Goods and Services Tax (Amendment) Bill

Madam, this Bill will update our GST regime. Significantly, this Bill will extend GST to imported low-value goods. This ensures a level playing field for local suppliers and overseas suppliers. Additionally, the Bill will also update the GST treatment for media sales to more closely reflect the reality of how services are advertised and consumed.

I thank MOF for consistently consulting the public on its Bills, including this Bill. I also commend the Ministry’s diligence in always providing summaries and its responses to key feedback received in its consultations.

I have two points of clarification to make on this Bill.

My first point is on the GST treatment for the supply of media sales. The amendments to section 21 mean that the GST treatment for supplies of media sales depends on where the customer and the direct beneficiary of the service belongs, rather than where the advertisement is circulated.

IRAS’ e-Tax Guide has provided some guidance on how to identify the “direct beneficiary” of media sales. In particular, the e-Tax Guide provides that the contractual client will, generally, be regarded as the sole direct beneficiary where two conditions are satisfied.

First, the service agreement does not require the services to be provided to another person. Second, the supplier liaises only with the contractual client and is accountable only to the contractual client.

Can the Minister clarify if both conditions must be satisfied in order for the contractual client to be deemed the sole direct beneficiary? Or is it sufficient that either one of the conditions is satisfied?

The e-Tax Guide also provides that when the two conditions are satisfied, the supplier does not need to look beyond the contractual client in determining the correct GST treatment. In the event that the two conditions are not satisfied, can the Minister share what other factors a supplier should take into account to determine who the “direct beneficiary” of the service is?

In particular, where multiple layers of contracts exist between a service provider and the beneficiary of a service, where should a supplier draw the line in determining its “direct beneficiary”?

My second point is on the use of best available information to determine whether goods are distantly taxable. The new section 14(1B) provides that a recipient may rely on the best available information to determine whether goods are distantly taxable if the recipient is unable to verify the location of the goods at the point of sale of the goods or how the goods will be transported to a place in the customs territory.

In the public consultation conducted on the Bill, MOF had declined to accept a suggestion that the Bill prescribe information that businesses should rely on to determine if a supply of goods are distantly taxable goods that fall within the scope of GST. MOF declined to prescribe the information to reduce compliance burden and has stated that IRAS will provide examples in its e-Tax Guide.

While the examples will be useful, what will also be important in the event of a dispute is which party bears the burden of proof. Can the Minister elaborate where the burden of proof lies and how the burden shifts in determining whether there was compliance with the tax treatment of distantly taxable goods? For instance, does the burden of proof shift to the Comptroller of Income Tax once the recipient is able to show a preliminary case that they relied on the best available information? Is the burden of proof then on the Comptroller to show that the recipient, in fact, had access to and should have relied on other information?

This clarification is important because the term “best available information” is so general that it might pose enforcement issues. Madam, notwithstanding these clarifications, I stand in support of the Bill.

Mdm Deputy Speaker, cross-border spending constitutes a key component of our e-commerce market. This is projected to reach $8 billion in 2025. As such, it is important to ensure that our tax policies are reviewed and revised accordingly. The decision to impose taxes on all imports by air or post will help to level the playing field for our local retailers. It will also help to supplement the increased Government spending in the upcoming years. I would like to share my thoughts on four issues.

First, Mdm Deputy Speaker, we need to provide more support for lower-income households. I am concerned that imposing GST on all incoming overseas goods will lead to an increased burden on these residents. Has the Government done research or sought feedback on how foreign online retailers intend to handle this tax increase? Will it be absorbed? If not, how much of it will be passed on to the consumers? As this new Bill mainly impacts individual buyers, the additional tax will be a heavier burden for our lower- to middle-income families. This will be compounded by the impact of the GST hike that is likely to be implemented in the next few years.

Are there further measures on top of the existing Assurance Package and GST vouchers to mitigate the impact on them? Or can the quantum of these initiatives be increased to help families, given this new change? Will it be possible to utilise the Assurance Package or GST vouchers to cover online purchases, too?

Second, Mdm Deputy Speaker, we need to continue to encourage our local retailers to compete globally. Compared to many of their overseas competitors, which have large economies of scale, SMEs are disadvantaged, as they often have to pay high rental and labour costs. If the savings on purchasing foreign imports are reduced, this could diminish the attraction of overseas purchases, thereby encouraging more Singaporeans to support local businesses.

