Back in 2006, the Government had put in place a freeze in fee increase for one year after the GST increase. This time round, will the Government consider a similar freeze?
Ms Indranee:
We will do our best, but we cannot defer fee increases forever. If and when we do have to have fee increases, we will do our best to ensure that Singaporeans are supported and buffered against such increases.
Second Minister for Finance Indranee Rajah tells Parliament on Tuesday (Jan 11) that the impact of the GST hike will be delayed for the majority of households in Singapore:
In response to MP Liang Eng Hwa's question on whether the government would consider delaying GST increases, 2nd Minister for Finance Indranee Rajah said: "through the assurance package, for the majority of Singaporeans we will delay the impact for them effectively by 5 years".
The Big Read: Singapore households, businesses not spared from global inflation storm as GST increase looms
SINGAPORE — Before the Covid-19 pandemic struck about two years ago, housewife Suria Saini would spend about S$400 a month on groceries and other basic necessities.
But as of December last year, her monthly spending has gone up to over S$500 on the same list of items.
“I always go to the same shops, the same stalls in the market. There seems to be a 50- to 80-cent increase on most things like shampoo and detergent. Fish, mutton, chicken… Prices have gone up so much,” said Mdm Suria, 47.
Her husband earns S$1,200 a month working in pest control and the couple has 14 children, four of whom are working but still living in the family's four-room flat and contribute "not much" to household expenses. Her children are aged between eight and 25 years old.
From December 2019 to February 2020, Mdm Suria had received Comcare cash assistance of S$350 a month, as well as subsidies for utilities and services and conservancy charges. Since then, the family does not get any Comcare assistance but her school-going children continue to receive government support for their school expenses.
Mdm Suria said she noticed that a carton of 30 eggs, which used to cost S$3, has gone up to S$5. The price of a packet of instant noodles has also increased from S$1.80 to S$2.20.
“Our budget is really tight... Now that we know that everything is going to increase even more in 2022, can you imagine how I'm going to manage?” said Mdm Suria.
For Madam Sandy Goh, 54, the rising cost of expenses — on top of a drastic loss in income — is taking a toll on her family of five. She and her husband have three school-going children aged between 11 and 18.
Besides an increase in her monthly utility bills from S$180 to over S$280 at her three-room public housing flat, she observed that food prices have also risen. Canned pork is now S$4.50, instead of S$3.50, and a meal at a coffee shop now averages around S$4, compared with around S$2.50 to S$3 about two years ago.
Around the world, inflation is set to be a key challenge this year, as prices rise on multiple fronts.
Border restrictions and supply chain disruptions — a result of measures to contain the spread of Covid-19 — have also led to higher manpower costs and freight fees for businesses.
In Singapore, families are facing higher prices in an array of goods and services, including for food, public transport and electricity.
The situation here is exacerbated by the recent spate of floods in Malaysia, driving up the imported costs of goods that Singapore gets from across the Causeway.
And prices are expected to go up further this year, with the impending increase in Goods and Services Tax (GST).
In his New Year message, Prime Minister Lee Hsien Loong said that the Government has to “start moving” on the planned increase in GST from 7 per cent to 9 per cent.
The MAS had said in its October macroeconomic review that public transport fares could be raised again and healthcare subsidies may be phased out this year as well.
MAS expects overall inflation for 2022 to come in between 1.5 and 2.5 per cent, up from around the projected 2 per cent in 2021. Core inflation, which strips out private transport and accommodation costs, is projected to rise between 1 and 2 per cent next year — higher than the upper end of the 0 to 1 per cent forecast range that MAS expects inflation to hit in 2021.
With multiple factors converging to push prices upwards, Ms Selena Ling, head of research and strategy at OCBC Bank, said the current situation is akin to an “inflation storm”.
"You not only have externally-driven imported inflation because of global supply chain disruptions... The question is whether some industries and firms are in a position to pass on the higher costs, not just from the GST hike, but also from the build up of higher operating costs," said Ms Ling.
MIDDLE-INCOME ALSO FEELING THE PINCH
Mr Kelvin Seet, 43, who works in the aviation industry, said that his expenses have increased by at least 20 per cent since the start of 2020.
