'Irresponsible' to proceed with GST increase amid uncertain inflation and higher prices: Jamus Lim

SINGAPORE – Raising the goods and services tax (GST) amid the uncertain inflation outlook and higher prices is an "irresponsible" move that should be postponed, said Workers' Party MP Jamus Lim on Monday (Nov 7).

Hitting back at comments by Deputy Prime Minister Lawrence Wong on how it is "more responsible" to proceed with the GST increase, Associate Professor Lim (Sengkang GRC) told Parliament that this was not the case.

DPM Wong had on Oct 14 said that while the global inflation outlook may be uncertain, the spending needs of Singapore are clear, and proceeding to increase the GST in the coming years was a "more responsible approach".

On Monday, Assoc Prof Lim said that in principle, tax increases could well dampen overall demand and tame rising prices, but added that these taxes could also end up raising the costs faced by firms and they could instead end up constricting supply, which will push up prices.

He also said it has been observed that increases in inflation follow the introduction of value-added taxes like the GST. He said that Japan has increased its version of the GST thrice over the past 25 years, and each time, the inflation rate would more or less double for up to a year.

"Imagine a doubling of inflation from our current, already unbearable levels," said Prof Lim.

In October, official data showed that core inflation hit 5.3 per cent year on year. This was higher than the 5.1 per cent rate in August, and marked its highest level since it touched 5.5 per cent in November 2008.

Prof Lim shared how inflation has hit Singaporeans hard, and noted that food prices overall have risen by 6.9 per cent, compared with a year ago.

The cost of utilities has also jumped by more than 16 per cent, with electricity rising by more than 26 per cent, which Prof Lim said has led to shock and dismay among some residents who approach MPs at meet-the-people sessions, seeking help for overdue utilities bills they have difficulty paying.

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"While if Singaporeans accept that inflation is very much a global phenomenon, the reality is that inflation has inadvertently become a tax on our people," he said.

The range of measures that the Government has rolled out, like additional U-Save rebates, service and conservancy charges credits and Community Development Council vouchers, have helped with higher costs, said Prof Lim. But these appear "piecemeal and inadequate" as they cater to the average household within each group, he added.

Prof Lim said residents have pointed out to him how the prices of their cai png (mixed rice) have increased from $3 to $5, and how their utilities bills have doubled.

"Herein lies the conundrum: Nobody is truly 'average', and so those who consume a narrower basket of goods and services will feel the pinch more acutely.

"This leaves many individuals and families feeling like the coupons, subsidies, and rebates fail to make up for the magnitude of the price increases that they face," said Prof Lim.

"Their worries are compounded since, by definition, spending on such necessities is seldom viewed as optional."

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A simpler way to address this problem is to temporarily exempt these categories of essential goods and services from the GST hike, he said, noting that these categories have been subject to the greatest price volatility in recent months.

"It is reasonable to offer temporary, targeted relief for these essentially non discretionary aspects of their spending," added Prof Lim.

Mr Louis Chua (Sengkang GRC) on Monday also questioned the need for the GST increase now, and asked if there was a need to contribute to inflationary pressures.

He brought up how inflation was not going back to the very low rates in the past, and said that even if inflation eases eventually, prices were not going to come down and instead will continue to increase and affect the cost of living pressures of Singaporean households.

On the Assurance Package announced by the Government to help with the GST hike, which will offset five years worth of additional GST for most households, Mr Chua questioned if such measures will help Singaporeans after their benefits wear off.

"Assurance packages are temporary, while a GST hike is forever," he said.

This article was first published in The Straits Times. Permission required for reproduction.