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Former PAP Minister Tharman against two-step GST hike in 2007 to thwart price inflation

In 2022, Finance Minister Lawrence Wong announced the implementation of two-step increase of the goods and services tax (GST) from 7 to 9 percent in 2023 and 2024.

An archived report from 2007 reveals a differing view by former Finance Minister Tharman Shanmugaratnam, advocating against two-stage hike to thwart price inflation ahead of a second step.

Despite current PAP Ministers defended the necessity of the GST hike, many Singaporeans faced amplified living expenses and inflationary pressures as a result.

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On 18 February 2022, during the budget speech, Finance Minister Lawrence Wong announced the goods and services tax (GST) rate to increase from 7 to 9 per cent in two stages, with one percentage point implemented on 1 January 2023, followed by another on 1 January 2024.

At the time, Mr Wong who is also the Deputy Prime Minister justified the GST hike by highlighting its expected contribution, estimating approximately 0.7 per cent of gross domestic product in annual revenue, which amounts to about S$3.5 billion when the full hike takes effect in 2024.

The increased revenue is earmarked for bolstering healthcare expenditures and providing support for senior citizens, alongside enhancing other areas of social spending.

Regarding the timing of the GST adjustment, Mr Wong acknowledged his careful consideration of various factors, including the ongoing pandemic, economic conditions, and the inflation outlook.

“Our revenue needs are pressing. But I also understand the concerns that Singaporeans have about the GST increase taking place at the same time as rising prices,” he said.

Singapore initially unveiled plans for a 2-percentage point GST increase from 7 per cent to 9 per cent back in 2018. However, this plan was delayed due to the Covid-19 pandemic.

Addressing worries that businesses might exploit the GST hike to raise prices, Mr Wong announced the establishment of the Committee Against Profiteering, chaired by Minister of State for Trade and Industry Low Yen Ling.

Mr Wong unveiled the Enhanced Assurance Package, comprising seven components designed to provide financial support to Singaporeans over the upcoming five years, as measures to offset the impact of the GST hike.

Mr Wong highlighted that, for the majority of Singaporean households, the package’s offsets would sufficiently address approximately five years of additional GST expenses.

Notably, for lower-income households expected to receive higher payouts, these offsets are projected to cover about a decade’s worth of additional expenses caused by the GST increase.

The package encompassed various forms of support, including cash payouts, augmented U-Save rebates tailored for utilities, and MediSave top-ups, among other measures aimed at alleviating the financial burden caused by the GST adjustment.

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.

Tharman in 2007: single-step rise in the GST to prevent profiteering by raising prices in anticipation of a second step 

Recently, the social media platform Wake Up Singapore shared an archived news report dating back to 2007 that sheds light on then-Finance Minister Mr Tharman Shanmugaratnam’s perspective on a gradual GST increase.

It seems Mr Tharman at the time, who is currently elected ninth President of Singapore, had a different approach contradicting with current Finance Minister’s two-stage GST hike.

During the GST hike in 2007, Tharman articulated the rationale behind the 2-percentage point increase from 5% to 7%.

In his parliamentary address ON 15 February 2007, he advocated for a single-step rise in the GST, emphasizing the benefits of elevating prices in one go while compensating Singaporeans with a substantial offset package.

“By doing it in one step, it also means that no one can profiteer by raising prices in anticipation of a second step.”

Moreover, consolidating the increase into one step would save costs for businesses as they would not need to adjust their systems twice, he said.

The news video went on to detail the impact of the 2 per cent increase on prices at that time. For instance, it highlighted that a loaf of bread would cost 3 cents more, a cellphone about S$12 more, and a plasma TV approximately S$50 more.

At the time, Mr Tharman also announced measures to  offset the GST increase, which cost the Government S$4 billion in total over five years.

Prior to the 2007 hike, the GST rate was also increased via a two-step hike from 3% to 4% on 1 January 2003 and to 5% on 1 January 2004.

PAP Ministers defended the necessity of the GST hike amidst Singaporeans felt the inflation pressure

As Mr Wong pursued a two-step GST increase, many Singaporeans began feeling the weight of inflationary pressures and the escalating expenses of daily necessities, significantly affecting the overall cost of living for a majority of the population.

An issued report from The Ministry of Manpower (MOM) in November 2023 highlighted the substantial impact of high inflation on the purchasing power of Singapore residents.

This resulted in a notable 3% decline in real incomes for resident workers positioned at the 20th percentile, in comparison to the previous year.

Even for median wage earners, despite a nominal wage increase, there was a discernible decline of 2.3% in their real incomes.

In August 2023, Mr Wong during a parliament session again 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.