Despite coming from a middle-income household, he is feeling the pinch. He lives in an executive apartment flat with his wife, who is also working full-time, and three children aged between eight and 12 years old.
He estimated that food prices at hawker centres have increased by about 20 per cent since pre-Covid, noting that the Western food stall in his area has raised its price of a spring chicken meal from S$9.90 to S$11.80.
His utility bill has also gone up by 20 per cent, and tuition fees for his children are increasing on a yearly basis.
But Mr Seet said his income has not increased over the past two years.
“I have not spent on any luxuries and just try to keep my family comfortable during this period," he said.
For 36-year-old Vincent Li, he has observed price increases on a wide range of expense items, such as property tax, refuse collection fees, wages of foreign domestic workers, childcare school fees, online purchases and electricity bills.
“Prices are going up while wages are only increasing by 2 to 3 per cent per year, which is unable to catch up with inflation,” said the business development professional in a tech firm. His combined monthly household income is around S$9,000.
'ICE-THIN' PROFIT MARGINS FOR FIRMS
It’s not just families feeling the pinch.
Several business owners told TODAY that they have been feeling rising cost pressures in several aspects — manpower, logistics, raw materials and electricity.
With many retailers forced to go online as a result of Covid-19, digital marketing costs have also gone up.
Ms Ling noted that these rising costs are taking place against a backdrop of fading financial support from the Government, such as the Jobs Support scheme, which provides companies wage subsidies, and rental waivers.
Mr Terence Yow, who is the managing director of shoe retailer Enviably Me, said that each of these cost components has gone up by two or three times on average, and costs have gone up by between 12 and 15 per cent across the board.
While the economy is recovering from its worst during the height of the pandemic, revenue is still down between 30 and 40 per cent, he said.
“Those (businesses) which have managed to survive till now… I think we are just trying to cope with every wave that comes on… What can we possibly do about freight fees, labour costs and GST? The alternative is to exit,” said Mr Yow, who is also the chairman of Singapore Tenants United For Fairness, which represents more than 770 business owners.
Mr Bernard Tay, the managing director of Jinjja Chicken, said that the operating costs for his Korean fried chicken business have increased by between 20 and 30 per cent last year, compared to 2020.
Describing food costs as “crazy”, Mr Tay said the price of one tin of cooking oil has gone up by 40 per cent.
Traditionally reliant on workers from Malaysia, border restrictions have also made it very hard for him to employ workers, and hence manpower costs have been going up to attract them.
“For the first time in my business, I have got the quota (to employ foreign workers) but I don’t have workers… You walk in a mall, which food and beverage (F&B) establishment is not putting up a hiring notice? And the salary offered is higher and higher. People can literally quit here today, and tomorrow work in the same mall in another outlet just next to mine,” he said.
While the return of dining-in for a maximum of five people has helped improve business, Mr Tay said the safe distancing requirement means that revenue is still below pre-pandemic levels.
“The margin is so thin like ice,” he added.
Another retailer Mr Keson Lim, the director of toys distribution firm Being Kids, also said that his business costs have jumped by a similar amount of 20 to 30 per cent.
In addition to a bump in freight costs, he has to contend with manpower shortage. Besides difficulties in hiring foreign workers to replace those who have quit to return home, Mr Lim said his traditional reliance on part-timers has been affected, as many of them are now working as swabbers or safe distancing ambassadors.
“The jump in costs was quite drastic, while recovery of revenue wasn’t that fantastic,” said Mr Lim.
“Many businesses that were profitable in 2019, were unprofitable in 2021 due to cost increases.”
Mr Yow said that businesses are stuck between a rock and a hard place, as they can’t keep absorbing cost increases.
“When sales are already down, it’s a very difficult choice to risk customers not being happy by increasing prices during such a difficult time. Most of us will try not to. But inevitably, I think there is no choice, prices will have to rise,” he said, adding that this is not even taking into account cost pressures from the GST increase.
Mr Tay said he has not raised prices of his Korean fried chicken in the last two years, but may look to increase it by 50 cents or S$1 to cushion the impact of the rising costs.
He reiterated that he cannot adjust prices too much, as consumers are now more price sensitive than they were pre-pandemic, as some may have lost their jobs or suffered a drop in income.
