Singapore — Workers’ Party MP Jamus Lim just lately tackled inflation, cost-of-living points, and the upcoming GST (Goods and Services Tax) hike.
The Sengkang GRC MP, an Associate Professor of Economics at ESSEC Business School, advised that the hike must be reconsidered, given the state of Singapore’s financial system.
“We also need to think very seriously about the wisdom of a GST increase,” he wrote in a Facebook post on Wednesday (Jan 26). “For us, a GST hike would not just add fuel to the fire, it could also shock an economy that is only just on a rebound.”
He expressed concern over the affect of the hike on sure industries, saying: “Sectors that will feel GST most directly (like F&B) remain weak.”
Prime Minister Lee Hsien Loong had stated in his New Year message that that the Government must “start moving” on the GST hike.
The Government’s iintention to extend the GST by two share factors was introduced in 2018 by the then-Finance Minister Heng Swee Keat when he delivered the Budget in Parliament. At the time, he projected that the GST could be raised by sooner or later between 2021 and 2025.
But the rise was not carried out final yr due to the pandemic’s affect on the financial system.
The present GST fee of seven per cent has utilized since July 2007. It was 5 per cent from 2004 to 2007; and 4 per cent all through 2003, inching up from the unique 3 per cent imposed on April 1, 1994.
Referring to the temporary debate in Parliament just lately on the rise in Cost of Living and inflation, he stated that as an economist, he considers the “underlying drivers” of inflation. “We get a little more worried when prices rise because workers are insisting on wage hikes, because they are facing steadily rising costs of living. Or when households factor higher prices into their budgets in anticipation of what they need to spend.”
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While he acknowledged that inflation is excessive — “4% in the latest December report” — it decreases when the prices of meals and vitality “which are usually more volatile” are eliminated.
“This so-called ‘core inflation’ is running at 2.1 per cent in December. This is hot, but only a little more than the 2 per cent target most central banks are comfortable with,” he stated.
But “the picture isn’t all peaches and roses’, he warns. “As anyone who drives a car or pays for utilities would have observed, energy prices are up sharply (by more than 10%). And while food costs have not risen as quickly compared to a year ago, they have jumped by close to 4% (on an annualized basis) over the past few months.”
The Government has accepted that there was inflation, though it has emphasised that “price increases would eventually come under control”. Prof Lim stated he agrees with this, however believes it is not going to “happen as quickly as economists (and central bankers) would like”.
Higher prices, he emphasised., are already making an affect.
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“Perhaps most significantly, persons are additionally feeling the ache now. The #workersparty believes that it’s attainable to make the numbers work with out additional rising a regressive tax like GST, and to as an alternative deal with different progressive sources.
“These include a wealth tax, additional tiers to property taxation, and adjusting the formula for the interest contribution from our reserves. We should also think more carefully about existing taxes on capital. Ultimately, while we agree that changing demographics mean that our expenditures (especially in healthcare) will increase, we think that a different mix to our revenue sources is both possible and desirable.”
Read associated: Jamus Lim makes use of parable of ‘saving and spending’ to elucidate why we must always not have a GST hike
Jamus Lim makes use of parable of ‘saving and spending’ to elucidate why we must always not have a GST hike
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