Goods and Services Tax Voucher Fund (Amendment) Bill

Order for Second Reading read.

1.56 pm

The Second Minister for Finance (Mr Lawrence Wong): Mr Speaker, I beg to move, "That the Bill be now read a Second time."

The Government established the Goods and Services Tax Voucher Fund under the GST Voucher Fund Act in 2012. The main purpose of the Fund is to provide financial assistance to the less well-off, to offset part of their GST expenses. Since 2012, the existing GST Voucher scheme has been funded from the GST Voucher Fund. Under this scheme, lower and middle income households receive annual cash payouts, MediSave top-ups, and utilities rebates, or "U-Save" to offset the GST that they pay on their daily expenses.

In his Budget 2020 Speech, Deputy Prime Minister Heng Swee Keat announced that the Government will introduce an Assurance Package for GST. The Assurance Package will help Singaporeans cushion the impact of the GST rate increase to 9%. Deputy Prime Minister Heng Swee Keat has explained why this is necessary to raise recurrent revenues to meet recurrent spending, particularly for healthcare.

Mr Speaker, let me now highlight the main features of this Bill.

Amendments to Part 2 of the Act expands the purpose of the GST Voucher Fund, such that the beneficiaries are no longer confined to those who are less well-off. With this amendment, the GST Voucher Fund can then be used to fund the Assurance Package for GST, which will benefit all Singaporeans during the transition period. Having said that, the weight of our assistance in the GST Voucher Fund will still go toward lower income Singaporeans who will continue to receive more support.

The amendments will also allow assistance to be provided in the form of grants-in-aid, to defray the expenses incurred by parents or guardians for infants and children under their care and charge. Given the expanded purposes of the Fund, we have also added a new section 8A to safeguard against legal action being inappropriately taken against the GST Voucher Fund, which basically is for general welfare.

In conclusion, Mr Speaker, the Bill broadens the group of beneficiaries who can receive financial support funded by the GST Voucher Fund and the possible forms of support. The Government will then be able to use the GST Voucher Fund for measures in the transitional package to cushion the GST increase for all Singaporeans, when the GST increase takes effect.

I want to reiterate that while we are broadening the assistance under the Assurance Package, we will continue to provide more support to lower income Singaporeans during the transition, and over and above this, we will continue to enhance the existing permanent GST Voucher scheme, to provide continued support to lower and middle income households. Mr Speaker, I beg to move.

Question proposed.

2.00 pm

Ms Joan Pereira (Tanjong Pagar): Mr Speaker, Sir, I welcome the amendments to the Goods and Services Tax Voucher Fund Bill. Compared to the current provision which targets the identified beneficiaries themselves, the grants-in-aid extend the reach of the Fund to help with the expenses that may be incurred by one person for the benefit of another beneficiary, such as by a family member of an elderly. My residents, especially those who are care-givers of their elderly parents welcome this move.

Presently, the Home Caregiving Grant provides $200 monthly cash payouts to care-givers to defray care-giving expenses, such as to be used to partially offset the wages of a foreign domestic worker (FDW) or eldercare fees.

The grants-in-aid will be a much-welcomed supplement as there are quite a number of care-giving expenses, including assistive devices and consumable home healthcare items. While the Seniors' Mobility and Enabling Fund provides subsidies to help cover some of these costs, financial assistance to offset the impact of GST on these items will provide added relief.

I would like to request the Ministry to consider taking a step further to exempt a list of vital items used by the elderly from GST altogether, that would include assistive devices like wheelchairs, walking sticks and hearing aids as well as home healthcare items, that would include nasal tubing, adult diapers and milk supplements. Sir, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] The grant-in-aid will be a much-welcomed supplement as there are a number of care-giving expenses, including those assistive devices and consumable home healthcare items. While the Seniors' Mobility and Enabling Fund provides subsidies to help some of these costs, financial assistance to offset the impact of GST on these items will provide added relief.