And he may have to increase prices again, if the Government decides to implement a 2 percentage point GST hike at one go. While it is industry practice among fast-food chains to absorb GST, Mr Tay said he would not be able to do so this time due to other cost increases.
However, if the increase is done in a staggered manner, whereby GST is raised by 1 percentage point first, Mr Tay said he may consider absorbing the GST, but it will have to depend what others in the industry do.
As for Mr Lim, he has already sent a notice to his corporate clients that they would have to increase prices by 10 per cent from this year, without even factoring in the impending GST increase.
“We did a marginal 10 per cent (price increase) to reduce the negative impact on ourselves. It’s not even to be profitable,” he said.
Like Mr Yow, Mr Lim said that if the current cost pressures persist, he would not be able to absorb the GST increase. However, he noted that the decision on whether to pass on the tax to consumers would largely depend on what will be announced during the Feb 18 Budget statement, and whether the authorities would further ease border restrictions in the next few months.
“Pre-Covid, absorbing the 2 percentage point increase would not have been an issue at all,” said Mr Lim.
TIMING OF GST INCREASE
Economists had previously told TODAY that 2022 provides a window of opportunity for the Government to implement a GST increase, even though there is never a good time to raise taxes.
For one, the Singapore economy is on firmer footing compared to last year, when it was just coming out of its trough in 2020 after being hammered by the pandemic.
Plans to raise the GST from 7 to 9 per cent between 2021 and 2025 were first announced in 2018 by then Finance Minister Heng Swee Keat, who is now Deputy Prime Minister. The purpose is to raise the Government’s revenue due to an expected increase in recurrent spending, especially in healthcare, as Singapore grapples with an ageing population.
But Covid-19 pandemic threw a spanner in the works. With Singapore then in the early stages of the pandemic, Mr Heng announced during Budget 2020 that the increase would not take place in 2021.
He said that the decision to not raise the GST last year came about after the Government reviewed its revenue and expenditure projections and considered the current state of the economy. However, it cannot be postponed indefinitely, he stressed.
The unprecedented crisis has also led the Government — on top of its usual spending — to commit nearly S$100 billion through five Budgets to help Singaporeans and businesses. The Government had to dip into the country's past reserves to fund the various assistance schemes, making the need to replenish the official coffers more urgent than ever, some economists have noted.
DBS senior economist Irvin Seah believes that the GST increase will be implemented in July and the Government will raise the tax by 2 percentage points in one go.
A one-step jump will limit the long-term impact of the increase, and the effect on overall inflation should fade away in 12 months, said Mr Seah.
While Ms Ling also thinks that the higher GST could kick in as early as July, she believes that a more gradual approach, in the form of a staggered increase, would not result in knee-jerk reactions from consumers.
Ms Ling estimates overall inflation this year to be around 2 to 3 per cent. Wage growth would have to be above that to offset the effects of the GST increase, she noted.
Mr Seah said that the labour market is showing signs of improvement, particularly for the finance, info-communication and technology industries.
Wages in these sectors would likely rise, though such growth would not likely occur across the economy.
“For the labour market to improve and wage growth to rise, we need the economy to be on a firmer footing. That will really depend on how soon we are able to reopen the economy,” said Mr Seah.
He said that the decision to not raise the GST last year came about after the Government reviewed its revenue and expenditure projections and considered the current state of the economy. However, it cannot be postponed indefinitely, he stressed.
The voting out of the greedy PAPigs cannot be postponed indefinitely too!
On the GST, he said the PAP would be "mad" to raise taxes just because it had garnered a certain percentage of the votes.
"Raising, adjusting taxes is a very big decision. You consider it carefully, you discuss it thoroughly, and you do it only when you absolutely have to.
"What will make you need to raise GST? Profligate spending and irresponsible, unsustainable plans. That is what will hurt and require you to raise taxes and GST."
He noted that the opposition party manifestos had plans to give money to various groups, but had little to say about how the spending would be financed.
"So I think when you see a manifesto like that, that's when you must ask, where's the money coming from?"
