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Budget 2007 – Reviewing the GST & the WIS scheme

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by Dark Matter

What is the GST Offset Package going to do for Singaporeans? To answer this question, the Ministry of Finance prepared a table to illustrate the benefits the package provides.

The table is reproduced here for public reference:


Table 1: Impact of GST Offset Package on Households

 

The following table is some calculations derived from Table 1:


Table 2: Derived Information of Impact of GST Offset Package on Households

If we divide the Total Benefits from GST Offset Package by Additional GST Payable Annually, we get values of 16.17 and 1.46 for HDB 1 RM and Private House and Flats households respectively. How these figures are related to the values 19 and 2 for respective households in Number of Years of Additional GST Payable that is offset by the GST Offset Package is a puzzle.

 

Lower income groups are not earning enough to cover expenditure

The next point worth noticing is that the low income groups have their annual household expenditure exceed their annual household income (with GST offset benefits included).

In fact, the report Trends in Household Income and Expenditure, 1993-2003 had shown that lower income groups are not earning enough to cover expenditure as early as 2003.


They will have to spend every cent they receive from the GST Offset Package and get some additional financial assistances elsewhere to make ends meet. How is it possible for them to set aside the GST Offset Package to pay for the additional GST payable in the next 10 to 15 years is another puzzle.

Given that low income families need to depend on various government assistance programs to make ends meet, including the GST hike, it may not be meaningful to say if the GST hike is a regressive tax or not. It is more like a way to fund another set of “Progress Package” for the next four years.

 

The Workfare Income Supplement (WIS) Scheme

The Straits Times articles “Workfare: Not an ideological shift, just economics” and “Rewarding work” (Feb 17, 2007) provide some interesting insights into the Workfare Income Supplement Scheme.

“The significance of Workfare lies in this statement made by Second Finance Minister Tharman Shanmugaratnam: ‘For the first time, the state will be supplementing the market wages that low-income workers receive.’

 

The statement recognises there is a gulf between the income needed to live decently in Singapore and the income a ruthless market dictates. The state has decided it needs to bridge the gulf.”

 

There is a need to make sure workers earn enough to live a decent life. This is the principle behind the idea of Minimum Wage (or Living Wage as some call it).The Singapore People’s Party and the Singapore Democratic Party are two proponents of the Minimum Wage idea.

 

While the government rejects Minimum Wage law as the way to go, it acknowledges the need to help with market oriented schemes like training fund and programs that help workers to acquire skills to earn higher wages and Job Redesign schemes to raise their productivity and pay.

 

The move to have a permanent wage supplement scheme is a more direct way to address the need. But, why is the government doing it now? Is it a sign that existing schemes have their limitations, like they do not work as well as expected or they do not work for some low income workers?

 

The Income Supplement Scheme is seen as a better approach than Minimum Wage law:

 

“SMU economist Pang Eng Fong added that supplementing incomes makes more economic sense than having a minimum wage which distorts the labour market.

 

‘Workfare does not change employers’ costs, and is simply a system to transfer resources to the most vulnerable members of society, and is therefore much more targeted than a minimum wage scheme.”

 

With Minimum Wage law, individual businesses will have to absorb the cost burden first and then pass on the cost to businesses and customers they serve. Some will bear a heavier share while others bear little. On the other hand, funding wage supplement via consumption tax like the GST will spread the cost across society. Individual businesses are not heavily impacted and those who are able to consume more bear a bigger share of the cost.

As such, the Workfare Income Supplement (WIS) Scheme has a better funding mechanism. However, the scheme that “benefit 438,000 Singaporeansand cost about $400 million a year over time” is a disappointment. The scheme is only offering low income workers $913.24 a year (or $76.10 a month) on average, with a larger share going to the CPF. It falls far short from doing enough to help low income workers “live decently”.

