Lower the Government Service Tax (GST) to 5.5 per cent and increase taxes on the wealthy earning above S$500,000. 

Those are among the National Solidarity Party’s key recommendations in response to the SingaporeBudget 2013 that was debated in parliament last week.

In its own post-Budget discussion held at the NSP headquarters along Jalan Besar on Wednesday evening, NSP asked that more tax restructuring fine-tuning be made.

Presenting the discussion were NSP secretary-general Hazel Poa nad party members Nicole Seah, Samantha De Silva,  Adrianna Tan, Tony Tan and Hazel Poa.

GST, a flat rate of tax across all goods and services, currently stands at 7 per cent but NSP said the GST rate affects more of the low-income earners in the spectrum since lower income earners tend to spend a bigger portion of their income on consumption as compared to high-income earners who have spare income to save. 

“It is a regressive form of taxation,” said the party.

Progressive tax structure

To better target the rich, NSP proposes to instead raise the tax rate for the higher income through personal income and corporate tax. They propose to increase the top marginal personal income tax rate to 22% for those earning above S$500,000. 

Singapore currently has one of the lowest direct tax rates. 

Income and corporate tax rates was cut from 40% before 1986, to the current 17% and 20% respectively, which are amongst the lowest in the world, says NSP.

The party also proposes to bring back a recalibrated version of the Estate Duty, which is a tax on the total market value of a person's assets (cash and non-cash) at the date of his or her death.

It was abolished in 2008 because Finance Minister Tharman Shanmugaratnam said it disproportionately affected the middle and upper-middle-income estates.  

Instead, NSP asked to re-instate Estate Duty at 5 per cent for total assets between S$10m and $15m. Anything beyond should be at 10 per cent.

COE, an inherently “flawed” system

NSP also called for a review of the current COE bidding system, saying that the allocation system is “flawed” because the ownership of a transport vehicle is based on solely the ability to pay and not on needs.

Last week, Transport Minister Lew Tuck Yew shared in Parliament that it would be “difficult to tax people based on needs” such as those with families or disability because of the difficulty in deciding fairly who deserves a car and who does not. 

The current COE system is a “prudent way to go about buying a car,” says the minister.

NSP argues that quelling the demand through high prices in effect reduces the urgency to expand road capacity. 

Increasing price ought to be seen instead as a signal to expand capacity, they say.

Underinvestment in public infrastructure

There also needs to be an increase in the funds used for development of public infrastructure from the current allocation of 23 per cent in 2013 to 33 per cent, argued NSP.

“We need to adjust our development budget to put more into building public infrastructure, especially housing, healthcare and transportation in order to support population and economic growth,” they explained.

“This begs the question, where is the budget for the massive infrastructure development advocated by the White Paper?” it asked.

In spite of an increase in population of more than 1.7 million since 1968, expenditure for development expenditure has steadily fallen from 40 per cent of total expenditure allocated in 1996 to 23 per cent in 2013.

Boosting support for local SMEs  

The opposition party also called for more to be done to help SMEs who will have increasing difficulty coping with the economic restructuring.

Measures proposed by NSP include reducing foreign workers levies by 50% for local SMEs for a year. 

NSP also asked for an increase in SME Cash Grant to $10,000 instead of the current $5,000 over the next 3 years and increasing the supply of public office and public shop space to support local SMEs and start-ups.

“The government needs to provide a steady hand to ensure that the SMEs also continue to grow”, said NSP member Tony Tan.

“Dependency ratios were cut, criteria for passes tightened, and foreign workers’ levies raised significantly,” says NSP of the Budget. 

“The policies targeted at supporting local SMEs will reduce business cost and enhance competitiveness of our companies.”

The funds needed for the SME boost would be channeled from the Corporate Income Tax (CIT) rebate and Wage Credit Scheme (WCS) worth $1.2 billion and $3.6 billion respectively.

“This will directly benefit local SMEs most reliant on foreign workers and thus most hit by foreign worker curbs, giving them additional cash flow to restructure.”

These suggestions were carefully crafted and calculated by after rigorous consultation with fellow members and people from various industries, said the NSP.

“We don’t want to oppose for the sake of opposing,’ says Nicole Seah. “Now that PAP is moving in this direction, what else can we add on to the discussion to nudge them further in the direction that we wish to see Singapore go towards.“

Source: Yahoo! Singapore Newsroom