Well done PAP, WELL DONE INDEED.
https://geraldgiam.sg/2010/03/raymond-lim-once-proposed-a-way-for-completely-free-public-transport/
Mr Louis Chua (Sengkang GRC):
Back in 2006, the Government had put in place a freeze in fee increase for one year after the GST increase. This time round, will the Government consider a similar freeze?
Ms Indranee:
We will do our best, but we cannot defer fee increases forever. If and when we do have to have fee increases, we will do our best to ensure that Singaporeans are supported and buffered against such increases.
https://www.straitstimes.com/singapore/politics/exchanges-in-parliament-mps-ask-if-government-can-delay-gst-hike-do-more-to-beat-inflation
Second Minister for Finance Indranee Rajah tells Parliament on Tuesday (Jan 11) that the impact of the GST hike will be delayed for the majority of households in Singapore:
The Big Read: Singapore households, businesses not spared from global inflation storm as GST increase looms
SINGAPORE — Before the Covid-19 pandemic struck about two years ago, housewife Suria Saini would spend about S$400 a month on groceries and other basic necessities.
But as of December last year, her monthly spending has gone up to over S$500 on the same list of items.
“I always go to the same shops, the same stalls in the market. There seems to be a 50- to 80-cent increase on most things like shampoo and detergent. Fish, mutton, chicken… Prices have gone up so much,” said Mdm Suria, 47.
Her husband earns S$1,200 a month working in pest control and the couple has 14 children, four of whom are working but still living in the family's four-room flat and contribute "not much" to household expenses. Her children are aged between eight and 25 years old.
From December 2019 to February 2020, Mdm Suria had received Comcare cash assistance of S$350 a month, as well as subsidies for utilities and services and conservancy charges. Since then, the family does not get any Comcare assistance but her school-going children continue to receive government support for their school expenses.
Mdm Suria said she noticed that a carton of 30 eggs, which used to cost S$3, has gone up to S$5. The price of a packet of instant noodles has also increased from S$1.80 to S$2.20.
“Our budget is really tight... Now that we know that everything is going to increase even more in 2022, can you imagine how I'm going to manage?” said Mdm Suria.
For Madam Sandy Goh, 54, the rising cost of expenses — on top of a drastic loss in income — is taking a toll on her family of five. She and her husband have three school-going children aged between 11 and 18.
Besides an increase in her monthly utility bills from S$180 to over S$280 at her three-room public housing flat, she observed that food prices have also risen. Canned pork is now S$4.50, instead of S$3.50, and a meal at a coffee shop now averages around S$4, compared with around S$2.50 to S$3 about two years ago.
Around the world, inflation is set to be a key challenge this year, as prices rise on multiple fronts.
Border restrictions and supply chain disruptions — a result of measures to contain the spread of Covid-19 — have also led to higher manpower costs and freight fees for businesses.
In Singapore, families are facing higher prices in an array of goods and services, including for food, public transport and electricity.
The Monetary Authority of Singapore (MAS) has highlighted the higher inflationary pressures and moved to tighten its monetary policy in response.
The situation here is exacerbated by the recent spate of floods in Malaysia, driving up the imported costs of goods that Singapore gets from across the Causeway.
And prices are expected to go up further this year, with the impending increase in Goods and Services Tax (GST).
In his New Year message, Prime Minister Lee Hsien Loong said that the Government has to “start moving” on the planned increase in GST from 7 per cent to 9 per cent.
The MAS had said in its October macroeconomic review that public transport fares could be raised again and healthcare subsidies may be phased out this year as well.
MAS expects overall inflation for 2022 to come in between 1.5 and 2.5 per cent, up from around the projected 2 per cent in 2021. Core inflation, which strips out private transport and accommodation costs, is projected to rise between 1 and 2 per cent next year — higher than the upper end of the 0 to 1 per cent forecast range that MAS expects inflation to hit in 2021.
With multiple factors converging to push prices upwards, Ms Selena Ling, head of research and strategy at OCBC Bank, said the current situation is akin to an “inflation storm”.
"You not only have externally-driven imported inflation because of global supply chain disruptions... The question is whether some industries and firms are in a position to pass on the higher costs, not just from the GST hike, but also from the build up of higher operating costs," said Ms Ling.