 

No “ideological shift”

The fact that the main share of the state’s ‘supplementing the market wages that low-income workers receive’ goes to CPF shows how cautious the government is. It can be seen as a step in turning ad hoc CPF top-up exercises we see over the years into a regular top-up scheme. The cash portion of the WIS scheme hardly produce any impact. The difficulty of making ends meet will continue to push workers to find ways to move up the wage ladder.

So, it is fair to say that there is no “ideological shift” in government policy. What we have is a more formal and structured mechanism of funding and distributing financial assistance to low income workers. It may also mean that the government acknowledges that the low income groups need long term attention, and hence a formal and structured funding mechanism.

——————–

Here is how the rest of the figures in Table 2 are calculated:

Annual Household Expenditure:

Dividing Additional GST Payable Annually by the 2% GST hike.

Annual GST offset benefits:

Dividing Total Benefits from GST Offset Package (over 5 years) by 5.

Net saving / debt:

Adding Annual Household Income from work and Annual GST offset benefits and minus Annual Household Expenditure.

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Ng Eng Hen: Dust clouds likely caused armoured vehicle collision during Exercise Wallaby

Dust clouds limiting visibility likely contributed to the collision between two Hunter vehicles during Exercise Wallaby, Defence Minister Ng Eng Hen explained in his parliamentary reply. 12 servicemen sustained mild injuries, but safety measures prevented more serious outcomes. A formal investigation is ongoing to ensure further safety improvements.

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SINGAPORE: Low visibility caused by dust clouds was identified as the likely cause of the collision between two Hunter armoured fighting vehicles (AFVs) during Exercise Wallaby last month, Defence Minister Ng Eng Hen said in a written parliamentary response on Tuesday (15 October).

The incident, which occurred in Queensland, Australia, on 24 September 2024, resulted in mild injuries to 12 servicemen.

Dr Ng’s statement was in response to a parliamentary question from Mr Dennis Tan, Workers’ Party Member of Parliament for Hougang SMC.

Mr Tan asked for details on the accident, specifically its cause and whether any lessons could be applied to enhance training and operational safety within the Singapore Armed Forces (SAF).

The collision took place during a night-time movement of Hunter AFVs at the Shoalwater Bay Training Area.

The vehicles were returning to base when one rear-ended another. Dr Ng explained that the dust clouds generated by the AFVs’ movement significantly impaired visibility, might likely contributing to the accident.

The 12 affected servicemen sustained mild injuries and were promptly taken to the nearest medical facility.

None of the injuries required hospitalisation, and all 12 servicemen were able to rejoin their units for training the next day.

According to the minister, adherence to safety protocols—such as wearing seat belts and protective gear—played a crucial role in limiting the injuries to mild ones.

Following the incident, a safety pause was immediately implemented, with all drivers being reminded to maintain proper safety distances, especially when visibility was compromised.

Troops were also reminded to adhere strictly to safety protocols, including the proper use of safety equipment, Dr Ng added.

The safety lessons from the incident were shared not only with the affected units but also with other participating groups in the exercise, as well as units back in Singapore, through dedicated safety briefings.

Mr Tan also asked about the broader implications of the incident. In his response, Dr Ng said that a formal investigation had been launched in accordance with SAF’s safety incident protocol.

The investigation aims to assess the circumstances more thoroughly and identify any further measures that could be taken to enhance safety.

Dr Ng shared that recommendations arising from the investigation will be implemented where necessary.

Exercise Wallaby is SAF’s largest unilateral overseas exercise, and the 2024 edition began on 8 September, running until 3 November.

The exercise involves approximately 6,200 personnel, including 500 operationally ready national servicemen.

The exercise has been conducted at Shoalwater Bay Training Area in Queensland since 1990, and it is a key part of SAF’s overseas training program.

The Hunter AFV, one of the vehicles involved in the collision, is a state-of-the-art platform jointly developed by the Defence Science and Technology Agency, the Singapore Army, and ST Engineering.

