Workers’ Party MP raises concerns about inflation and cost-of-living pressures.
SINGAPORE — Workers’ Party MP Jamus Lim recently addressed inflation and cost-of-living challenges alongside the upcoming GST (Goods and Services Tax) hike. The Sengkang GRC MP, who is also an Associate Professor of Economics at ESSEC Business School, suggested that the planned hike should be re-evaluated considering Singapore’s economic recovery.
In a Facebook post on Wednesday (Jan 26), he emphasized, “We also need to think very seriously about the wisdom of a GST increase. For us, a GST hike would not just add fuel to the fire, but could also shock an economy that is only just on a rebound.” He expressed particular concern regarding the potential impact on vulnerable sectors, stating, “Sectors that will feel GST most directly (like F&B) remain weak.”
Prime Minister Lee Hsien Loong previously indicated in his New Year message that the government intends to proceed with the GST hike. The increase of two percentage points was first announced in 2018 by then-Finance Minister Heng Swee Keat, with plans to implement it between 2021 and 2025. However, the hike was postponed last year due to the pandemic’s adverse effects on the economy.
The current GST rate of 7% has been in place since July 2007, having risen from 5% (2004-2007) and 4% (2003). During a recent parliamentary debate on inflation and the rising cost of living, Prof. Lim noted his concerns as an economist about the “underlying drivers” of inflation. He highlighted that rising prices are worrying when they prompt workers to demand wage hikes or when households adjust their budgets in anticipation of further price increases.
While acknowledging that inflation is high at “4% in the latest December report,” he pointed out that core inflation, excluding volatile food and energy costs, stood at 2.1%. “This is hot, but only slightly above the 2% target most central banks are comfortable with,” he said.
However, he cautioned, “the picture isn’t all peaches and roses.” Lim noted that energy prices have surged by over 10%, while food costs have increased by nearly 4% on an annualized basis in recent months.
The government has acknowledged rising inflation but remains confident that “price increases would eventually come under control.” Prof. Lim agreed with this sentiment but warned that control may not be achieved as swiftly as economists would prefer. “People are feeling the pain now,” he stressed.
“The Workers’ Party believes that it is possible to make the numbers work without further increasing a regressive tax like GST. We should instead explore other progressive revenue sources,” he proposed, suggesting alternatives such as a wealth tax, additional tiers to property taxation, and adjustments to the formula for interest contributions from reserves. Lim concluded that while changing demographics will necessitate increased expenditures, especially in healthcare, a different mix of revenue sources is both feasible and desirable.