I would like to request the Ministry to consider taking a step further to exempt a list of vital items used by the elderly from GST altogether, that would include assistive devices like wheelchairs, walking sticks and hearing aids as well as home healthcare items, that would include nasal tubing, adult diapers and milk supplements.

(In English): Sir, I support the Bill.

2.02 pm

Assoc Prof Walter Theseira (Nominated Member): Mr Speaker, the Goods and Services Tax has been the subject of much misunderstanding. While the tax itself is straightforward, the policy of using GST Vouchers to correct the impact of the tax on low-income Singaporeans is perhaps less clear at times.

Before I discuss today's proposed amendment to the GST Voucher Fund, I think it useful to outline why the GST Voucher Scheme is crucial to address persistent criticisms of the GST.

Many critics argue that the GST is a regressive tax, that it places a greater burden on lower income Singaporeans and this leads to suggestions that the GST should be waived on necessities, replaced with a tax on luxury goods, or replaced by more progressive income taxes.

These ideas while well-meaning are likely to be inefficient, compared to our practice of simply granting GST Vouchers to households. For example, differentiating between necessities and luxury goods is not straightforward. A number of US states exempt groceries from sales tax, but not take-away food. This can lead to the perverse result that lobsters are exempt from sales tax but fast food is fully taxed. So simply returning the GST paid to lower income households through GST Vouchers is much easier.

Progressive income taxes should be an integral component of any fair taxation system but some critics also present a false choice between raising income taxes and GST. Income taxes do not cover short-term visitors to Singapore but GST does. Our present income tax system does not cover most sources of non-wage income to individuals, so GST does help to ensure people pay some taxes out of capital income, windfalls, capital gains, and so on.

There are reasonable concerns, for example, Ms Pereira raised that retirees are burdened by paying GST. But again, returning the GST paid to low-income retirees through GST Vouchers is much easier, while high-income retirees undoubtedly benefit overall from the lack of capital taxes in Singapore.

The permanent GST Voucher Scheme, backed by the GST Voucher Fund, is an ideal solution to the problem of regressivity. If it is well designed, it can eliminate most or all of the burden of GST on low-income Singaporeans.

The concern I have with this amendment is that in broadening the purposes of the GST Voucher Fund to "mitigate the impact of the goods and services tax", we are moving away from the original intent that the GST Voucher Fund is meant to directly finance "relief from goods and services tax" to low-income Singaporeans.

As GST increases the cash price of purchasing goods and services, it is simplest if cash is just returned to lower income households, so that they end up paying little or no net GST. Simplicity is also a virtue when it comes to addressing misunderstandings about the GST. It is a lot easier to point to the cash value of the GST Voucher payouts, and then compare that to the GST paid by individuals, rather than to count up the value of other subsidies.

I wish to ask the Minister whether the Government continues to have the policy intent of using the GST Voucher Fund, as far as possible, to provide cash and cash-equivalent relief from GST to lower income households. If that is the case, then would it be really necessary to move this particular part of the amendment? Could then the other relief schemes be funded through other means?

I would also suggest that the Government annually assess and publish estimates of the amount of GST paid by individuals and households at different parts of the income distribution. These could then be compared to the value of GST Voucher payouts, so the actual incidence of the GST on Singaporeans will be transparent. This would also be useful for fine-tuning aspects of the GST Voucher Scheme because changes to savings and expenditure patterns in the population could affect the GST incidence people pay.

The Minister for Finance has revealed in this year’s Budget debate that the bottom 40% only pay for 10% of net GST. The top 20% and foreigners pay for 60% of net GST. But I still think it would be more useful and illuminating if the Ministry could publish estimates on the effective rates of GST at different parts of the income distribution and how this will be impacted by the proposed increases to the GST rate, with the GST Voucher Scheme in mind.

