Singapore Votes 2025: The Roundtable - How to finance the growing needs of Singaporeans?

Key Concepts:

• GST (Goods and Services Tax) hikes and their impact on inflation.
• Budget surplus and alternative revenue sources.
• CPF (Central Provident Fund) returns and government retention.
• NIRC (Net Investment Returns Contribution) and its potential increase.
• EP (Employment Pass) levy on foreign workers.
• Affordable Home Scheme (AHS) and its impact on HDB (Housing Development Board).
• Government land sales and revenue amortization.
• Taxation of wealth and corporations.
• Citizens dividend and unconditional cash transfers.
• Real wage growth and its importance.
• Fiscal discipline and responsible use of reserves.
• Price controls on necessities.
• Tiered utility pricing.
• SkillsFuture and lifelong learning.
• Social compact and social safety nets.

1. GST and Budget Surplus:

• The GST hikes are perceived to contribute to inflation.
• Taxes are crucial for financing public services like healthcare, housing, and transport.
• In 2024, Singapore had a budget surplus of $6.4 billion, while GST raised about $3.5 billion.
• From 1999 to 2019, the total budget surplus was $40 billion.
• The difference between CPF annualized returns and payouts, plus government retention, amounts to $13.4 billion annually.
• Special transfers amount to $24-25 billion annually.
• Increasing the NIRC by 10% could generate an additional $5 billion.

2. PSP's Revenue Proposals:

• The PSP's manifesto includes over 60 proposals, some aimed at increasing government revenue.
• A modest EP levy of $1,200 per month on EP holders is proposed to level the playing field between Singaporean and foreign workers.
• Under the PSP's Affordable Home Scheme (AHS), HDB would no longer need to pay land costs for BTO flats into the past reserves.
• The AHS aims to eliminate a large part of HDB's deficit arising from subsidies to buyers.
• The PSP proposes to amortize revenue from government land sales for commercial and industrial land over the lease duration, instead of immediately allocating it to reserves.

3. Taxation and Wealth:

• It's crucial to ensure that the tax ecosystem doesn't erode Singapore's competitiveness.
• Taxes are a key source of revenue, but it's important to consider who bears the burden.
• There's a perception that taxes disproportionately affect ordinary Singaporeans compared to the wealthy and large corporations.
• Wealth is not taxed enough.

4. Alternative Revenue Methods:

• The decision to increase GST in 2022, amidst high inflation, was considered ill-timed.
• Alternative methods to generate revenue include changing the NIRC formula from 50% to 60%.
• Implementing a minimum corporate tax rate, aligned with other nations, could provide a buffer.

5. PAP's Approach to Cost of Living:

• The PAP acknowledges that the cost of living is a key concern due to Singapore's reliance on imports.
• The government aims to mitigate the impact of imported inflation by maintaining a strong Singapore dollar.
• Support measures include the Assurance Package, Cost of Living Special Payment, SG Bonus, and Permanent GST Voucher scheme.
• The PAP believes the best long-term solution is to grow the economy, enabling businesses to thrive and workers to earn higher wages.
• From 2019 to 2024, the 20th percentile (lower-wage workers) experienced a 5.9% real wage growth, and the median real wage growth was 3.6%.
• Eight in 10 families can buy their first HDB flats using CPF with little or no cash outlay.
• Seven in 10 patients in public healthcare institutions do not pay cash.
• Eight in 10 patients pay less than $100 out-of-pocket.
• 90% of public education costs are subsidized.
• The PAP emphasizes fiscal discipline and covering current needs with current resources, avoiding borrowing or gambling on future generations' savings.
• The GST increase was necessary to support healthcare needs for an aging population.
• The GST increase is packaged with support measures, resulting in lower and middle-income households paying an effective GST rate lower than 9%, even lower than 7%.

6. Price Controls and GST on Necessities:

• The PR does not recall proposing price controls on necessities.
• The PR advocates for removing GST on necessities like food, groceries, and healthcare.
• Reducing the cost of housing is crucial, and the PR proposes stopping permanent residents from buying HDB resale flats to curb price surges.

7. AHS and Resale Market:

• The PSP's AHS aims to sell new flats at construction cost plus a location premium.
• The AHS is not expected to crash the resale market, as AHS flats will constitute less than 10% of the total HDB flat supply even after 5 years.
• The resale market will still be supported by buyers ineligible for BTO flats, those unsuccessful in balloting, those seeking specific locations, PRs, and those upgrading to larger flats.

8. Citizens Dividend:

• The RDU proposes a citizens dividend, an unconditional cash transfer as a financial safety net.
• The citizens dividend would be financed through budget surpluses.
• The RDU highlights the potential pressure on jobs and incomes in the coming years due to global workforce changes.

9. WP's Proposals:

• The WP has proposals to manage the costs of utilities, healthcare, and transportation.
• Tiered utility pricing is proposed to incentivize socially conscious behavior and relieve pressure on smaller households.

10. SkillsFuture and Social Compact:

• The PAP emphasizes the need for both short-term support and long-term structural measures.
• This year's budget allocates 5% to immediate concerns and the remaining to preparing the economy and society for the future.
• Investing in SkillsFuture and lifelong learning is crucial to help workers adapt to new technologies and opportunities.
• Addressing the healthcare needs and retirement adequacy of seniors is a priority.
• Maintaining a strong social compact, as outlined in Forward Singapore, is essential.
• Economic growth should be coupled with investments in social safety nets and social cohesion.

11. Concerns about AHS and Corporate Tax:

• The PAP raises concerns that the AHS is a "buy now pay more later" scheme due to interest on deferred payments.
• The PAP questions how the PSP can guarantee that the AHS won't crash the housing market.
• The PAP cautions against relying on corporate tax surpluses, given the uncertain global economic outlook.
• Reserves should be safeguarded for future generations and difficult times, not constantly tapped into.

Synthesis/Conclusion:

The discussion revolves around balancing the need for revenue to fund public services with concerns about the cost of living for Singaporeans. Various parties propose different approaches, including adjusting tax policies, utilizing reserves, and implementing new schemes like the AHS and citizens dividend. The PAP emphasizes fiscal discipline, economic growth, and investing in skills and social safety nets, while cautioning against proposals that could jeopardize long-term financial stability and the housing market. The debate highlights the complexities of managing Singapore's economy and ensuring a sustainable future for its citizens.