MOF claims GST increase has nothing to do with cancellation of KL-Singapore HSR project

Speaking for the Ministry of Finance, Second Minister for Finance Lawrence Wong said in Parliament today that the prospect of the KL-Singapore High-Speed Rail (HSR) project being cancelled and the impending Goods and Services Tax (GST) hike are two separate things.

Wong, who also serves as Minister for National Development, had been responding to a question by Workers’ Party secretary-general Pritam Singh who asked whether the possible cancellation of the project would have any bearing on the Government’s intention to raise the GST.

Wong claimed that the revenue generated from the planned GST increase was never meant to fund large infrastructural investments like the HSR project. These projects will, instead, be financed by saving through initiatives like the Changi Airport Development Fund and the Rail Infrastructure Fund or borrowing by Statutory Boards and Government-owned companies.

The Government will use this approach to financing projects like Changi Terminal 5 and the JB-Singapore Rapid Transit System Link as well, according to Wong.

Noting that the main causes of rising Government expenses is healthcare, security and social spending, Wong said: “These are broad-based, structural increases in recurrent spending, so we have to raise recurrent revenues, of which the planned GST increase is one component, to pay for these ongoing needs year after year.”

Responding to Singh and Non-Constituency MP Daniel Goh, Wong declined to answer about what the estimated total expenditure on the HSR project is and said that it is not appropriate to discuss this at present: “Doing so could affect the behavior and pricing strategy of bidders.

Wong further confirmed that Singapore is continuing to fulfill its obligations under the HSR agreement as it awaits confirmation over whether the project will go ahead from its Malaysian counterpart, which has indicated that the project will be too costly for it to bear.

Wong’s clarification that the GST is not being hiked to finance infrastructural investments such as the HSR project is curious since Finance Minister Heng Swee Keat indicated during Budget 2018 that the tax hike is necessary as the government makes “massive investments” in four major areas of expenditure growth – healthcare, infrastructure, education and security.