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- Contributions from Reserves (NIRC) is now our single largest source of revenue. It is unwise to over-depend on one source.
- Reserves are our national savings – for a rainy day.
- Our generation is benefiting from NIRC because past generations saved and grew the reserves.
- We too should leave a fair amount to future generations - we balance this by using 50% and reinvesting 50% of our investment returns.
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- It is unsustainable to borrow to meet recurrent spending, like healthcare or other social spending.
- If we keep borrowing every year, this means debt for our children and grandchildren.
- Borrowing is more suitable for financing major long-term infrastructure projects because:
- The completed projects will benefit current and future generations.
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- We already do. Past Reserves are used to fund land-related projects such as:
- Land reclamation, including polders (which are part of climate change measures).
- Creation of underground space like the Jurong Rock Cavern.
- Land acquisition projects like HDB’s SERS (Selective En-bloc Redevelopment Scheme).
- Past Reserves can be used for these purposes as the reserves are essentially converted back into land and the asset is preserved.
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- Our general principle is to preserve and grow our assets.
- Selling land converts land (physical assets) into land sale proceeds (financial assets).
- If we simply spend the proceeds, we are eating into our wealth.
- Instead, we preserve and grow the assets by investing land sale proceeds as part of our reserves and earn income on it.
- This income is part of NIRC.
- We spend 50% of the income and keep the remaining 50% for future generations.
- Hence, land sale proceeds are indirectly flowed back through NIRC.
- In short, we make our land work for us by generating annual income.
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- We already tax high-income earners and wealth.
- For income, we increased the top marginal Personal Income Tax (PIT) rates for higher-income earners in Budget 2015, from 20% to 22%.
- For now, PIT rates are reasonable to keep us attractive, given the intense global competition for talent.
- We will continue to review our rates regularly.
- Increased property tax rates for vacant or rented residential properties in Budget 2013.
- Increased top marginal Buyer’s Stamp Duty (BSD) rate for higher-value residential properties in Budget 2018.
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- Our economy is small and open. Companies can easily move their businesses out of Singapore if we become too expensive – Singaporeans may lose their jobs.
- Corporate Income Tax (CIT) rates around the world are coming down.
- US, UK, and France have cut or announced plans to cut taxes in recent years.
- Closer to home, Malaysia and Vietnam have also cut their CIT rates.
- Singapore’s headline CIT rate at 17% remains competitive internationally. We will continue to monitor other countries closely.
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- Government will continue to absorb GST on publicly subsidised education and healthcare.
- For healthcare, absorbing GST helps lower- to middle-income Singaporeans who are subsidised patients at public health institutions.
We will keep the cost of living affordable and manageable.
1. Enhance GST Voucher Scheme - Permanent GST Voucher scheme will be enhanced when the GST is increased. This will help lower-income Singaporeans and seniors.
- Assistance is given in the form of:
- Cash for those with lower income. - MediSave top-ups for most elderly aged 65 and above. - U-Save for eligible HDB households to directly offset utilities expenses.
2. GST Offset Package
- We will have a GST Offset package to help you adjust to the GST increase.
- Lower- and middle-groups, and seniors will get more help.
3. Government will continue to absorb GST on publicly funded education and healthcare.
4. Continued targeted support.
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- Higher-income households consume more. Such an exemption would benefit them more.
- Instead, we charge the same GST rate on everything, and then use part of the GST revenue to target help for lower-and middle-income Singaporeans and seniors through GST Vouchers and other subsidies.
- This is fairer and more effective, and makes sure the help goes to Singaporeans who really need it.
- Experience of other countries shows that multiple rates complicate the GST system.
- Difficult to define a “necessity” – leads to many disputes.
- Raises compliance costs for businesses.
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- When we last raised GST in July 2007, most businesses did not raise prices beyond the GST increase.
- Committee Against GST Profiteering (CAP) was formed to look into complaints of profiteering.
- Similarly, when GST is raised to 9%, we expect business not to exploit this to raise prices.
- We will convene the Committee this time too, to make sure this does not happen.
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As a responsible government:
- We think and plan ahead to ensure Singaporeans’ needs are met.
- We know healthcare and other social spending will increase with our ageing population.
- Should not wait until the last minute and surprise Singaporeans. Need to inform Singaporeans ahead of time.
- Better to be upfront and honest with our people now so they can prepare and make arrangements.
- It is the right and proper thing to do.
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- GST and HSR project are separate issues. They do not affect each other.
- Increase in GST is not meant to finance lumpy infrastructure investments.
- Large, lumpy infrastructure investments will be funded as follows:
- Saving ahead e.g. Changi Airport Development Fund and Rail Infrastructure Fund.
- Borrowing by Statutory Boards and Government-owned companies.
- We are also studying option of direct Government borrowing.
- Unlike infrastructure projects, recurrent needs (e.g. healthcare, security, education) call for recurrent sources of revenue.
- GST is one such revenue source that supports these needs.
- Raising GST to meet these needs is a responsible and sustainable approach.
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- Government has thoroughly studied our spending trends and different ways to raise revenues to fund our plans.
- Based on this, the Government has concluded that it needs to raise GST sometime in the period from 2021 to 2025.
- It is prudent to raise taxes in good time, and not only when our resources become strained.
- When deciding on the exact timing of the GST increase, we will carefully assess the state of the economy, trends in expenditure and revenues.
- Just as the decision to raise GST was not made lightly, the Government will also exercise care in deciding when to do this.
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