Arguing against the disadvantages of rising the GST — particularly in the time of growing inflation— 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.

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What has the anti profiteering committe led by Low Yen Ling been doing?

So far, nobody has been prosecuted for profiteering? The committee looks to be just for show.

Can Thar Man reverse the steps?

thar man can say what he likes n pinkies gang can do what they like!

Greed knows no bounds.

Where is the Future PM.Speak for your administration. Are you leading or following the ways of the Loong?!?

Just becos Govt use Google. Dun need to keep asking google to send stupid wayang msg daily to continue your SHIT narrative! You PAP ain’t White!!!!

You can badmouth Mr Tharman all you can but we the 70% support Tharman and the PAP government. You fuckinh oppies not happy, you can do 2 things. Either you migrate or go kill yourselves. Either way, get out of our face. This country is for winners. Not losers, whiners, lazy fart, mother fickers.

All from the same mould, same box, compulsorily has to be unanimous in decisions taking. So whether is Tharman the odd ball or Lawless Wong is his own man, Sheeps are conditioned to be PAP creation of fools and dumbos to follow what they say. Isn’t it? In other words, they are PLAYING GAMES playing ping pong, badminton or tennis, except no one trying hard to push the ball out of court bcz of the nature of these games – I push to you, and u push the ball back to me. Don’t be fooled, everyone. The penultimate solution is… Read more »

Last edited 5 months ago by 80twenty

cotton and pineapple lovers any difference? they loved to be fooled over and over again. tsk tsk tsk

Are you telling us this:
70% Pineapple Lovers:
This is GOOD FOR YOU:
1) Increase GST
2) Increase PUB utilities
3) Increase COE, ERP
4) Increase Food Prices
5) Increase Housing prices
6) Increase Cost of Living
7) Increase Transport fares
8) Increase Hospital and Medical costs
9) Increase Foreigners intake, increase job losses
10) Increase Prices on Chicken, Eat Fish
11) Increase in Ageing population, collect carton boxes, a good form of
exercise. 
We need solutions not price increase!!!! What do you think?

So, … has the nation felt the “Tharman effect” yet !!!

70.40% of the nation voted this man in, … for what exactly !!!

To make a difference, or, … because they “believed” that he’s a nice man, a good man, … a sincere man !!!

He is, … nice, good and sincere to his “backers” who made it all possible !!!

Haha888hahaha88haha, … SillyPoreans indeed !!!

This PAP Administration retarded wholly – IS FULLY BLINDED by the EVIL ILLS of a population of 6 Million Mouths and Bodies, and MORE, that 700 sq km can absorb. Their Only concern Is HOW TO KEEP up their Multi Million Dollars Salaries to impress they are a bunch for expensive BUT NOT GOOD FOR VALUE Monsters who year in YEAR OUT SHOUT SG inclusiveness and no one left behind BOTH OF WHICH border on frauds and lies AGAINST Sheeps. Motherhoods like they are concerned, they are fully aware – AMOUNT to DEVIL linguistic output designed amount to nothing more… Read more »

talk cock only. he did nothing to stop it. bullshit headline to make pineapple voters more happy?

Everyone knows LawlanWong is just delivering the narrative that was decided by someone else. A million$ messenger boy, hor – very useful.

Just keep the GST increase to corporates as they can claim it back from the govt. Companies and individuals who are not registered for GST claims should not be made to pay GST. It is a totally unfair system. No need to give packages to offset GST as the govt. is walking round in circles like clowns. It is again much to do about nothing but forcing monies out of the 80% in Public Housing and small time traders and hawkers. LW. should impose a wealth tax on the 20%. It should be the wealthy supporting the poor not the… Read more »

No respect! Before you call ppl Free riders Show employment and unemployment statistic by constituency.

Before the GST, they already increase the price. So it is actually adjusted price plus GST. State own and Empire own pattern. No?!?

GST increases should be calculated from the end consumer “mainstreet” price rounded up to the nearest 5 cents. Eg: if the price BEFORE say an additional 2% GST increase is $1.00, then the price AFTER the 2% GST increase should be $1.05 and not say $1.20 which is what is happening.

This is how cost of living keeps spiraling up and up ….

What was not mentioned was that Tharman subsequently said he was “pleasantly surprised” when the increase to 7% GST (under his term) netted an additional 5-7(?)billion in revenue (above? the intended amount for increasing the GST then). There was then a lot of noise questioning why he shouldn’t be more prudent and increase to instead to 6%, as 7% had proven to “exceeded the intended net increase in revenue” – but as usual Singaporeans have very short memory. So Tharman is not as clean as many would like to paint him to be. The 70% are really the fuxking suckers… Read more »

papsident of the 70s

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