Insights into GST offsets, wealth taxes, and what to watch for in the upcoming budget.
SINGAPORE: The arrival of Budget 2024 has sparked discussions on Singapore’s economic policies, from GST hikes to wealth taxes. To demystify these issues, economist Manu Bhaskaran, Vice President of the Economics Society of Singapore and CEO of Centennial Asia Advisors, shared his insights on the challenges and trade-offs shaping Singapore’s fiscal landscape.
Effectiveness of GST Offsets
When asked about the impact of measures like CDC vouchers and lump sum payments on mitigating GST hikes, Mr. Bhaskaran acknowledged that such offsets alleviate burdens for lower-income households. However, he noted the lack of detailed studies on the secondary effects of GST hikes, such as firms raising prices beyond the tax increase due to limited consumer protection mechanisms in Singapore.
The Debate on Lower Taxes
The theory that lower taxes lead to higher tax revenue, popularized by the Laffer Curve, has long been debunked, according to Mr. Bhaskaran. He explained that while reduced taxes can incentivize spending and attract wealthy individuals, they may also limit government revenue for essential services like healthcare and education. Striking a balance between taxation levels and social spending remains a critical challenge.
Wealth Tax and Family Offices
The economist highlighted the complexity of implementing a wealth tax, questioning its fairness and practicality. Singapore’s current approach indirectly taxes wealth through higher property and luxury car taxes, which can disproportionately impact middle-class families.
Regarding the rise in family offices in Singapore, Mr. Bhaskaran noted the benefits, such as increased demand for professional services and potential wage growth. However, he expressed skepticism about whether the economic spillovers justify the higher costs imposed on local businesses, including office space and staffing expenses.
Key Questions for Budget 2024
As Singaporeans await Budget 2024, Mr. Bhaskaran urged citizens to focus on several critical points:
Revenue trends: Are government revenues higher than forecasted?
Allocation of funds: How is the additional revenue being utilized?
Relief measures: Are there more benefits for average Singaporeans?
Taxation changes: Are new taxes being introduced or existing ones increased?
Spending priorities: What are the government’s focus areas for economic and social development?
Mr. Bhaskaran emphasized that the budget is not just about numbers; it also reflects the government’s economic and social vision. “The budget statement is a platform for the government to articulate its policies. Will there be more help for less fortunate Singaporeans, such as the elderly, the poor, and the unemployed?” he concluded.
As Budget 2024 unfolds, these insights from an expert provide valuable context for understanding the nation’s fiscal direction.
