorption of GST for subsidised education and healthcare. Households already receive these offsets today and as permanent measures, they will continue alongside, and even after, the Assurance Package. Through the GSTV, we help lower- to middle-income households defray a significant part of their GST expenses permanently. The GSTV scheme has four components: cash; MediSave for seniors to support their medical needs; U-Save rebates to offset utilities bills; and S&CC rebates to offset S&CC bills. Besides the GSTV, we will continue to absorb GST for publicly subsidised healthcare and education. So, after putting together the permanent GSTV and GST absorption – what we have is an overall GST system that taxes consumption in a fair and effective manner. What are some of our features of our system? In effect, we have a multi-tiered GST system – one that is tiered by income levels, with lower-income households paying a much lower effective GST rate than higher-income households. As I had explained in the Budget this year, on average, the bottom 10% of households do not pay any GST at all after the permanent offsets. This includes many retiree households without income. And even after the GST increase, the effective GST rate for households in the first three income deciles remains unchanged at below 3%. That means the GST increase will not negatively impact them. The full impact of the GST will be borne largely by higher-income households, as well as tourists and foreigners who are based here – and this is also the group that contributes the biggest share to net GST revenues from households and individuals.”
“So, $4,000 in benefits, compared to $800 in additional expenses per year, that is about five times, which means that the Government pays about five years’ worth of the family’s additional GST. That was the computation we made earlier this year in the Budget. With higher inflation this year and in the coming years, we can expect that the household expenditure and therefore the additional GST expenses will increase. The size of the Assurance Package will therefore need to be correspondingly increased to meet our committed levels of offsets. Therefore, after reviewing the elevated inflation situation, I have decided to top up the Assurance Package by another $1.4 billion to reach around $8 billion. This ensures that the package continues to offset additional GST expenses for the majority of Singaporean households for at least five years, with around 10 years offset for lower-income households. I will share the details of this enhancement in my Budget Statement next year. So, for those who ask the Government to delay the GST rate increase, the Assurance Package in effect does precisely that, for the majority of households. The cash and other forms of support under the Assurance Package amount to more than what most citizens will pay in additional GST for at least five years. I have explained how the Assurance Package works and how it is for all Singaporean households and provides a cushion to ease the transition. Let me now turn to another important design feature of the GST system in Singapore – which is our permanent GST Voucher (GSTV) scheme and Government absorbing GST for subsidised education and healthcare services. Because people say the Assurance Package, no matter how generous is temporary.”
“This GST rate increase is an important revenue move that will provide us with additional resources to meet our growing healthcare expenditures and to take better care of our growing number of seniors. The Government will help all Singaporeans adjust to the GST increase, especially the less well-off. We will help every Singaporean family through the Assurance Package. We had already planned for this at the same time as we planned for the GST rate increase. Members will know that at Budget 2020, Deputy Prime Minister Heng and then-Finance Minister set aside $6 billion for the Assurance Package. At this year's Budget, I enhanced the package by $640 million. With the Assurance Package, we had committed that the majority of Singaporean households will not feel the impact of the GST increase for at least five years and that lower-income households will not feel the impact for about 10 years. Put another way, they will effectively not face additional GST expenses for many years. So, we will continue to uphold these commitments even as the inflationary outlook evolves. Let me illustrate what I mean. In my Budget Statement, I gave an example of a middle-income family of four with two school-going children, living in a 4-room flat and earning a monthly household income of around $8,000. At that time, we estimated that they will incur GST on household expenses of around $3,400 a month, or $40,000 a year. With a two percentage-point increase in GST, this means their additional GST expenses would amount to around $800 per year. Under the Assurance Package, the family would have received around $4,000 in benefits.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time". The Goods and Services Tax (Amendment) Bill 2022 covers six amendments. Two give effect to measures that were announced in my Budget Statement this year. The other four arise from our periodic review of the GST regime to clarify tax rules and to improve administration. MOF had sought views from the public on the draft Bill in June. We published our responses to the key feedback received on 10 October 2022. We thank the contributors for their inputs and have incorporated their suggestions where relevant. Let me start with the changes announced in my Budget Statement this year, which is the increase in the GST rate from 7% to 8% from 1 January 2023, and from 8% to 9% from 1 January 2024. Clause 4 of the amendments will give effect to this change. The proposed change in our GST rate has been robustly debated in this House but let me reiterate a few points. Sir, this Government looks after our people, our families and our seniors. We have been expanding support for their needs, including their healthcare, social and ageing needs, and we will continue to do more. We also want to improve social mobility, invest in skills upgrading and green our economy and city. To achieve all this, we will need more Government spending – on a structural and recurring basis. This is why at this year’s Budget, I had raised a slate of taxes, including Personal Income Tax, Property Tax, GST and the ARF rates for vehicles. This is how, as a responsible Government, we plan ahead and we meet our future needs in a sustainable way.”