Nevertheless, why do Singaporeans shop from overseas sites? According to a survey, eight in 10 local respondents shared that the main reason was the overall lower cost of procuring goods and services from foreign sites. The second reason was the wider variety of international brands’ products and the lack of availability from local retailers. If Singaporeans cannot find their preferred brand, services or shopping experience locally, the imposition of the GST will do little to shift their buying behaviour towards local businesses.

As such, local businesses must not be lulled into a false sense of security, thinking that they can rest on their laurels and become complacent with the perceived decreased competition from foreign markets. They must continue to innovate, use business analytics to understand their customers’ needs, establish global partnerships and bring in products that are in high demand. The Government must continue to encourage and support our local businesses to compete globally by embarking on digitalisation and by getting onto these online retail platforms. In this connection, perhaps the additional tax revenue from the imposition of GST can be funnelled to support the globalisation efforts of local businesses.

Mdm Deputy Speaker, my third point is on the need to tackle implementation challenges that come with the new taxation policies. With more companies and individuals obliged to comply with the new GST regime, compliance costs will, therefore, increase. What is the estimated number of low-value transactions in a year?

There may be a disproportionately large number of low- versus high-value transactions. As such, the Government may require disproportionately more resources to ensure that individuals comply with the new GST regulations. How will the Government ensure that there are adequate resources to enforce the new policies in an efficient manner? Will more personnel be hired to handle the additional workload at IRAS? In light of the additional cost to ensure compliance, has any study been done to weigh up the cost of compliance, including prosecution of GST evasion, and the potential tax revenue that may be generated?

With the new law, individuals are subjected to taxation or reverse charge. Is IRAS ready for the potential increase in enforcement action when this comes into play? As for businesses, local GST is imposed on all GST-registered companies in Singapore. They collect GST from the customers or absorb it. And the collective amount is paid to the Government. Will foreign retailers who wish to sell to the Singapore market be GST-registered? How will the Government engage these foreign businesses and provide them with the relevant legislative and administrative material, so that they have sufficient time to understand and apply the new practices?

Perhaps this ties in with my above point on compliance. There are foreign companies with a large online shopping presence in Singapore, such as Amazon, Taobao and Lazada. These companies allow smaller third-party companies to sell on their platform. Have the relevant stakeholders engaged these companies to collaboratively resolve the issue of compliance?

What if the foreign retailer withholds GST payment? How will the Government deal with overseas companies who fail to comply with our GST regulations? In the case of New Zealand, their Inland Revenue would monitor for non-complying retailers. Under international agreements, it can request counterparts in some countries to collect tax on its behalf or assess and pursue unpaid tax through a retailer’s national courts. Is this an option that we would pursue? Or will the burden then irrevocably fall on the customer as a reverse charge?

In addition, similar to Member Saktiandi Supaat's earlier point, how will consumers be made aware about whether their payment at the point of purchase already includes GST? And will they be told that they have to pay additional GST to collect their parcel in Singapore? SingPost has recently switched to an online cashless system for collecting GST on packages valued above $400. The new policy would see a significant rise in the number of packages due for GST payment. This could also provide opportunities for scams. Unscrupulous merchants may leverage on this to cheat consumers into paying them a sum to retrieve their purchase. Parcel clearance scams, where callers masquerade as customs officers asking for payment to retrieve a parcel, have not been uncommon even before this. It is thus imperative to educate consumers on when and where GST is to be paid and the official payment platforms to do so. I would expect that SingPost or other online delivery platforms would be well-equipped by then to address more queries concerning GST payments on their parcels.

How will the Government keep track of all parcels coming into Singapore and their GST payment status? Some packages may contain purchases from small businesses, or gifts from family and friends. Some may not come with invoices.

Second-hand items like those from eBay, may have had their GST paid when the items were first bought. Are these second-hand items still subjected to GST taxation a second time? It is also not unheard of that some foreign retailers would allow customers to under-declare the value of their purchases to evade taxes, or to reduce the amount of tax payment due. How will the Government police these?

Mdm Deputy Speaker, my last point is on the implementation for media sales. Many firms now employ gig workers from overseas or outsource to provide remote services like designing programmes or media pieces.

