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.
iii. Discuss any TWO (2) alternatives (other than GST) to raise government revenue.