2.07 pm

Ms Anthea Ong (Nominated Member): Mr Speaker, thank you for the opportunity to speak on this Bill which seeks to expand the Goods and Services Tax Voucher Fund’s beneficiaries as the Government plans to cushion the impact of the GST hike for nearly every household in Singapore, whether they are in need of relief or not.

The Government recognises that GST is a regressive tax. It hits low earners the hardest. The GSTV Fund was established to help lower income Singaporeans cope with their GST expenses, mitigating GST’s regressive nature. It is an ingenious institution. But I have two questions.

First, why is the policy limited only to Singaporeans when GST hurts all lower income residents?

Second, why expand the scope of beneficiaries to those who do not need the relief when there are people in our midst who need it but do not get it?

Mr Speaker, our migrant worker population is one of the most vulnerable in Singapore. They will suffer from the GST hike and are being offered no relief. It seems counter-intuitive to give money to individuals who do not need the relief while denying those who do. In fact, when we consider migrant workers' centrality to the building of our nation, it seems almost perverse.

Singapore relies on an enormous foreign workforce to sustain the construction, marine, manufacturing and domestic work sectors. As of June 2019, there were 1.4 million foreign workers in Singapore. Seventy percent of them were work permit holders. That is about 17% of the population and 26% of our resident labour force. They most commonly come from India, China, Bangladesh, Indonesia and the Philippines. Low-wage migrant workers are most commonly employed in construction, shipyards, sanitation services, manufacturing, and domestic work. These industries touch the everyday lives of every Singaporean in one way or another including making sure our facilities and surroundings are properly cleaned and disinfected during this COVID-19 crisis.

Our progress these last two decades would not have been possible without their labour. The Marina Bay skyline, Gardens by the Bay, the Jewel and many more would not exist without our foreign workforce. The Building and Construction Authority or BCA reported that net operating surplus for the Construction sector alone grew by a Compounded Annual Growth Rate (CAGR) of 9.3% per annum, in nominal terms, between 2005 and 2017. I think it is fair to deduce that the economic contributions of our migrant workers are more than significant.

The same can be said of our foreign domestic workers or FDWs. According to a 2019 regional study, FDWs contributed S$11.1 billion to the economy in 2018, or 2.4% of Singapore’s GDP. This contribution is a combination of the FDWs’ direct personal expenditure and indirectly from the real value of "paid" domestic work and value of freed-up time. For example, freeing mothers to participate in the labour force added S$3.5 billion to the Singapore economy. This includes savings of S$675 in monthly childcare costs per Singapore household.

Despite these significant contributions, our migrant workers often go unrecognised when we celebrate key milestones of Singapore’s development, be it SG50 or Bicentennial bonuses that were distributed.

Mr Speaker, our migrant workers need relief from the upcoming GST hike. The financial pressures on them are immense. Let me highlight three main factors.

The first is low, stagnant wages.

The second is debt and remittances. The workers are fettered to extortionate recruitment debt and most of their remaining wages go to supporting their families in their home countries.

And the third is expenses arising from inadequate legal protection. Many workers spend their earnings on food because their employers are not obligated to provide them with food, or fail to meet their obligations.

First, the wage factor. MOM reported that the median monthly salary from 2005 to 2019 of work permit holders, excluding foreign domestic workers, increased by 2.2% per annum, in nominal terms. A 2017 TWC2 survey of 910 work permit holders employed in non-domestic sectors showed that basic salaries for first-time workers from India and Bangladesh have flat-lined since 2006 – averaging under S$600 per month. When adjusted for inflation, average basic salaries for first-time construction workers seem to have declined by about 20% since 2006. The same survey found foreign domestic workers earned an average of $597 a month in 2016.

TWC2 informs me that Bangladeshi workers were typically paid a basic rate of $18 a day in 2004, and that rate remains unchanged to this day. This was largely consistent with HealthServe’s and HOME’s casework observations of Bangladeshi migrant workers, wherein $16 to $18 daily basic remains normal. One worker was paid a daily basic rate of $13. For another, his monthly salary was $158, as declared by the employer.