Such services are difficult to apply a quantum to and are easy to evade. As such, many of these services could be under-declared or not declared at all, to avoid GST. In addition, many of these small firms may neither have a turnover of $1 million nor are GST-registered. Will these firms – which may be acting as an underlying supplier or re-deliverer – be liable for reverse charge, if the services provided are below $400? If reverse charge still applies to these firms, can they still pass these additional costs to the consumers?

In conclusion, Mdm Deputy Speaker, taxing all imports is necessary as e-commerce grows globally. Nevertheless, the Government should provide some support to lower-income groups who are impacted by such taxes.

In Yio Chu Kang, I recall meeting Mdm K during a house visit, who was a homemaker looking after three kids. Her husband, who is the sole breadwinner, is a delivery driver and does not earn a lot. Mdm K supplements her family income by importing children’s story books, toiletries and cosmetics from China and Korea, which are either cheaper or not available in Singapore. These items do not cost a lot. And Mdm K brings in items in small amounts. I, therefore, urge the Government to provide some support to the lower-income groups, micro businesses and entrepreneurs like Mdm K and her family who may be significantly affected by the changes, if the tax is passed to them.

This policy is also an opportunity for our local businesses to innovate, in the face of a globalised world. If local businesses are unable to improve their offerings and customer experience, they can expect our residents to continue shopping overseas. Our competition is the world. If we do not innovate, we will stagnate.

Finally, implementation is policy. We must ensure that the relevant agencies are well-equipped to handle the additional workload and customer enquiries. The policies must be well-enforced, with adequate information made accessible to the public, lest they become loopholes to be exploited for dishonesty and fraud. I support the Bill.

Mdm Deputy Speaker, I declare that I am a Council Member of the Institute of Singapore Chartered Accountants but I do not advise clients on tax matters.

The Inland Revenue Authority of Singapore (IRAS) has to factor in many considerations and strike a delicate balance as it seeks to fulfil its mission. For example, there is the trade-off between protecting revenue and minimising the distortions of taxes on market competition. In addition, it has to find ways to optimise the efficiency of tax administration and avoid unnecessary enforcement burden.

One of the concerns of levying GST on lower-value items is whether the resources required to enforce the collection are worth the effort. But I can see why the Ministry is implementing GST on this category of goods. There is no better time to start than this current moment and e-commerce has become the hottest vertical in Singapore's tech sector during this pandemic.

To facilitate tax compliance for foreign online suppliers, IRAS should implement a simplified registration and compliance regime. In other countries, e-commerce platforms collect and remit the tax on the Government’s behalf, as they take on the role of a "store" with an offering of different supplies. In many cases, it acts as the sole point of contact with the end consumers.

Under our current Overseas Vendor Registration regime, I understand that foreign suppliers and e-marketplace operators which make significant sales of digital services to Singapore’s consumers are required to register with IRAS for GST. With this new legislation, the Overseas Vendor Registration regime will be expanded.

I would like to ask what if the foreign suppliers are non-compliant for the import of their goods into Singapore? Will the Singapore-based purchasers, like the consumers, be asked to pay for the GST? Can IRAS work with Electronic Distribution Platforms (EDPs), like Aliexpress and eBay, via a joint and several liability (JSL) notice mechanism to notify the foreign suppliers, as we are unable to regulate these suppliers effectively, to help us with the tax collection?

IRAS should concentrate its efforts in the fight against GST fraud and ensuring the effective taxation of cross-border online sales to raise additional revenue and strengthen the functioning of our tax systems. I understand the need to grow our tax base in order to fund other expenditures. For example, Australia recorded total revenues of over AUD 1 billion of GST collected in the first two years of operating its GST regime for online sales of services and digital products and in the first year of its implementation for online sales of goods. Mdm Deputy Speaker, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.]  One of the justifications for levying of GST on low-value imported goods sold online is to ensure fair competition for our domestic retailers against online retail platforms. Singaporean retailers are required to charge GST on their sales, but online retailers are not. While this measure may help some of our local stores narrow the price gap between them and online retailers, our consumers will have to pay higher prices.