MIDDLE-INCOME ALSO FEELING THE PINCH
Mr Kelvin Seet, 43, who works in the aviation industry, said that his expenses have increased by at least 20 per cent since the start of 2020.
Despite coming from a middle-income household, he is feeling the pinch. He lives in an executive apartment flat with his wife, who is also working full-time, and three children aged between eight and 12 years old.
He estimated that food prices at hawker centres have increased by about 20 per cent since pre-Covid, noting that the Western food stall in his area has raised its price of a spring chicken meal from S$9.90 to S$11.80.
His utility bill has also gone up by 20 per cent, and tuition fees for his children are increasing on a yearly basis.
But Mr Seet said his income has not increased over the past two years.
“I have not spent on any luxuries and just try to keep my family comfortable during this period," he said.
For 36-year-old Vincent Li, he has observed price increases on a wide range of expense items, such as property tax, refuse collection fees, wages of foreign domestic workers, childcare school fees, online purchases and electricity bills.
“Prices are going up while wages are only increasing by 2 to 3 per cent per year, which is unable to catch up with inflation,” said the business development professional in a tech firm. His combined monthly household income is around S$9,000.
'ICE-THIN' PROFIT MARGINS FOR FIRMS
It’s not just families feeling the pinch.
Several business owners told TODAY that they have been feeling rising cost pressures in several aspects — manpower, logistics, raw materials and electricity.
With many retailers forced to go online as a result of Covid-19, digital marketing costs have also gone up.
Ms Ling noted that these rising costs are taking place against a backdrop of fading financial support from the Government, such as the Jobs Support scheme, which provides companies wage subsidies, and rental waivers.
Mr Terence Yow, who is the managing director of shoe retailer Enviably Me, said that each of these cost components has gone up by two or three times on average, and costs have gone up by between 12 and 15 per cent across the board.
While the economy is recovering from its worst during the height of the pandemic, revenue is still down between 30 and 40 per cent, he said.
“Those (businesses) which have managed to survive till now… I think we are just trying to cope with every wave that comes on… What can we possibly do about freight fees, labour costs and GST? The alternative is to exit,” said Mr Yow, who is also the chairman of Singapore Tenants United For Fairness, which represents more than 770 business owners.
Mr Bernard Tay, the managing director of Jinjja Chicken, said that the operating costs for his Korean fried chicken business have increased by between 20 and 30 per cent last year, compared to 2020.
Describing food costs as “crazy”, Mr Tay said the price of one tin of cooking oil has gone up by 40 per cent.
Traditionally reliant on workers from Malaysia, border restrictions have also made it very hard for him to employ workers, and hence manpower costs have been going up to attract them.
“For the first time in my business, I have got the quota (to employ foreign workers) but I don’t have workers… You walk in a mall, which food and beverage (F&B) establishment is not putting up a hiring notice? And the salary offered is higher and higher. People can literally quit here today, and tomorrow work in the same mall in another outlet just next to mine,” he said.
While the return of dining-in for a maximum of five people has helped improve business, Mr Tay said the safe distancing requirement means that revenue is still below pre-pandemic levels.
“The margin is so thin like ice,” he added.
Another retailer Mr Keson Lim, the director of toys distribution firm Being Kids, also said that his business costs have jumped by a similar amount of 20 to 30 per cent.
In addition to a bump in freight costs, he has to contend with manpower shortage. Besides difficulties in hiring foreign workers to replace those who have quit to return home, Mr Lim said his traditional reliance on part-timers has been affected, as many of them are now working as swabbers or safe distancing ambassadors.
“The jump in costs was quite drastic, while recovery of revenue wasn’t that fantastic,” said Mr Lim.
“Many businesses that were profitable in 2019, were unprofitable in 2021 due to cost increases.”
Mr Yow said that businesses are stuck between a rock and a hard place, as they can’t keep absorbing cost increases.
“When sales are already down, it’s a very difficult choice to risk customers not being happy by increasing prices during such a difficult time. Most of us will try not to. But inevitably, I think there is no choice, prices will have to rise,” he said, adding that this is not even taking into account cost pressures from the GST increase.
Mr Tay said he has not raised prices of his Korean fried chicken in the last two years, but may look to increase it by 50 cents or S$1 to cushion the impact of the rising costs.
