With Singapore heading to the polls soon, all signs point to an intense contest among the political parties – not only for parliamentary seats but also for primacy in the ideas they champion.

In the days to come, Singaporeans will certainly hear more about the policies each party espouses, whether through election manifestos, rallies or on walkabouts during the hustings.

Even so, analysts say voters should consider what MPs from the various parties in Parliament have said in the last five years, before they decide at the ballot box.

The Straits Times outlines where these parties stand in four key areas: fiscal policy, cost of living, foreign talent and housing.

Fiscal policy

In November 2022, Parliament debated the necessity, timing and extent of the hike to the goods and services tax (GST), after the Government first gave notice in 2018 that it intended to do so.

The WP and PSP both opposed the increment of the GST from 7 per cent to 9 per cent, citing the inflationary environment, and suggested alternative ways of raising revenues, such as using more past reserves and proceeds from land sales.

The PAP, however, said the opposition’s proposals were politically more attractive but would be to the detriment of future generations of Singaporeans. 

At the 2022 debate to amend the GST Act, then Deputy Prime Minister Lawrence Wong, who is now prime minister, said the GST had to be raised to close the gap between revenue and expenditure until 2030, given projected increases in healthcare and social spending.

While the Government had looked at various other revenue alternatives, such as property tax, personal income tax and corporate income tax, the sums simply did not add up to an alternative to a GST hike, which would raise $3.5 billion each year.

For instance, to make up the revenue through personal income tax instead would have required top marginal rates to go up from 22 per cent to 42 per cent, or higher tax rates for a broader group of people, he said.

Alternatively, the headline corporate income tax rate would have to be raised from the current 17 per cent to more than 22 per cent to generate $3.5 billion a year, a move that would have a major impact on Singapore’s competitiveness, Mr Wong, who is also Finance Minister, said in reply to a 2022 parliamentary question from Non-Constituency MP Hazel Poa.

Competing ideas on use of reserves, GST

To delay the effect of the tax hike by at least five years for most Singaporean households, an $8 billion Assurance Package was set aside, on top of the permanent GST Voucher scheme and other transfers.

More broadly, key tenets of the ruling party’s fiscal policy approach include balancing the Budget over each term of government and imposing a strict limit on the use of the Net Investment Returns Contribution (NIRC), which are returns from past reserves.

Under the system it has set, the Government is allowed to spend half of the expected long-term real investment returns on past reserves while saving the other half.

NIRC, which provides revenue for one-fifth of government spending, stood at $24 billion for the 2024 financial year.

Besides being “a natural division... 50 per cent for the present, 50 per cent for the future”, this apportionment has also resulted in NIRC contributing about 3.5 per cent of gross domestic product for each of the past five Budgets, said then Prime Minister Lee Hsien Loong in February 2024.

This means the past reserves have been growing in lockstep with the economy and not faster than it.

Also core to the PAP’s fiscal approach is the investment of proceeds from the sale of land rather than treating the money as operating revenue that can be spent directly.

The reason is that land sales do not generate fresh revenue but simply transform one asset into another.

That is, money from selling land for 99 years makes up for the state’s loss of the use of the land for that many years, Second Minister for Finance Indranee Rajah said in a 2022 reply to a parliamentary question.

The WP has opposed the GST hike, citing it as the reason for objecting to Budget 2022.

It said then that the Government was raising the GST amid cost-of-living and business challenges caused by high inflation, a point the party reiterated at the Budget 2025 debate.

Leader of the Opposition Pritam Singh noted the Government had projected for deficits in 2021 and 2022, but these turned out to be surpluses.

He said the “exceedingly healthy” fiscal position at Budget 2025 had also led Singaporeans to question why the GST rate had to be raised in the preceding two years, and that poor budgeting accuracy could lead to public cynicism over future tax increases.

At the Budget 2022 debate, the WP proposed alternatives such as raising the NIRC ceiling from 50 per cent to 60 per cent, which would result in the reserves growing at a slower rate but contributing more to public spending.

Other suggestions its MPs advanced to raise revenues in lieu of the GST hike were to use a portion of land sales proceeds for recurrent spending needs, a further increase to property tax and personal income tax, and increased taxes on gambling, alcohol, tobacco and carbon emissions.

WP MPs, such as Ms He Ting Ru, also called for necessities to be exempted from GST. While acknowledging that a tiered GST system could increase compliance costs for businesses, the Sengkang GRC MP said this could be alleviated with the use of artificial intelligence.

Although the personal income tax rate for top earners was raised in 2022 alongside taxes for luxury properties and cars, Mr Singh called for the Government to look at taxing wealth outright.

In 2021, Sengkang GRC MP Jamus Lim had proposed a tax of 0.5 per cent on net wealth in excess of $10 million, rising to 1 per cent for wealth above $50 million and 2 per cent for wealth above $1 billion.

Mr Singh said a distinction had to be made between what he called “legitimate accumulation of wealth through effort and tangible business activity” and that achieved through capital appreciation, which should be taxed differently.

The PSP, represented in Parliament by NCMP Leong Mun Wai and Ms Poa, also opposed Budget 2022 in view of the GST hike.

In 2021, the party called for 100 per cent of the NIRC to be spent. Mr Leong said doing so would not only make up for that year’s budget deficit but also result in a surplus of $8.2 billion.

As part of a suite of moves intended to improve housing affordability and fund social spending, the PSP also called for land sales proceeds to be counted as revenue and not to be directly transferred into past reserves.

In a February 2024 speech in Parliament, Mr Leong said the PSP’s view of the NIRC is that it is “supposed to enhance the welfare of Singaporeans so as to avoid the necessity to increase taxes”.