Due to the pandemic and the Government's persuasion, many Singaporeans have changed their shopping habits. Cautious consumers should not be punished for remaining wary of crowded shopping centres and stores, especially as COVID-19 cases and hospitalisations are on the rise again. On the other hand, local retailers who have supplemented their business with online sales may face the double whammy of low footfall plus a new tax on their online sales of imported items.

(In English): Mdm Deputy Speaker, I have some questions for the Minister. Is this new approach meant to minimise the entry of high numbers of new gig economy operators, like the SMEs, into the GST system, perhaps with limited compliance capacity and knowledge of their tax obligations? I am concerned that the new economy operators, especially the micro-businesses and SMEs, may often have limited GST knowledge and capacity to comply while their activities may involve considerable GST revenues and create risks of competitive distortion that may be significant at an aggregated level.

Does IRAS expect the revenue impact of this approach to be significant when activity shifts from a limited number of established and largely GST-compliant conventional operators to a large number of gig economy operators that may remain outside the scope of GST?

Will bringing in these new gig economy operators into the GST net create undue pressure on tax administration and compliance challenges for the operators? How will IRAS use technology to facilitate GST administration and compliance? Are there third-party reporting obligations, taxpayer education and other activities to raise awareness?

How does IRAS enforce and collect the right amount of tax? The purchases that many Singaporeans purchase online are less than $400. So, many Singaporeans will be affected and feel that they are forced to pay the cost of COVID-19 even though the change will only happen in 2023.

Online sellers have found ways to evade paying taxes: posting goods without declaring, offering services on online social media, boosting cash transactions and running multiple sales websites. How will IRAS minimise such non-compliance?

Can a portion of tax revenue collected from these imported purchases be earmarked to strengthen the resilience of our retail sector in the event it encounters another major economic downturn like now?

I look forward to the Minister's response and would like to conclude with my support for the Bill.

Mdm Deputy Speaker, I thank all the Members of Parliament who have spoken for their support of the Bill. The questions raised by the Members fall broadly into four categories.

First, how IRAS will implement GST on low-value goods imported via air or post and business-to-consumer, or B2C, imported non-digital services. Second, how IRAS will enforce collection and ensure compliance. Third, specific queries on the updated GST treatment for a supply of media sales. Fourth, feedback concerning cost of living and the GST Voucher Scheme.

Mr Yip Hon Weng, Mr Don Wee and Mr Louis Ng asked how GST on low-value goods imported via air or post and B2C imported non-digital services will be implemented. GST on low-value goods imported via air or post and B2C imported non-digital services will be implemented by widening the scope of our existing Overseas Vendor Registration, or OVR, and Reverse Charge, or RC regimes.

These regimes are not new and have been successfully implemented from 1 January 2020 to tax business-to-business, or B2B, imported services and B2C imported digital services.

Under the OVR regime, overseas vendors, such as overseas suppliers, electronic marketplace operators and re-deliverers that make significant B2C supplies of imported services and/or low-value goods imported by air or post to non-GST registered customers in Singapore will register with IRAS if they are not already registered. They will collect GST from their customers on such supplies and then hand the collected GST over to IRAS. Non-GST registered customers in Singapore include individuals like many of us here. This approach ensures a level playing field in terms of GST treatment, whether we buy such services or goods from local suppliers or overseas vendors

Mr Don Wee asked whether a simplified registration and compliance regime will be available for overseas vendors. Our current regime is not onerous. Overseas vendors can already choose to register under a simplified pay-only mechanism. The simplified pay-only mechanism allows overseas vendors to enjoy simplified GST reporting and documentation requirements.

Under the RC regime, which is only applicable to B2B transactions, local GST-registered entities will account for GST to IRAS when they import low-value goods via air or post or buy B2B services from overseas suppliers. Our RC regime does not affect most GST-registered entities in Singapore. This is how we keep the tax compliance burden low. This is because they are fully taxable persons entitled to a full refund on the GST incurred on their purchases and even their account for GST on the low-value goods imported by air or post or on imported services, they will still get a refund of this same amount.

Only a small minority of GST-registered entities here are subject to RC – these make non-taxable supplies, such as exempt supplies or non-business supplies, and cannot get a full refund of GST incurred on their purchases. This minority of GST-registered entities that are subject to RC include financial institutions and residential property developers.

For this minority of GST-registered entities that are subject to RC, they are required to account for GST on the imported services, including services procured from overseas gig workers, regardless of the value of the services.

