February 21, 2010
According to a Bloomberg report on 18 February 2010, Singapore
may incur a budget deficit of as much as S$8.1 billion dollars or 3
per cent of its gross domestic product this year.
It will be the third consecutive budget deficit after a
predicted deficit of S$8.7 billion dollars in 2009 when the
reserves were tapped to give cash to companies and citizens to
shower the reccession.
While economists say that there are unlikely to be changes to
corporate and personal income taxes, GST may be raised to boost
government revenue.
“Given the likelihood of a sizeable deficit by Singapore
standards, we doubt that the fiscally conservative government will
judge it timely to further deplete a major source of government
revenue,” said Kit Wei Zheng from Citigroup.
Alvin Liew from Standard Chartered made a bold prediction:
“We forecast that the GST will be raised to 10 percent by
2012 as an expected increase in tourism broadens the domestic
consumption base, making indirect taxes a more significant
contributor to government revenue.”
GST was raised from 5 to 7 per cent in 2006 just after the
election amidst much public displeasure.
Prime Minister Lee Hsien Loong claimed that the GST hike was
necessary to “help the poor”, but till now he had not explained how
it had helped the lower income group in Singapore.
The budget deficit incurred pales in comparison to the billions
of dollars lost in failed overseas investments by Singapore’s two
sovereign wealth funds Temasek Holdings and GIC.
The Chairman of GIC is Singapore’s octogenarian leader Lee Kuan
Yew while Temasek Holdings is led by his daughter-in-law Ho Ching.
None of them have prior experience in the finance industry.
GIC is expected to lose more than S$10 billion dollars when its
stake in Swiss bank UBS is converted entirely to shares on 5
March.
Till today, nobody knows exactly how much GIC has lost though
its Deputy Chairman Dr Tony Tan revealed that it has since
“recouped” half its losses due to a stock rally last year.
As for Temasek Holdings, it is an “Asian investment firm” owned
entirely by the Ministry of Finance and therefore is not
“accountable” to the people of Singapore.
With the next election looming around the corner, Singaporeans
can expect a bag of “carrots” to be dangled in front of their eyes
after which GST and other taxes will be increased when the ruling
party gets voted into office again with another “overwhelming
mandate.”
PM Lee unveiled a “progress package” for Singaporeans before the
2006 elections. After he won another 5-year term, one of the first
things he did was to raise the salaries of himself and his
ministers.
Singaporeans should not be too concerned if GST will be raised
to 10 per cent. Even if it’s raised to 20 per cent, there is
nothing they can do about it.
http://www.temasekreview.com/2010/02/21/standard-chartered-economist-predicts-gst-will-be-raised-to-10-per-cent-by-2012/