To understand the extent of the stress such low wages exert on our migrant workers, we must understand where their income goes. This brings me to the second factor which is that a large chunk of their salary goes towards paying their recruitment debt.

A 2014 study reported that Bangladeshi workers earn the lowest salaries – between $350 and $800 – and yet they could pay up to $15,000 in recruitment fees which are 26 to 51 times their monthly wage that leaves them in crippling debt. They take an average of 16.5 months to repay those fees. According to HOME, the entire salary of foreign domestic workers goes towards paying their recruitment fees for the first four to eight months.

Aside from debt-servicing, HealthServe informed me that the non-domestic migrant workers they serve would remit at least half of their income back home, even up to 80%. HOME also shared that the average foreign domestic worker remits about 80 to 90 percent of her salary. When a migrant worker is unpaid, underpaid, or injured, one of their major worries is how to send money back to their families.

Last but not least, after paying off a portion of their recruitment debt and remitting monies home, migrant workers must also pay for their own food, phone and transport bills out of whatever remains of their low wages.

Employers of non-domestic migrant workers are not required to bear the cost of food for their employees. As a result, a significant amount of migrant workers’ earnings go towards a basic necessity: food. I am given to understand that many dormitory dwellers do not have a say in the type of food catered, even though they have to pay for it. Many have experienced food that they feel is of poor quality and inadequate for their nutritional needs, confirmed in a 2015 survey by NUS and HealthServe of 500 Bangladeshi workers – 80.6% indicated "the food I get from the caterer is of poor quality".

Foreign domestic workers spend on food, too. Employers are required by law to ensure they have adequate food. Yet, insufficient or poor quality food remains a top complaint among cases seen at the various migrant support centres. In one case that I know of, the helper was given a pack of rice containing weevils to cook and eat from! If food provided to the workers cannot sustain the physical demands of their labour, we should not be surprised that our migrant workers have to purchase their own food.

Yet, like all lower income groups, migrant workers suffer from rising food prices in Singapore. Overall, price of food has increased approximately 7% faster than inflation over the past 10 years. Certain food essentials have become at least 60% more expensive.

Mr Speaker, as much as I am also deeply concerned about the low-income households in Singapore, the benefit of GST and public transport vouchers along with other social schemes, such as ComCare, are at least in place to hopefully cushion the impact of inflation and GST.

Our migrant workers have no such help. Given their low wages, high debts and rising expenses, coupled with the high-risk nature of their jobs, they worry every day whether they will be able to provide for themselves and their families. Their circumstances leave them vulnerable and deeply stressed on a daily basis – even more so in a crisis like COVID-19. Financial support for migrant workers will go a long way in helping them manage their overwhelming financial and mental health challenges. Will the Minister consider distributing GST Vouchers to migrant workers as well as reviewing social support schemes for them?

Mr Speaker, I do not think any of us can deny that migrant workers are Singapore's great enabler. Without migrant workers, our buildings would not be built, our estates would not be cleaned and our women would not be able to go out and work. Our economy blossomed on the backs of these foreign men and women. We cannot talk about #SGTogether or #SGUnited if we do not include and care for these 1.4 million men and women in the most tangible ways.

This Bill is an opportunity for us to ask ourselves the kind of society we want to be. This COVID-19 crisis is also an opportunity for us to dip into our common humanity and ask what is Singapore in Singapore Together? Surely, before we extend financial assistance to individuals who do not need the relief, we should extend it to those who do in our midst?

Mr Speaker: Mr Lawrence Wong.

Mr Lawrence Wong: Mr Speaker, I thank the Members, Ms Anthea Ong, Ms Joan Pereira and Assoc Prof Walter Theseira for their comments on the Bill. All three Members have spoken on different aspects of the Bill and I will seek to address their comments and feedback.