Businesses with annual turnover of less than $1 million and not importing services exceeding $1 million are not required to register for GST and are not required to apply RC on their imported services. This is similar to how we do not require local businesses with less than $1 million annual turnover to register for GST.

Mr Yip Hon Weng asked how, under OVR, consumers will know if their payment at the point of purchase already includes GST and how Singapore Customs will know if GST has already been paid on a package. When consumers check out their purchases, GST-registered overseas vendors will charge and collect GST on the low-value goods at the point of purchase when the order is confirmed. This is similar to how, since 1 January 2020, GST is collected on imported B2C digital services.

Where GST has been charged and collected by the overseas vendor on the low-value goods, the overseas vendor will include the relevant information on the GST collected in the commercial document which is passed through the logistics chain. Import GST will not be payable at the border when this information is furnished to Singapore Customs. For example, for goods delivered via air couriers, the GST registration number of the overseas vendor is included in the summary list of parcels to be imported or in the permit declared to Singapore Customs.

Mr Louis Ng asked how GST-registered entities that are subject to RC can use best available information to determine if a purchase is subject to RC. As I have explained earlier, only a small minority of GST-registered entities here are subject to RC. When these entities buy low-value goods, RC will apply only if the goods are imported by air or post into Singapore. Singapore Customs already collects GST for all goods imported via land and sea into Singapore.

GST-registered entities that are subject to RC will usually know from its contract with a supplier whether the low-value goods it buys is located outside Singapore at the point of sale and whether the goods will be imported via air or post. However, there may be occasions in which the GST-registered entity only knows this information upon receipt of the goods.

Allowing GST-registered entities that are subject to RC to use the best available information to determine whether the RC applies is, therefore, meant to ease compliance by such entities.

Apart from information available at the time of purchase of the goods, the entities can use information at the point of goods receipt or other information collected by their business systems and processes to determine the location of goods and mode of shipment into Singapore. One example of such available information is the import and shipping documents that accompany the goods.

As it would be difficult to envisage all the types of available information that may be used, we will not provide a prescriptive list of information that GST-registered entities subject to RC can rely on. Instead, IRAS will provide examples on the type of documents or information in its e-Tax Guide. Entities subject to RC can approach IRAS for clarification if they wish to use other available information.

Mr Yip Hon Weng, Mr Saktiandi Supaat and Mr Don Wee, asked how we will engage overseas vendors and ensure that they comply with the new GST regime. First, since 1 January 2020, the regime is already in place for overseas vendors that sell B2C digital services to local consumers. This has helped IRAS gain experience in administering and enforcing the regime. The rules of our OVR regime are consistent with those of other jurisdictions. This makes it easy for overseas vendors to comply and also provides certainty for the industry.

Many of these overseas vendors are familiar with similar GST or VAT obligations in other jurisdictions. We are not the first jurisdiction to implement GST on low-value goods imported via air or post, or on imported services. For instance, Australia, the European Union, New Zealand, Norway, Switzerland and the United Kingdom have extended their GST or VAT regimes to cover low-value goods.

Our experience with OVR thus far since 1 January 2020 and the experience of other jurisdictions with OVR show that these multinational businesses do comply with GST or VAT obligations of the jurisdictions they make supplies to.

IRAS will make use of various information sources to identify and engage overseas vendors that should be GST-registered and verify their GST reporting after GST-registration. In the event of non-compliance, the existing penalty and enforcement regime under the GST Act will apply. IRAS is empowered to raise additional tax assessments, apply penalties and recover the outstanding tax payable directly or through the appointment of agents. Provisions in bilateral tax agreements will also allow IRAS to obtain information on overseas vendors from other tax jurisdictions.

IRAS has been actively engaging the industry, including overseas vendors, on the implementation details for the OVR and RC regimes. These include consultation on IRAS' draft e-Tax Guides and the proposed legislation. IRAS is also conducting outreach activities for potential GST registrants, including participating in workshops in various international fora and holding webinars, to educate overseas vendors on the new GST rules.

I will now proceed to address questions regarding the updated GST treatment for suppliers of media sales.