He reiterated that he cannot adjust prices too much, as consumers are now more price sensitive than they were pre-pandemic, as some may have lost their jobs or suffered a drop in income.
And he may have to increase prices again, if the Government decides to implement a 2 percentage point GST hike at one go. While it is industry practice among fast-food chains to absorb GST, Mr Tay said he would not be able to do so this time due to other cost increases.
However, if the increase is done in a staggered manner, whereby GST is raised by 1 percentage point first, Mr Tay said he may consider absorbing the GST, but it will have to depend what others in the industry do.
As for Mr Lim, he has already sent a notice to his corporate clients that they would have to increase prices by 10 per cent from this year, without even factoring in the impending GST increase.
“We did a marginal 10 per cent (price increase) to reduce the negative impact on ourselves. It’s not even to be profitable,” he said.
Like Mr Yow, Mr Lim said that if the current cost pressures persist, he would not be able to absorb the GST increase. However, he noted that the decision on whether to pass on the tax to consumers would largely depend on what will be announced during the Feb 18 Budget statement, and whether the authorities would further ease border restrictions in the next few months.
“Pre-Covid, absorbing the 2 percentage point increase would not have been an issue at all,” said Mr Lim.
TIMING OF GST INCREASE
Economists had previously told TODAY that 2022 provides a window of opportunity for the Government to implement a GST increase, even though there is never a good time to raise taxes.
For one, the Singapore economy is on firmer footing compared to last year, when it was just coming out of its trough in 2020 after being hammered by the pandemic.
Plans to raise the GST from 7 to 9 per cent between 2021 and 2025 were first announced in 2018 by then Finance Minister Heng Swee Keat, who is now Deputy Prime Minister. The purpose is to raise the Government’s revenue due to an expected increase in recurrent spending, especially in healthcare, as Singapore grapples with an ageing population.
But Covid-19 pandemic threw a spanner in the works. With Singapore then in the early stages of the pandemic, Mr Heng announced during Budget 2020 that the increase would not take place in 2021.
He said that the decision to not raise the GST last year came about after the Government reviewed its revenue and expenditure projections and considered the current state of the economy. However, it cannot be postponed indefinitely, he stressed.
The unprecedented crisis has also led the Government — on top of its usual spending — to commit nearly S$100 billion through five Budgets to help Singaporeans and businesses. The Government had to dip into the country's past reserves to fund the various assistance schemes, making the need to replenish the official coffers more urgent than ever, some economists have noted.
DBS senior economist Irvin Seah believes that the GST increase will be implemented in July and the Government will raise the tax by 2 percentage points in one go.
A one-step jump will limit the long-term impact of the increase, and the effect on overall inflation should fade away in 12 months, said Mr Seah.
While Ms Ling also thinks that the higher GST could kick in as early as July, she believes that a more gradual approach, in the form of a staggered increase, would not result in knee-jerk reactions from consumers.
Ms Ling estimates overall inflation this year to be around 2 to 3 per cent. Wage growth would have to be above that to offset the effects of the GST increase, she noted.
Mr Seah said that the labour market is showing signs of improvement, particularly for the finance, info-communication and technology industries.
Wages in these sectors would likely rise, though such growth would not likely occur across the economy.
“For the labour market to improve and wage growth to rise, we need the economy to be on a firmer footing. That will really depend on how soon we are able to reopen the economy,” said Mr Seah.
A lot more at https://www.todayonline.com/big-read/big-read-singapore-households-businesses-not-spared-global-inflation-storm-gst-increase-looms-1785761
He isn't called dishonourable by his siblings for nothing. ;)
'MAD'
On the GST, he said the PAP would be "mad" to raise taxes just because it had garnered a certain percentage of the votes.
"Raising, adjusting taxes is a very big decision. You consider it carefully, you discuss it thoroughly, and you do it only when you absolutely have to.
He noted that the opposition party manifestos had plans to give money to various groups, but had little to say about how the spending would be financed.
"So I think when you see a manifesto like that, that's when you must ask, where's the money coming from?"
https://tnp.straitstimes.com/news/singapore-news/pm-lee-quashes-wps-gst-claim