Case 2 – Singapore GST Increase
Singaporeans pay much less in taxes compared to citizens elsewhere:
Lawrence Wong
Singaporeans pay much less in taxes compared to citizens elsewhere,
but still “enjoy high quality public services”, said Deputy Prime Minister
Lawrence Wong in Parliament on Friday (Feb 24). In his closing speech
on the debate on Budget 2023, he also described Singapore’s tight
fiscal position as “very much a reality” over the medium term – hence
the need for Singapore to proceed with a second raise of the Goods
and Services Tax (GST) in 2024. “Deferring this will only store up more
problems for the future and will leave us with less resources to take care
of our growing number of seniors,” said Mr Wong, who is also Finance
Minister.
Mr Wong noted that Singapore’s tax to GDP ratio was, at 14 per cent,
“considerably lower” than most other advanced economies. “This low
tax burden rewards hard work and enterprise, and allows our people
and businesses to keep most of what they earn,” he said.
Source: Adapted and edited from CNA, 24 Feb 2023
i. Explain whether GST is a progressive, regressive or proportional
tax, and why GST is an appropriate measure for Singapore.
ii. Explain the impacts of the increase in GST on real GDP. Include
a clearly-labelled aggregate expenditure diagram to support your
explanation. (10 marks)
iii. Discuss any TWO (2) alternatives (other than GST) to raise
government revenue.