While the cost of growing the reserves was tolerable amid rapid growth in the economy and Singaporeans’ incomes, the current rate of accumulation could come to hurt the welfare of present-day Singaporeans, he said.

As with the WP, the PSP disagreed with the ruling party’s view that one can never be sure of how much reserves is enough for Singapore, given the unknowable nature of future crises. Mr Leong said that the “point of enough” is reached when the Government has to raise taxes while Singaporeans are facing a cost-of-living crisis, in order to maintain the current rate of reserve accumulation.

Consequences if GST hike had been delayed

Observers said that at the heart of the divergence on raising government revenues is the matter of intergenerational equity. 

PAP leaders have said that if past generations had not saved, the absence of NIRC would have required the GST to be at 18 per cent or 20 per cent.

Just a one-fifth reduction in the NIRC would have required the GST to be raised to 11 per cent, instead of to 9 per cent, Mr Wong said in 2022.

That is why changing the reserves rules is a last resort, especially when there are tax options like the GST that can be implemented progressively.

Increasing the NIRC ceiling would leave the next generation facing a greater tax burden and with fewer resources to cope with crises that can emerge in this uncertain world, he added.

“The main disagreement is this: The Workers’ Party basically wants to use more past reserves and leave behind less for our children and grandchildren,” he said.

“Just state it honestly, there is no need to have fancy words (like) ‘slow down the rate of growth of reserves’.”

PM Wong said in February that if the Government had avoided increasing GST because it was unpopular, and if not for unexpected upsides in corporate income tax collections that emerged only in the last two years, financial year 2024 would have ended in a deficit. The projected balance in financial year 2025 would also have been a deficit.

“Basically, Singapore and Singaporeans would have ended up in a much weaker position,” he said.

Rules on reserves instil discipline

Associate Professor Terence Ho, a policy expert, noted that at the current 50 per cent cap, the reserves have been projected to grow at roughly the same pace as the economy over the medium term.  

This preserves the ratio of Singapore’s dry powder to its GDP, said the deputy executive director of the Institute for Adult Learning.

Keeping the NIRC at the current level of about a fifth of the Budget also instils a certain discipline on government spending, he added.

“It forces greater rigour in deciding what to spend on and how to spend public monies efficiently,” he said. “It also provides a strong impetus to grow the economy and incomes rather than to become ever more reliant on the largesse of previous generations.”

There is also no guarantee that the long-term projected returns on investment of past reserves can be maintained, given the turbulence in climate, geopolitics, trade and security, said Dr Gillian Koh of the Lee Kuan Yew School of Public Policy.

Just to generate the same returns might require the principal sum to be even bigger, which requires greater fiscal conservatism, she added.

“It is a great irony, from my point of view, to be discussing even more use of the reserves given that we already spent $40 billion of the principal sum of the reserves (to deal with) the recent Covid-19 pandemic in this term of government,” she said.

Associate Professor Walter Theseira said one way to look at the question of equity is whether public spending has greater marginal social benefits today or in the future.

Ideally, the Government should aim to have similar marginal impact across generations, but this must be a judgment call given the need to project into the future, said the Singapore University of Social Sciences economist.

From a welfare economics standpoint, governments should spend more when the impact is greater and save more when there is a lower social return to spending, he said.

“Since nobody can predict the future perfectly, though, there will always be a debate as to whether the right time to spend is now or in the future,” he said.

How practical are the alternatives?

A tiered GST system and wealth taxes come with real implementation challenges as well, noted observers, even as these could theoretically improve the progressivity of the tax regime and diversify revenue streams.

Mr Gene Kwee, Asia-Pacific head of tax at professional services firm Forvis Mazars, said Singapore currently operates a streamlined, single-rate GST model that is efficient, simple and widely understood.

A tiered GST system would entail a major overhaul to accounting systems and the tax code, as well as extensive public education to ensure businesses and consumers are aware of the changes, he said.

As it stands, Singapore already has a highly tiered GST system, though the tiers are based on the impact of the tax and not by types of goods and services, said PM Wong.

This is because the well-to-do tend to consume more, even of basic necessities, than the lower-income and, therefore, pay more in GST.

Meanwhile, the permanent GST Voucher scheme and Assurance Package help to defray the GST paid by lower- and middle-income Singaporean households and seniors.

The result of these transfers is that the effective GST rate for households in the bottom 30 per cent of income distribution remains unchanged at below 3 per cent even after the GST was raised.

Singapore’s system is thus a fairer and far more effective way of taxing consumption, and the opposition’s charges that the GST disproportionately affects the poor are “misguided claims (that) ignore the way we have implemented GST”, Mr Wong said in 2022.

Wealth taxes could also be less redistributive than intended, Mr Kwee said.

There remains the risk of capital flight by high-net-worth individuals relocating, given today’s highly mobile environment, for one thing.

Wealthier individuals often also have the means to use complex tax planning to avoid such taxes, he noted. 

This includes gifting properties to the next generation during their lifetime to avoid inheritance tax. Prior to abolishing its inheritance tax in 2008, the Ministry of Finance said estate duty was payable by just 3 per cent of the 16,000 deaths here each year.

Despite these concerns, Mr Kwee said more targeted measures can offer a practical approach to wealth taxation, such as higher taxes on luxury properties – which Singapore implemented in 2022 and 2023 – and capital gains taxes on speculative assets.

“Ultimately, while wealth taxes present a potential lever to support both fiscal and social objectives, their design would need to be carefully calibrated,” he said.

“Striking the right balance between equity, economic competitiveness and administrative feasibility will be key.”

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