Let me, first, reiterate our position. First, we have a standing commitment to provide more help to lower income Singaporeans for their GST expenses on a regular basis, that is, through the existing GST Voucher scheme. On top of that, we plan to support all Singaporeans during the transition to a higher GST rate through the Assurance Package for GST. So, there are two different aspects. One is permanent baseline; another is transitionary, in order to cushion the impact of the increase of the GST rate.

Earlier, I had already explained the reasons for the amendment, which is to broaden the purposes of the GST Voucher Fund, in order to enable the Assurance Package to be implemented to cushion the impact of the GST rate increase. I also emphasised that we will continue to provide more support to lower income Singaporeans through the existing permanent GST Voucher scheme. So, the policy intent of ensuring that lower income Singaporeans get more support remains unchanged and Assoc Prof Walter Theseira can be assured that we are not moving away from this.

In his Budget 2020 Statement, Deputy Prime Minister Heng, in fact, reiterated our public commitment for this permanent GST Voucher scheme. He said that it would fully offset the GST for the lower half of retiree households. It would significantly offset the GST for the upper half of retiree households and it would offset about half of the GST for lower income households with no elderly persons. So, that is our commitment. When the GST rate is increased, we will enhance the permanent GST Voucher scheme to continue to meet this commitment. And as part of the review to work out the likely enhancements, we will carefully study the impact of the increased GST and the GST Voucher on Singaporeans, as Assoc Prof Theseira has suggested.

In Budget 2020, we also made clear the Government's commitment to cushion the increase for Singaporeans as we transition to the higher GST rate. As our fiscal resources are limited, we will have to put Singaporeans first when we think about how to allocate these resources. We will have to prioritise support for our citizens. This reflects the responsibilities and privileges of citizenship and also acknowledges our citizens' commitment to Singapore.

Ms Anthea Ong shared her concern for migrant workers who reside in Singapore. I understand her concerns. These are workers here for employment. Like all foreign work pass holders, they will have to pay the increased GST rate from the onset, compared to Singaporeans, who will effectively see a delay in the GST increase for at least five years after offsets.

We do appreciate the contributions of migrant workers to our economy. Many of them seek employment here to give their families back home a better life. While they have to pay GST, they also benefit from job opportunities here. Rather than extend GST Vouchers to this group, we will have to look at other ways where we can address more directly the concerns and needs that migrant workers have, bearing in mind that there are also many organisations out there that play an important role in looking out for the well-being of migrant workers and ensuring that they are treated fairly and have good working conditions. So, these organisations continue to do good work and the Government will see how we can continue to work with these organisations to look out for the well-being of our migrant workers.

Ms Joan Pereira asked whether we could consider exempting GST for a list of vital healthcare items and assistive devices used by the elderly. I will address this briefly as it does not really directly relate to the Bill. We have a broad-based GST system with minimal exemptions and we have chosen this approach so as to keep the GST rate relatively low while we provide targeted assistance to the lower income and the elderly through subsidies and grants. In fact, Assoc Prof Theseira has helped to explain why we think this is a better approach and meets the objective of helping those who need help.

Today, we already absorb GST for all subsidised patients for medical services and medications in polyclinics, public hospitals or intermediate and long-term care and we will continue to do so with the GST increase.Seniors currently receive more benefits under the GST Voucher scheme through annual MediSave top-ups. Seniors also receive significant support for their healthcare costs through other subsidies. Seniors who need assistive devices and home care consumables can tap on the Seniors' Mobility and Enabling Fund and the Home Caregiving Grant which Ms Pereira has also highlighted. Additional help, such as through ComCare and MediFund, would be made available to those who require further financial assistance. Of course, seniors can also approach the agency for integrated care, for advice on the available support.

Mr Speaker, I thank the Members for their comments on the Bill and I believe I have addressed the comments. I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Lawrence Wong].

Bill considered in Committee; reported without amendment; read a Third time and passed.