It is difficult to increase Goods and Services Tax (GST) in an uncertain economic environment. But the government needs money, instead of rising GST, water tax and carbon tax can generate the same effect and revenue. They will do it in two phases. First they collect the increased water tax in 2107 and 2018, then followed by carbon tax.
GST is a dirty word. People don’t like sales or value added tax as they think it applies to everyone, especially low-income families. GST also has a psychological effect, especially for businesses. The destruction created by GST to the economy is huge and so GST is a weapon of last resort.
GST increase is aso bad for election. Hence, the PAP government will try not to raise GST before the next election. In the meantime, they have to depend on water tax and carbon tax to generate revenue. They have already tried very best to make money from ERP, road tax, COEs, car parks fees, tobacco tax, liquor tax etc. (and indirectly through increased town council fees).
Furthermore, in a slow growth economy, due to lower business activities, the growth rate for GST collection will also be lower than before. In fact, in an uncertain investment environment, the return of state assets will also be lower.
For those who argue Singapore has a low water price and we should match price to production cost, it is important they understand WATER IS A HUMAN RIGHT.
Singapore has a very high GINI index and the rich-poor gap will create problems for lower income families despite the government HDB subsidy.
Certainly, matching price to production cost is a pure economic decision. It certainly never considers water is a human right. It is also against United Nation resolution of providing affordable drinking water to the people.
This is a typical PAP solution to social problems.
While water tax and carbon tax are environment friendly. We are against waste of natural resources, global warming, air-pollution, etc. By introducing these two taxes, Singaporeans can show the world we are engaging in environment protection strategies.
In paper, these taxes are to adjust social ill - bad habit for water consumption, driving car, etc, like tobacco and liquor taxes.
However, tobacco tax has resulted to many low income and foreign workers smoking very low grade of cigarettes. And so do the lower quality of liquor products. This will lead to social costs (health issues). Our GDP per capita increases, but those, who cannot catch up with the price increase, will have to end up with lower quality of life.
Perhaps, we all forget about the UN resolution: water is a human right. And the PAP government is famous for human rights violation.