SINGAPORE: The planned future increase of the goods and services tax (GST) is part of a "balance" Singapore is striking between staying competitive and staying inclusive, Deputy Prime Minister Tharman Shanmugaratnam said on Tuesday (Feb 27).
Finance Minister Heng Swee Keat had announced the increase during his Budget 2018 speech last Monday, saying that the tax will go up from 7 per cent currently to 9 per cent sometime in the period between 2021 and 2025.
Speaking at an international conference co-hosted by the International Monetary Fund (IMF) and Bank Indonesia in Jakarta, Mr Tharman said: "That balance between staying competitive and ensuring that we can grow at a sustainable pace, but at the same time staying inclusive, and in particular, being able to afford the quality healthcare that an ageing population needs - that's foremost on our minds."
He went on to say that the rich would have to "pay more over time".
"We need more revenues - we have been quite plain about it. It will allow us to expand healthcare provisions for an ageing population. And we can do it in a way that is fair to the poor and middle class," he said.
"Those who are better off, one way or another have to pay more over time. But we want to do it in a way that doesn't hurt our competitiveness."
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At the conference, which was about new growth models in a changing global landscape, Mr Tharman also spoke about the "huge opportunity" offered by a new wave of financial innovation in the region.
"If you look around the region, there are still very significant underserved populations, and fintech and financial innovation have a lot of potential to reach out to them."
The Deputy Prime Minister added that he thinks the vision for ASEAN has to include a single digital economy, with a network of smart cities which are hubs within this digital economy.
"It should also include a single, inter-operable payment system, enabling digital commerce to be smooth and frictionless," he said.
There is "still a lot of work to be done" regarding the regional supply chain and digitising the supply chain and markets will be a "plus-plus" for ASEAN countries, according to Mr Tharman.
"It will be a more inclusive form of growth and we should find every way of encouraging it," he added, explaining that it will benefit both start-ups and small and medium-sized enterprises.
In achieving this, human capital strategies - to give those in the workforce or about to join the workforce the confidence to participate and take advantage of the digital economy - is fundamental to succeeding in the digital economy and should be the "number one priority", Mr Tharman also said.
When asked about signs of retreat from globalisation in the world, the Deputy Prime Minister said this hesitation and sense of uncertainty with regard to the benefits of an open world economy "should not be taken as a given".
"We should work against it. In ASEAN and in Asia, we must remain a voice for openness, and through our own actions we have to show that we are moving progressively towards being more open.
And we have to be models of inclusivity domestically, as well - which must mean not just inclusivity in economic terms, but in social terms. When it comes to social, cultural, and religious accommodation, ASEAN has to be a model for the world."
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