“The Government assesses the performance of our investment entities on an overall portfolio basis over the long term, rather than that of specific investments in the short term. The Government’s mandate to our investment entities is to achieve good, long-term returns and we do not influence their specific investment decisions and exposures. Our investment entities’ portfolios may be impacted by changes in the operating environment from time to time. They are monitoring the situation in the UK closely, just as they monitor the situations in other countries they invest in. To manage investment risks, our investment entities have globally diversified portfolios, with investment exposures across geographies, asset classes and sectors. More information can be found in their annual reports.”
“From FY2019 to FY2021, the Inland Revenue Authority of Singapore (IRAS) investigated a total of 465 cases of tax evasion: 141 in FY2019; 192 in FY2020; and 132 in FY2021. IRAS proactively detects tax evasion cases through its combination of data analytics, intelligence gathering, tax audit and reporting by whistleblowers. Once identified, IRAS subject cases to rigorous audit and investigation to determine whether tax offences have been committed. Where IRAS has established that tax evasion offences have been committed, IRAS will not hesitate to initiate Court proceedings to prosecute the taxpayer and/or the abettors. Those found guilty of tax evasion may face a penalty of up to four times the amount of tax evaded, a fine not exceeding $50,000, and/or imprisonment of up to seven years. Whistleblowers are able to receive a reward of 15% of the tax recovered, capped at $100,000, if the information provided leads to a recovery of tax that would have otherwise been lost. In practice, most whistleblowers are not motivated by rewards. Most do not request, and thus do not receive, the reward for making tip-offs. Taken together, the penalties for non-compliance and rewards for whistleblowers have contributed to keeping tax evasion cases low.”
“Table 1a shows the requested information for the total accounting profit before tax (PBT) by companies in the respective PBT brackets. The information is based on companies assessed by the Inland Revenue Authority of Singapore (IRAS) in each Year of Assessment (YA). Information for YA 2022 is not yet available. Table 1b shows the total corporate income tax (CIT) paid by companies in the respective PBT brackets. The Member may be asking for the above data to compute the effective tax rates (ETR) for companies. But to compute the ETR, we use the chargeable income before group relief, loss carry back, partial tax exemption and startup tax exemption, and not their accounting PBT. As mentioned before, the average ETR for SMEs (that is, companies with turnover of up to S$100 million) was 3.4% for YA 2010 and 2.8% for YA 2019. The average ETR for non-SMEs (that is, companies with turnover exceeding S$100 million) was about 8% to 10% over the same period.”
“The Qualifying Child Relief (QCR) is given to taxpayers to recognise their efforts in supporting their children. The Working Mother's Child Relief (WMCR) is given to encourage women to continue working after their marriage and childbirth, and to encourage more births. Given the objective, the child must be unmarried and financially dependent on the parent (that is, not earning any income), and meet the following criteria: (a) below 16 years old; or (b) studying full-time at any university, college, or other educational institution at any time in the year. As a concession, like all other dependant tax reliefs1 (for example, Parent Relief), children who derive incidental income can qualify as a dependant if their income is not more than $4,000 a year. The number of full-time National Servicement (NSFs )whose parent(s) had QCR and/or WMCR claims allowed in respect of them in the last five years is in Table 1. NSFs receive an allowance to support their basic personal upkeep, including for transport and incidentals. Lodging, food, clothing and medical care are provided for by the Singapore Armed Forces as most NSFs stay in camp. Hence, they are not considered financially dependent. However, in line with the concession, if they receive a total NS allowance and income of less than $4,000 in a particular year (for example, because they were in National Service for only part of the year), they could qualify as a dependent for QCR and WMCR. On the suggestion to treat NSF allowances like transport and meal allowances for tax purposes, this is already the case. NSF allowances, like fixed monthly transport and meal allowances, are considered income and subject to tax if the individual's chargeable income is $20,000 or more.”
“The Inland Revenue Authority of Singapore (IRAS) has processes to review high-value donations, including donations of shares and unit trusts, before the tax deductions are applied. Where there is reason to believe that the arrangement leading to the donation was made for the purpose of tax avoidance, including cases involving insider gifting, IRAS will not hesitate to investigate and will work with the relevant agencies such as the Monetary Authority of Singapore. Where appropriate, IRAS will take action under section 33 of the Income Tax Act, which empowers the Comptroller to disregard or adjust the tax deduction claims and impose relevant tax surcharges against the donor. In order to attain Institution of a Public Character (IPC) status, charities must have in place robust internal processes of transparency and accountability. This includes carrying out proper due diligence checks on their donors.”
“Singapore Customs employ various measures to deter the under-declaration of the value of imported cars. These include the requirement for importers to provide supporting commercial documents so that suspicious transactions can be detected. Surprise audits and inspections on motor vehicle importers are conducted to verify the accuracy of declarations. Importers who are found to have under-declared the values of imported cars may be prosecuted. Through these efforts, the excise duties due from the under-declared value of cars imported into Singapore has been kept low at $1.3 million over 2011 to 2021, which is less than 0.1% of the total excise duties collected by Singapore Customs for motor cars over the same period.”