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Lawrence Wong: GST impact on inflation is not permanent

In Wednesday’s Budget debate, DPM Wong reaffirmed the PAP government’s rationale for raising GST. He defended that the GST hike impacts on prices is “once off” and not permanent.



SINGAPORE: While acknowledging that the Goods and Services Tax (GST) rise does impact inflation, Deputy Prime Minister Lawrence Wong, in his Parliament address during the Budget 2024 debate on Wednesday (28 February), once again defended the PAP government’s decision to raise GST to 9%.

He clarified that the rise in GST affects prices but emphasized that this impact is a one-time occurrence and not permanent.

“On GST, does it impact on inflation? Yes, it does impact on prices, but the impact is once-off, it’s not permanent.”

He was responding to questions from Associate Professor Jamus Lim, Workers’ Party Member of Parliament for Sengkang GRC.

Assoc Prof Lim sought clarification from DPM Wong on whether he still believes the timing of raising GST was justified, or if a postponement would have been wise, especially given the country’s bumper tax receipts from other sources in recent years.

He referenced a 2022 MAS macroeconomic review paper that attributed a significant portion of inflation to domestic drivers and contended that the decision to hike GST might have contributed to domestic inflation, citing global examples of VAT hikes sparking inflation.

Concerning the Base Erosion and Profit Shifting regime (BEPS), Assoc Prof Lim acknowledged the practicality of BEPS but expressed concern about a potential race to the bottom in tax policies.

His question to DPM Wong was about what the government would do if other countries decide to apply a tax top-up in response to a belief that Singapore’s Refundable Investment Credit (RIC) contravenes the spirit of the refundable tax credit scheme under BEPS.

Impact of GST is “not the key driver behind inflation spike”

In response, DPM Wong reiterated that both he and MAS have consistently communicated that the impact of the GST rise is not a prolonged one.

“If you look at the overall impact on inflation actually,  we have seen the impact on that monthly inflation when GST went up, but if you look at the subsequent trends down the rest of the month, inflation continues to moderate as it has in other advanced economies.”

He defended that GST is not the key driver behind Singapore’s inflation spike and would not cause inflation to remain high, “this inflation trend happening globally, we are seeing similar trends in Singapore and our inflation rates are also coming down.”

DPM Wong reiterated that the government have deferred the impact on lower-income groups through the Assurance Package for the majority of Singaporeans.

He emphasized that the measures taken for low-income groups are not temporary but include enhanced permanent GST vouchers to prevent adverse effects on the poor in Singapore.

“I think our approach is, let’s do it correctly, let’s do it in good time, put in place to make sure that our fiscal system remains sound and always ensure that we have sufficient revenues to cover our spending.”

On BEPS, he confirmed that the RIC is compliant with BEPS rules, as discussed in BEPS conversations.

He Pointed out that refundable tax credits announced in the 2024 Budget, like the RIC, are allowed under BEPS’s rules, emphasizing that governments worldwide are adopting similar measures.

Allocating funds in government reserves for future commitments and spending needs

Earlier in his wrap-up speech, DPM Wong underscored the significance of allocating funds in government reserves to fulfill genuine commitments and anticipated spending requirements in the future.

MPs delved into fiscal matters during discussions, particularly addressing the implementation and repercussions of BEPS 2.0 Pillar Two rules for multinational enterprises (MNEs).

DPM Wong acknowledged the uncertainty surrounding the actual impact of BEPS 2.0 Pillar Two rules on Singapore’s corporate income tax revenue, despite estimates ranging from S$2 billion to S$11 billion.

The tangible effects of Pillar Two changes are expected to materialize only from FY2027.

“The reality is that MNEs have bargaining power and governments around the world are all finding ways to favour them and getting them to invest,” said DPM Wong.

Wong acknowledged Singapore’s need to play a strategic game to anchor crucial investments.

This rationale has led to the introduction of the Refundable Investment Credit scheme and increased spending to support new investments, research, and innovation.

DPM Wong cautioned that the Pillar Two changes, coupled with the delayed implementation of Pillar One, are not likely to generate significant additional net revenues on a sustained basis.

He acknowledged that Pillar One implementation will be revenue-negative for Singapore.

Addressing Singapore’s fiscal approach, DPM Wong stated that the country has achieved commendable social outcomes with relatively conservative public spending.

He affirmed Singapore’s current sound fiscal position, attributed to recent tax changes and robust revenue collections.

These resources are being utilized judiciously to address immediate concerns and upcoming needs, involving the establishment of government funds for future major expenditures.

These funds encompass recurring commitments such as permanent GST  Vouchers or healthcare subsidies under the Majulah Package.

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Truly lawlanWong is out-smoking himself already. So he saying the increase of GST to 8%, 9% is not permanent??? Eventually all prices will return to the 7% or 5% GST levels???

Little confidence in him as next-PM.

The ONLY thing that is NOT PERMANENT is to REMOVE it!

So when do U want to remove gst?

Inflation…….we do not think U can deal with it?

What, the GST is not permanent? The 9% may not be permanent, it still could go up!

What permanent GST vouchers, if GST is not permanent?!

The only way to make GST not permanent is to vote out the PAP.

Whaaaaat? Permanent GST increase has no permanent impact on price/inflation?? And he is the FInance minister? We are screwed 🙂

What the “F” is this Millionaire Minister taking about? Hello, Mr Lawrence Wong, do you not have a degree in economics? I only took one introductory class in economics and I already know that you are talking nonsense. What does “permanent” even mean? Do you not understand how inflation works? Has it been that long since you’ve touched your study materials? Once prices are elevated, it remains elevated. If the price goes down, that is “deflation” which is also disastrous in its own context. GST adds onto “inflation” because it forces producers to increase their prices in response to increased… Read more »

Not permanent but here to stay? Every time I make a purchase, I pay GST. If the price goes up, the GST is increased. So how is it not permanent?

How is it not permanent?
Next year another gst raise…
Goes up each time ..domino effect
Then prices of everything under the SG sky goes up..
Maybe ask the jamus lim to explain this..
LW is getting too fired up ..many a time during this recent parliament session, answeing questions etc, i felt he was ready to flare up.
The KAYU ONE is putting too much pressure on LW…too early on???

Not permanent this remark is like the lie generation of the other ambiguous remark, Your HDB flat is A Store of Value.

Lawrence Wrong got it wrong again, gst’s impact on inflation happens every time you make a purchase and as long as it is in effect citizens have to keep paying it. Therefore, it is NOT “once off” and it is permanent and increasing until pee air pee removed it.

“Impact is once-off, it’s not permanent”……you dafties see after the prices for all services and goods went up is….PERMANENT or NOT loh!😆😆😆🤣🤣🤣🤣