Jamus Lim rebuts Chee Hong Tat, calls PAP’s rejection of GST exemption as an “abdication of leadership on the economy”

SINGAPORE: Senior Minister of State for Finance Chee Hong Tat has taken on Workers’ Party Member of Parliament Associate Professor Jamus Lim, criticising the latter for “factually inaccurate” in his recent Facebook post, claiming that the decision of some supermarkets and retailers to absorb 1% GST was suggested by him and her colleague.

In response to Mr Chee’s criticism, Assoc Prof Lim argued that while efforts to have merchants absorb the GST increase are appreciated, they are largely irrelevant in the broader policy context.

He emphasized the WP’s position that a government-level exemption makes more sense, asserting that consumers, being less able to alter their behaviour, bear the brunt of the increase as long as GST is in place.

Notably, Assoc Prof Lim, in his original post, highlighted the WP suggestion, which was regrettably dismissed as infeasible by the PAP government in Parliament. He criticised the government’s decision to sidestep the commonsensical idea as an “abdication of leadership on the economy.”

Assoc Prof Lim: Govt’s decision to sidestep GST absorption for essentials is an “abdication of leadership on the economy”

On Tuesday, in a Facebook post, Assoc Prof Lim shed light on residents’ concerns about price hikes that extended well beyond the one per cent GST increase. Allegedly, some merchants took advantage of the situation to adjust prices across the board.

The Sengkang MP, also an economics professor, elucidated why price changes, particularly increases, may not surprise during a GST hike.

He asserted that prices are “sticky” both psychologically and practically, with consumers anchoring to existing prices and businesses facing challenges in updating price schedules.

“But when there’s sufficient justification for overcoming inertia to alter prices—impetus such as a nationwide GST increase—then we shouldn’t be shocked that prices move up, often disproportionately, as a result.”

He then expressed gratitude that many large retailers have decided to absorb the GST increase for essentials, such as fresh food and personal care products.

While he and his colleague Ms He argued for an approach to absorb GST in Parliament, the idea was regrettably dismissed as infeasable.

However, major chains such as Giant, Changi Airport, and Fairprice have exemplified its viability, aligning with consumer preferences.

Assoc Prof Lim then criticized the government’s decision to sidestep this commonsensical idea as an “abdication of leadership on the economy”.

Minister Chee accused Jamus Lim for “claim credit”

Assoc Prof Jamus Lim’s remark drew Minister Chee’s attention, prompting a Facebook response disputing Lim’s assertion that retailer discounts aligned with his Parliament suggestions.

Mr Chee clarified that what was proposed by Lim and He was an exemption of GST by the government for “essential goods,” not retailers choosing to absorb the GST increase voluntarily.

He referenced Deputy Prime Minister Lawrence Wong’s explanation that a GST exemption for “essential goods” is ineffective in practice, citing difficulties in defining what qualifies as essential, for instance, rice maybe an essential staple but also part of an expensive sushi dinner.

“What’s more, an exemption for essential items will benefit the well-to-do more, because they spend more on their purchases, including on essentials.”

He said Singapore developed its own distinctive GST system, which he deemed “fairer and more effective,” and he believed that Through the permanent GST Voucher Scheme, lower-income households pay a much lower effective GST rate than higher-income households

He also pointed out The Assurance Package (AP) as a measure that has delayed the GST increase by more than 5 years for the majority of Singaporean households.

He credited MOS Low Yen Ling and her CAP for engaging with supermarket chains and merchants to offer discounts and other benefits.

He urged Lim to provide details to CAP to investigate alleged merchants exploiting the GST hike.

He then called out Assoc Prof Lim should not misrepresent the debates in Parliament and claim credit for what others have done.

“That is disingenuous and misleading. While we welcome different points of view on public policy, we must ensure that our political discourse and debates are conducted with integrity and honesty.”

“Raising GST at a time of generalized inflation is foolhardy”

In the February 2022 Budget debate, Ms He Tingru, WP MP for Sengkang GRC, advocated for the exemption of food items, healthcare, and childcare from GST, citing Australia and Japan as examples.

In November 2022, Assoc Prof Lim reiterated the call for a temporary exemption of essential items from GST or, at the very least, the GST hike.

He highlighted that certain emerging economies, like India, employ differentiated GST regimes.

In response to Mr Chee’s FB post, Assoc Prof Lim reiterated WP’s position on GST exemptions for essential items and addressed the critique of the government’s stance.

He explained the concept of the incidence of taxes, emphasizing that when a tax is introduced, the burden is determined by the relative responsiveness of demand and supply (elasticity).

“The bottom line is that, inasmuch as the effort to get merchants to absorb the GST increase may be appreciated, it is largely irrelevant, from the point of view of policy. ”

He argued that consumers, particularly those purchasing essential items, are less able to alter their behaviour in response to a tax increase.

Hence, he stressed that WP’s position that a government exemption for essential items makes more sense.

If there is no GST being charged, there is no burden on any party, and everyone can enjoy relief without the need for rebates.

He then highlighted the government’s argument that it is impractical to exempt essential items due to difficulties in defining necessities,  a standpoint he found weak.

Regarding the CAP, he said it is limited by the ability to pin a disproportionate price rise to the GST hike, and the GST hike alone.

“I had asked once, in Parliament, how the CAP could be expected to distinguish between a price rise that opportunistically used the GST hike as an excuse to raise prices by more than 1 per cent, versus one that was genuinely premised on increases in, say, costs due inflation. I never got a satisfactory answer, nor do I expect one.”

Jamus Lim concluded by expressing his belief that raising GST during a period of generalized inflation is foolhardy.