It replaced the SAF’s aging fleet of Ultra M113 AFVs in 2019, which had been in service since the 1970s. The Hunter is equipped with advanced features, including a 30mm cannon, a 76mm smoke grenade launcher, and an automatic target detection and

tracking system designed to enhance operational effectiveness. It is also capable of traveling at increased speeds and covering longer distances, making it a versatile asset for the SAF.

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Government to “carefully consider” Lee Hsien Yang’s demolition application for 38 Oxley Road

The Singapore Government will “carefully consider” Mr Lee Hsien Yang (LHY)’s application to demolish the house at 38 Oxley Road. LHY announced his intent on Tuesday morning following the recent death of his sister, Dr Lee Wei Ling, reaffirming his commitment to honour his parents’ wish for the house’s demolition.

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The Singapore Government has indicated that it will “carefully consider” Mr Lee Hsien Yang’s (LHY) application to demolish the family home at 38 Oxley Road.

LHY, the youngest son of Singapore’s founding Prime Minister, the late Lee Kuan Yew (LKY), announced his intention to apply for the demolition in a Facebook post on 15 October 2024, following the death of his sister, Dr Lee Wei Ling, on 9 October.

The announcement marks a significant development in the ongoing saga over the fate of the historically significant property, which has been at the heart of a family dispute since LKY’s passing in 2015.

In his will, executed in December 2013, LKY expressed his desire for the house to be demolished “immediately after” Dr Lee moved out of the property. Dr Lee, a prominent neurologist, had been the last remaining resident of the house.

LHY reaffirmed his commitment to carrying out his father’s wishes, stating, “After my sister’s passing, I am the only living executor of my father’s estate. It is my duty to carry out his wishes to the fullest extent of the law.”

He added that he would seek to build a small private dwelling on the site, which would be “held within the family in perpetuity”.

LHY also referenced his brother, Senior Minister Lee Hsien Loong’s (LHL) remarks in Parliament in 2015, when he was Prime Minister, stating that upon Dr Lee’s passing, the decision to demolish the house would rest with the “Government of the day.”

In response to media queries regarding LHY’s announcement, a spokesperson for the Ministry of National Development (MND) acknowledged the intended application and emphasised that the Government would “carefully consider issues related to the property in due course”.

The spokesperson also highlighted that any decision would need to balance LKY’s wishes, public interest, and the historical value of the house.

The house at 38 Oxley Road, where key decisions about Singapore’s path to independence were made, has been a focal point of public and political discussion.

The future of the house became contentious in 2017 when LHY and Dr Lee publicly accused their elder brother, LHL, of trying to preserve the house against their father’s wishes for political reasons.

LHL denied the accusations, issuing a Ministerial Statement in Parliament, where he also raised concerns over the preparation of their father’s final will. He clarified that he had recused himself from all decisions regarding the property and affirmed that any government action would be impartial.

In 2018, a “secret” ministerial committee, which was formed in 2016 to study the future of 38 Oxley Road, proposed three options: preserving the property and designating it as a national monument, partially demolishing the house while retaining the historically significant basement dining room, or allowing complete demolition for redevelopment. LHL accepted the committee’s conclusions but stated that no immediate decision was necessary, as Dr Lee was still living in the house.

In a statement conveyed by LHY on behalf of Dr Lee after her passing, she reiterated her strong support for her father’s wish to demolish the house. “My father, Lee Kuan Yew, and my mother, Kwa Geok Choo, had an unwavering and deeply felt wish for their house at 38 Oxley Road to be demolished upon the last parent’s death,” the statement read.

She added, “He had also appealed directly to the people of Singapore. Please honour my father by honouring his wish for his home to be demolished.”

Despite selling the house to LHY at market value in 2015, LHL’s stance regarding the house’s preservation became a public issue, especially after the family disclosed that the Government had raised concerns about reinstating the demolition clause in the 2013 will. The ministerial committee had reviewed the matter, but a final decision was deferred until now.

The fate of 38 Oxley Road remains to be seen, but the Government’s decision will likely have lasting implications for the legacy of the Lee family and the conservation of Singapore’s historical landmarks.

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