To recap, the GST treatment for a supplier of media sales will be revised from 1 January 2022, to be based on where the person who contracts for the service, for example, a local or overseas headquarters, and the person who directly benefits from the service, for example, a subsidiary in Singapore, belong. Currently, the GST treatment depends on where the advertisement was circulated. With the advent of the digital economy, including online advertisements, our GST treatment needs to be updated.

IRAS has provided guidance in its e-Tax guide to state that the person who contracts for the service, or the contractual client, will, generally, be regarded as the only person who directly benefits from the service, where two conditions are satisfied. The first condition is that the service agreement does not require the services to be provided to another person. The second condition is that the supplier of the service liaises only with the contractual client and is accountable only to the contractual client.

Mr Louis Ng asked whether both of these conditions must be satisfied, in order for the contractual client to be deemed the sole direct beneficiary and how to determine the GST treatment of the supply of media sales in the event that both conditions are not satisfied. To clarify, both conditions must be satisfied for the contractual client to be regarded as the sole direct beneficiary. IRAS has provided examples in its e-Tax guide to illustrate this.

Where the two conditions are not satisfied, the determination of the direct beneficiary would be dependent on the facts of the case. As a general rule, the supplier should consider the party other than the contractual client stated in the contract that he is required to provide a service to and to whom he is accountable for his service deliverables. For example, if the media sales supplier's contract is with an overseas headquarters, but the contract requires the media sales to be, first, provided to a subsidiary in Singapore, or second, the media sales supplier is accountable to the subsidiary in Singapore for his service deliverables, then the subsidiary in Singapore is the direct beneficiary of the service.

In both instances, the supplier will have contact with the subsidiary in Singapore, the actual recipient of his service. Therefore, regardless of the presence of multiple layers of contracts, the supplier will know the direct beneficiary of his supply of service. IRAS will include more examples in its e-Tax guide to illustrate the situation where both of these conditions are not satisfied.

With the extension of GST to low-value goods imported via air or post and to imported B2C non-digital services from 1 January 2023 as announced in Budget 2021, this means that GST will apply to goods and services imported into Singapore. This, in turn, levels the playing field for our local businesses, as overseas suppliers of goods and services will be subject to the same GST treatment as local suppliers. This change also helps to defend our GST revenue base from being eroded as the digital economy grows and more people shop online.

Mr Sharael Taha asked whether the tax revenue from this measure could be used to provide more support to small retailers and help with their digital transformation. The revenue collected will form part of our total fiscal resources. We have set aside $24 billion over the next three years, as announced in Budget 2021, to enable firms and workers to transform and emerge stronger from the pandemic, of which a key focus is to support SMEs in their digitial adoption. There are schemes already in place, such as SMEs Go Digital, Heartlands Go Digital and SME centres, to help small retailers through ground support and consultancy services with their digital transformation.

Ms Yeo Wan Ling called for more support for microbusinesses and wider changes to support our retail ecosystem. We have implemented several schemes throughout 2020 and 2021 to help SMEs in the retail sector. We are also refreshing the Retail Industry Transformation map, or ITM, which lays out a longer-term vision for the industry as part of a broader refresh of the 23 ITMs, given disruptions brought about by the COVID-19 pandemic.

Mr Yip Hon Weng and Mr Saktiandi Supaat asked how this measure would impact overall inflation and living costs in Singapore, particularly for the lower- and middle-income.

The bulk of individual consumption, such as food, utilities, transport, education and health care, will not be affected by the change. These goods and services are, typically, bought from local suppliers rather than from overseas suppliers and thus are not affected by the extension of GST to low-value goods imported via air or post and B2C imported non-digital services.

Mr Yip Hon Weng also asked whether additional assistance will be provided on top of the Assurance Package and GST Voucher scheme. We have said that the Government will continue to absorb GST on publicly subsidised healthcare and education. To support lower-income Singaporeans, we already have other permanent schemes, such as Workfare Income Supplement (WIS), Silver Support and ComCare.

As part of our annual Budget, we have also provided additional support, such as Service and Conservancy Charge (S&CC) rebates and top-ups to Child Development and Edusave accounts. The Government remains committed to supporting Singaporeans, with more help given to the lower-income.

Let me now address the queries raised by Mr Louis Chua. He had asked for the GST collection from our existing OVR and RC regimes. And the answer to that is that it is about $250 million a year.

