Economist Donald Low has entered the national debate on whether the Goods and Services Tax (GST) hike contributed to inflation in Singapore, questioning the government’s justification for the increase.
His remarks come after Leader of the Opposition and Workers’ Party Secretary-General Pritam Singh criticised the tax hike during the Budget 2025 debate, arguing that it exacerbated inflationary pressures.
Singh had stated in Parliament, “Why the PAP went headlong and headstrong into raising GST, and thereby turbo-charging inflation further, is something only the PAP itself can answer to Singaporeans for.”
His comments sparked an intense backlash from People’s Action Party (PAP) supporters and leaders, with Prime Minister Lawrence Wong himself refuting the claim while sidestepping Singh’s point about the Monetary Authority of Singapore’s own data.
Wong argued that external factors—such as global supply chain disruptions and rising commodity prices—were the primary drivers of inflation in Singapore.
He further noted that in the two years when the GST was raised, inflation, as measured by the Consumer Price Index (CPI), actually fell.
Wong’s rebuttal was echoed by PAP supporters, who defended the necessity of the GST hike for maintaining government revenue and funding social programs.
Amid this heated exchange, Donald Low weighed in on the discussion in a Facebook post on Friday, expressing scepticism toward the government’s defence of the GST hike.
Low, a Senior Lecturer and Professor of Practice at the Institute of Public Policy at the Hong Kong University of Science & Technology, argued that Singapore’s budget presentation often understates the government’s fiscal resources.
He highlighted how last year’s budget surplus had grown from an initially estimated S$0.8 billion to over S$6 billion, questioning whether the GST hike was necessary and whether it had contributed to inflation.
“There’s a great deal of scepticism of the PAP apologists’ defence of the GST hike and their insistence that it didn’t raise inflation (by much),” Low wrote. While acknowledging that it is difficult to quantify the GST’s exact impact on inflation, he suggested that it likely played a role in increasing the budget surplus.
“And that’s not even accounting for the fact that budget surpluses in Sg tend to be understated.”
Low also warned that the government’s persistent underestimation of surpluses or overestimation of deficits could lead to excessive fiscal conservatism. He argued that this could result in social needs being unmet due to perceived financial constraints or unnecessary tax hikes being imposed.
“When the government faces genuine fiscal constraints, people may not believe it,” he wrote, referencing a 2015 article he had authored on the risks of budget opacity.
He suggested that public scepticism toward the GST hike stemmed from years of perceived misrepresentation of Singapore’s fiscal position, which has eroded trust.
His post drew responses from financial and legal professionals who echoed his concerns.
Lawyer Yeoh Lian Chuan pointed to the substantial returns generated by the Government Investment Corporation (GIC) on over S$800 billion in government borrowings. He estimated that these earnings amount to S$10-15 billion annually, yet are not reflected in the Net Investment Returns Contribution (NIRC) or classified as revenue in the budget.
This, he argued, supports Low’s assertion that the government has greater fiscal flexibility than officially presented.
Former banker and financial commentator Chris Kuan added to the discussion, highlighting Singapore’s rising government debt, which has increased from 110% of GDP a decade ago to 170% today, totalling S$1.2 trillion.
He noted that the profits generated from the difference between GIC’s investment returns and the cost of government debt are substantial but remain outside official budget calculations.
Low concluded his post by critiquing the government’s approach to economic governance, warning that a lack of transparency in policymaking could undermine public trust.
He also criticised what he described as the suppression of unfavourable economic news while promoting government-aligned perspectives, arguing that this approach could ultimately harm the quality of policymaking.
His remarks have intensified the debate over the GST hike’s effect on inflation and fiscal transparency. As discussions continue, there are growing calls for a more open presentation of Singapore’s budget and long- term financial strategy.
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