Photo of Indranee Rajah from Straits Times

Speaking at a government forum defending the GST increase, Senior Minister of State Indranee Rajah openly lied that the revenue collected from the GST tax increase would be returned to Singaporeans:

“I hope Singaporeans would understand that at the end of the day, when the GST goes up and the money is collected, the funds are still returned to Singaporeans – in the form of developments in healthcare, infrastructure, security and education. There are offset packages as well as enhancements to the GST voucher scheme to help them adjust to the changes.”

The Minister of State for Law and Finance did not back up her claims with any statistics as a bulk percentage of the GST revenue collected ended up as corporate tax rebates, ministerial salaries and luxurious exorbitant projects like Terminal 5 and Garden By the Bay.

Minister Indranee Rajah also admitted that the government has no money left for the new projects and have to resort to borrowing. The Minister did not reveal the dollar figure for Terminal 5 and only said “it is pretty large”:

“We are now exploring the possibility of borrowing, which is backed by government guarantee leveraging on the reserves. This was a shift simply because the expenditure for infrastructure is pretty large. It’s also sort of lumpy because certain portions have to be paid first, and another portion later. This is something we hope Singaporeans will look at and understand the need for why we are doing this.”

The PAP Minister also defended the “50% rule” of using investment returns of Temasek Holdings and GIC. There is no explanation on why it has to be 50%, and apparently the Minister plucked the figure out from thin air. Nonetheless, the Minister angrily debated against the percentage when it was pointed out that that Singapore can avoid a GST increase if a higher percentage of the investment returns is used to pay for exorbitant one-off projects:

“We think that 50 per cent is a fair figure. If you start going down the slippery slope then after a while you have to make your principal work a lot harder. And then you are also not assured that you will be able to get consistent returns all the time, you don’t know what the investment market will be like. The better thing to do if you want to ensure consistency, stability and sustainability … is to continue to tap, but keep it at 50 per cent and then also introduce the increase in GST.”

Still unhappy when forum participants rejected her reasoning, Minister Indranee Rajah then took to Facebook to re-post her view:

“We currently use 50%. So why not more? Why not use, say 60% instead of raising GST?

This suggestion assumes various things:

– it assumes an additional 10% of NIR (from 50% to 60%) will always give you the same amount as a 2% GST increase

– this in turn assumes that the amount of returns generated by our reserves will always be the same. However, even with the NIR framework (which essentially smooths out volatility by taking a longer term expected return), long term investment returns can still vary or fall. We can never eliminate investment risk.

– it also assumes that we will never have to draw on the principal amount of reserves on which the returns are generated ( Not a wise assumption – given we that we had to draw on the principal back in 2009 during the global financial crisis)

– it assumes you can get the same returns on a principal amount that is growing at a slower rate. Again, not a safe assumption. When we use more, we save less, which in turn means less is reinvested. That means we will have less to spend over the long term. This is short term gain, at the expense of future gain.”