He had also asked about the number of cases of non-compliant overseas vendors under the existing OVR regime detected by IRAS so far. IRAS has not detected any cases so far and the overseas vendors are generally compliant.

He had asked how much does the Government expect to collect from each of the new measures. The measures would yield about $130 million a year.

And his final question was whether there will be any changes to GST import relief for those coming back from overseas. That will not change.

I think Mr Louis Chua then concluded by a call to review whether or not it is necessary to raise the GST rate. Let me say this.

First of all, today is not really the time to have a debate on whether or not we should raise GST as a whole, because today's Bill is focused on a very specific aspect, which is low-value goods. However, I want to just make a few general remarks, given that Mr Louis Chua has also made a call or some remarks on raising of the GST rate, which is really this.

You have to consider our revenue and you have to consider our expenditure situation. And I think Members of the House know this already. In terms of our revenue, taxes and fees are only 80% of our total revenue. We are already relying on the NIRC for 20%. That is one-fifth. Our revenue is not coming from taxes alone. And the budgetary surpluses of the entire last two decades have been called upon because of COVID-19. And because of COVID-19, because of the pandemic, we have had to dig into our reserves – not just NIRC, but the actual reserves. And the draw on our past reserves amounted to about $53 billion. That is our revenue situation – we are digging into the savings.

On the other hand, our expenditure, if you just look at the horizon – and I outlined this in my speech yesterday on the Adjournment Motion – we have very large expenditure items looming on the horizon. Firstly, ageing population and all the healthcare that comes with that; secondly, climate change and the need to have a sustainable future for Singaporeans; and, thirdly, renewing our social compact, bridging inequality, doing more for the vulnerable, helping those who are in need.

So, what do we have? We have a situation where our fiscal situation is already tight, because we are digging into our savings and our reserves. We have got impending challenges which require us to spend more and you also have the Workers' Party, on top of that, asking us to spend even more than that.

The money must come from somewhere.

The Workers' Party has attempted to put forward some suggestions. So, they have suggested tax increases; they support the tax change today. But you must remember that the kind of money that is raised from the GST change in today's Bill is in the millions. But if there is a GST increase of two percentage points, the amount of revenue raised per year is about $3 billion. You are comparing millions with billions. And the kind of expenditure that is required is billions.

The other suggestion that the Workers' Party has put forward is on land sales and to treat land sales as revenue. Actually, I have explained this before. But in a nutshell, what they are really saying is, if you have land, if you have property, today, it is in the physical form; when you sell it, you are converting it to cash, to another form – and the suggestion is to treat that as revenue. We do not treat it as revenue because you have not become richer by selling it. You have just converted it from a physical form to a cash form. It is just not prudent in terms of the way one should run a fiscal system.

So, I would just simply urge the Workers' Party to consider this: our fiscal constraints, the need to spend more and that the money must come from somewhere.

I had also, yesterday, outlined why the Singapore system – the taxation system and the fiscal system – is progressive and fair. It is built on principles that everybody contributes something, but those who have more contribute more. In fact, in some cases, a lot more. And what we do is we redistribute it to those who have less.

In terms of GST, as I mentioned yesterday, over 60% of the net GST from households and individuals is estimated to be from the higher-income and from the foreigners who live and work in Singapore and from tourists. Tourism is down now, but when you look at the mid- and longer-term projections, that 60% still remains the same. So, our GST system is a good example of how we do this redistribution and never forget that this Government will do what is necessary to support our people. When you consider the pandemic, we had five Budgets. Every time the MTF had to put in place measures that affect businesses, we put in place support. So, you cannot look at just one single item and say, "Oh, this, by itself, please change, it is very onerous". You do have to look at the bigger picture. And you cannot just look at a very narrow tunnel-vision thing.

The other takeaway is really that this Government will always make sure that whoever is in need, in genuine need, will have support. And the only way you can do that is to have diverse revenue sources which are sustainable; and for recurrent expenditure, to make sure that you have recurrent revenue.

That is all I plan to say about GST at this stage and I hope that this is something that the Workers' Party will reflect on.

Mdm Deputy Speaker, let me just conclude by saying that MOF will continue to review our tax regime regularly to ensure its relevance and its effectiveness in the digital economy. And 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. – [Ms Indranee Rajah].*

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