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GST hike, Budget surplus and rising costs

LAST year’s huge Budget surplus of $6.45 billion is causing some economists and MPs to question the timing of last July’s hike in the goods and services tax (GST).

The issue came up for debate when a taxi driver, two MPs, two economists and a businessman met at The Straits Times on Thursday for a roundtable discussion on Budget 2008.

Rising costs for individuals and businesses remain their top concern.

Citigroup economist Kit Wei Zheng pointed out that some of the cost increases are within the Government’s control.

He cited the GST hike and the increases in Electronic Road Pricing charges due to start in April.

‘There’s a question of why all these price increases are coming at a time when the inflation rate is already very high and continues to rise,’ he said.

But MP Inderjit Singh countered Mr Kit’s point that the GST should have been raised in two steps, not one.

That would have opened the door for businesses to raise prices not once, but twice, possibly causing more hardship to consumers, Mr Singh said.

The six panellists also tackled the issue of a widening income gap and whether regular Budget handouts would breed a ‘subsidy mentality’ among Singaporeans.

Businessman Zulkifli Baharudin said: ‘It’s good to give but I hope down the line, we do not create a mentality that Budget time is just about hongbao.’

Insight reports on their frank exchange of views on the Government’s financial policy.

Source: The Straits Times 23 Feb 08

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