LHY: GST increase ‘callous and unjustifiable’, foreseeing increased hardship for Singaporeans

SINGAPORE: The Goods & Services Tax (GST) has increased by 1%, rising from 8% to 9%, effective from 1 January 2024.

In response to this development, Mr Lee Hsien Yang (LHY) expressed deep concern about the adverse effects this hike will have on the citizens of Singapore.

He criticized the decision, labelling it as callous and unjustifiable due to the hardships it would impose and its potential contribution to inflation and economic strain.

Highlighting the temporary nature of the government’s handouts to alleviate these impacts, LHY emphasized the permanence of the tax increase, indicating a prolonged burden on the populace.

As the son of Singapore’s founding father, Lee Kuan Yew, and the younger brother of Prime Minister Lee Hsien Loong, LHY conveyed his disappointment in a Facebook post on the evening of Monday (1 January).

He recalled that In the 2015 General Election, former Workers’ Party Secretary-General Low Thia Khiang, during a WP rally, suggested that the PAP might increase the GST if it gets an overwhelming majority of seats.

However, PM Lee, who is also the secretary-general of PAP, dismissed the WP suggestion.

PM Lee asserted, “What would make you need to raise GST? Profligate spending and irresponsible and unsustainable plans. That is what will hurt and require you to raise GST”

LHY pointed out the contradiction when, in 2018, the PAP had indeed changed its stance, justifying the GST hike among other reasons, citing the necessity to fund healthcare for an ageing population.

“Didn’t PM Lee and his ministers foresee the ageing population issue in 2015?”, asked LHY.

He also noted that, according to the International Monetary Fund (IMF) data, Singapore has been running a chronic balance of account surplus over the last 20 years, with the exception of 2020, as a result of COVID.

“A rise in GST now, with all the attendant hardship it will engender for Singaporeans, is callous and unjustifiable. Rises in water, electricity, and gas prices are adding fuel to this fire,” commented LHY.

It was reported in November last year that high inflation impacted the purchasing power of Singapore residents in 2023, resulting in a 3% decline in real incomes for resident workers at the 20th percentile compared to the previous year.

Median wage earners also saw a decline of 2.3% in their real incomes despite an increase in nominal wages.

At the same time, the Monetary Authority of Singapore expects overall inflation to average 3 to 4 percent, while core inflation is expected to average 2.5 to 3.5 percent. This is down from 2023’s official forecast of headline inflation of around 5 percent and core inflation of around 4 percent.

PM Lee during GE2015: PAP would be ‘mad’ to raise taxes based solely on vote percentages

In the GE2015, PM Lee said that the PAP would be “mad” to raise taxes just because it had garnered a certain percentage of the votes.

This was in response to a suggestion by former WP Secretary-General Low Thia Khiang that the PAP might increase the GST if it gets an overwhelming majority of seats.

At the time, Mr Low cautioned that with a clear mandate, the ruling party’s policies might undergo unexpected changes.

He pointed out a similar instance during the 2006 General Election when the PAP had initially denied considering a GST increase, yet within a year, the GST rate surged to its current 7% in July 2007.

PM Lee dismissed Mr Low’s assertions, refuting the insinuation that the government had intentions of implementing detrimental policies.

He stated, “I think it’s a strange psychology to think that this is a government which is only dying to do bad things to people… Do we look like that?”

“Here we are, trying to do the best and needing support. And I would turn the argument and say, be careful if they give more votes to the WP.”

“WP will become even more arrogant and oppressive over the rest of the parties as they are already so.”

“Raising, adjusting taxes is a very big decision. You consider it carefully, you discuss it thoroughly, and you do it only when you absolutely have to,” said PM Lee.

He added, “What will make you need to raise GST? Profligate spending and irresponsible, unsustainable plans. That is what will hurt and require you to raise taxes and GST.”

In GE2015, the PAP achieved a resounding victory by securing 83 out of 89 contested seats. This triumph granted them a strong mandate and a commanding majority in the Parliament.

The PAP’s vote share significantly surged to 69.9%, marking an impressive increase of nearly ten percentage points from the 60.1% obtained in the 2011 election. Notably, the party attained more than 70% of the vote in 15 out of the 29 wards, a notable outcome unprecedented in recent electoral history.

PAP Ministers defended the necessity of the GST hike

In August 2023, Deputy Prime Minister and Minister for Finance, Mr Lawrence Wong, dismissed the idea of deferring the GST increase despite a surge in Corporate Income Tax (CIT) revenue.

He asserted that such a move would only “store up more problems for the future”, leaving Singapore with fewer resources to address its growing fiscal needs.

Mr Wong further pointed out that growth in corporate income tax revenue is typically aligned with Gross Domestic Product (GDP) growth.

He clarified that any changes to the tax policies take into consideration not just year-to-year fluctuations but also medium-term trends in expenditures and revenues.

With the pressures of an ageing population and escalating healthcare costs, government expenditure is anticipated to increase from the current 18% of GDP to potentially over 20% by FY2030.

He emphasised the importance of continuously monitoring revenue and expenditure trends and adjusting fiscal strategies to meet the aspirations of both present and future Singaporeans.

The GST was raised by 1% from 7% to 8% on 1 January 2023 and was increased by another 1% to 9% on 1 January 2024.

This two-tiered hike was approved by the PAP Members of Parliament in the Budget 2022, despite objections from opposition parties, the WP and the Progress Singapore Party (PSP). They cited the potential impact on the population.

The PAP ministers defended the necessity of the GST hike to generate sufficient revenue for future expenses.

However, WP MPs and PSP NCMPs proposed alternative revenue sources and also suggested dipping further into reserve earnings—a move that, while slowing reserve growth, will still not touch the principal sum. Contrary to the PAP’s allegations, these plans do not constitute “raiding the reserves.”

The GST hike has ignited significant discontent among Singaporeans due to its cascading effect on inflation, causing dissatisfaction with the Singapore Government and the ruling party.