Selling GST rise will test 4G leaders’ political mettle

In News Reports on February 21, 2018 at 1:39 am

So we all heaved a sigh of relief that the Goods and Services Tax isn’t going up this year, or the next year or the year after. If you think about it, it would be quite silly for the G to raise the tax from the current 7 per cent when it’s just announced a massive surplus of $9.6 billion. Finance Minister Heng Swee Keat was quick to say that this surplus wasn’t a “structural’’ thing, that is, don’t expect a repeat performance every year. But it’s still so way ahead of its own projections of $1.9 billion that people will think that his ministry is very bad at forecasting or wonder if all those trial balloons about having to expand revenue streams is just so much hot air.

Then comes the SG bonus or between $100 and $300 for every adult Singaporean. You would think that a G which keeps harping about not having enough money for the future would stash this $700 million away. It’s small beer, sure, compared to the rest of the money that is going into a rail fund and to pay for Eldershield premiums. But, hey, we’ve been brought up to believe that every penny counts.

So a GST rise too soon is out of the question.  If the G had gone ahead with it, you can bet that the opposition politicians will make hay of it – for breaking a promise to defer a tax rise for this decade. In fact, the time frame we’ve been given is between 2021 and 2025.

Which G in the world announces higher taxes four years in advance? They are usually secret stuff, done quickly to prevent any escape from the tax net or impact on the markets.

Does this mean that people have some wriggle room to lobby against the tax before the deadline? And how would the G cope then with such “populist’’ pressures? It is an extremely confident Government which can make plans for the next Government. Because it assumes that the ruling party will continue to be in power after the general election due by January 2021. And we don’t even know who might be leading that future Government,  because the People’s Action Party 4G leaders haven’t decided.

So what will happen between now and 2021? You can bet your last dollar that you will hear these arguments:

  1. Just use the reserves lah. Got more than $1 trillion right? After all, the President is a former PAP MP.
  2. Raise the 50 per cent cap on using net investment returns; you’ve got enough MPs to muster a constitutional change.
  3. You added Temasek into NIR framework in 2015, cannot add another government company ah?
  4. Why only such a small increase on buyer’s stamp duty for people who can afford $1-million properties? Raise it further or hike up marginal income tax to get the rich to re-distribute money.
  5. Cut your own ministerial salaries and we can build a hospital or two.
  6. Already going to have carbon tax and some kind of Netflix tax. Not enough ah?
  7. Never mind about the GST offset package, don’t you know GST is a regressive tax? The poor will get poorer.

I suppose it’s natural. No one wants to pay more tax – or we think somebody else should pay it. Which only makes you wonder why the G wants to open a window for such attacks. The cynical would say that this is so that it can decide later NOT to raise tax and win the kudos of the people. No one really wants this particular promise kept anyway. The empathetic would say the G is giving us all time to get used to the idea and even somehow prepare ourselves (quickly go buy everything you need now!)

What is clear is that the G has some explaining to do because some of its actions and concepts seem contradictory to the layman, including myself. I ask that economists excuse me my ignorance if I put the issue this way:

We’ve always been taught to be prudent with money. The elected president is in place to make sure a government cannot anyhow, to use the popular phrase, “raid the reserves’’. (Not that we know how much we really have for that extremely rainy day). So the idea was that a government can only spend the interest from the reserves. This is how any conservative investor would behave – keep the capital protected or even guaranteed and only spend the interest income or dividend. People can grasp this idea.

Then this net investment income framework was changed in 2008 to net investment returns. So some financial gurus will calculate what is the expected long-term returns on assets from Government Investment Corporation and Monetary Authority of Singapore. These are stable entities which don’t do risky things. We hope that those gurus got their numbers right because how far into the long-term can they see? And is the president equipped with enough financial advisors to give her/his assent/dissent to the rate? But never mind. The numbers are too mind-boggling for the layman.

Then Temasek, a rather more active player, was thrown into the mix in 2015.  The reason it was late in the list – it’s more difficult to come up with a way to calculate the return rate, said then Finance Minister Tharman Shanmugaratnam. It can’t escape some people’s attention that its addition was fortuitous because we would have been hard put to finance our expenditure in 2016.

I think the G would have to go back to brass tacks and explain the reserves from Ground Zero. It’s got beyond what people can grasp.

The conservative will ask: So we are actually just predicting what the long-term rate will be and then skim off half? (The G has said that is a much better way of smoothening out how much it can use every year, then having to depend on interest earned year by year. So there’s a point there.)

The less conservative will ask: Just raise the cap a bit and we get more money immediately. There’s, after all, still the rest of the money to add to the reserves. (It’s a point that’s gaining traction and even proposed by economists. The G will need to come up with a better answer on why it considers 50 per cent a magic number. And not 55 or 60, as academic Donald Low has pointed out.

Then there is the question of why the marginal income tax rate was not raised for high-income earners or some sort of wealth tax imposed to help reduce income inequality. After all, so many rich – and foreign – people settle here because they pay lower taxes than in their homeland. Singapore has even been mis-labelled a tax haven!

I figure a full answer on what high income earners give in return to society is very much needed. And it has to go beyond how they create new jobs, fund new ventures and give Singapore a cosmopolitan cast essential for a global financial centre. My hope is that the G doesn’t answer by saying that they would all be scared away if more was asked of them. This won’t be unlike the argument that we’d be raiding the nest egg if we went 100 per cent of NIR, which no one is asking for.

Here’s another concept that would be difficult for the layman to grasp: statutory boards and government-linked companies borrowing to pay for infrastructure projects. (The media can’t seem to decide if this is new or not since HDB already issues bonds to build homes.)  The G paints this as an equitable way to even out who pays for projects like rail lines and airport terminals. It’s not the current generation but today’s young people who would reap the benefits – and pay for it themselves when the time comes to collect. Other governments elsewhere do it but here, in Singapore, we’ve always been told to spend within our means because we don’t know what the future holds. And not to borrow from loan sharks.

I am, of course, simplifying and magnifying some of the above but I don’t think I am exaggerating the amount of political work the G would have to do to explain Singapore’s financial position and why GST has to go up.

I can anticipate some of the responses: That the G could have just let the GST be (see points 1 and 2). But it chose to be honest with the people at the expense of losing political capital. Honesty, however, must be accompanied by more information and explanation to the people, lest they only grasp headlines and miss the context.

I suppose this is where the 4G leaders will be tested on their mettle since it is likely that they will lead the next election campaign. We’ll probably be hearing more about “trust’’ – that the G is doing the right thing.

But trust cannot be blind.


The news: as and when the G is ready

In News Reports on February 10, 2018 at 4:09 am

I have been wanting to write about the Official Secrets Act ever since it was announced in November that an HDB officer had been charged in court for breaching it but refrained from doing so in case my comments would be viewed as subjudice. When Mr Ng  Han Yuan was finally sentenced to pay a $2,000 fine in late December, I was away from the country. I am reminded of it again when I read today that Mr Ng had been re-deployed. And I think the topic deserves even greater airing now because a select committee has been set up to explore the issue of deliberate fake news.

What has one to do with the other? Plenty.

They are about the practice of journalism which I will loosely define as the search for the truth, that is, not fake news.

To recap, Mr Ng pleaded guilty to passing confidential information about the impending establishment of a HDB resale portal to a reporter, who then tried to chase the tip-off by canvassing for more information from other parties, including the HDB. Ms Janice Tai of ST was given a “stern warning’’.

I find the episode troubling because the article she was working on was never published. In the past, journalists have been taken to task or invited to a lim kopi session because they had written articles which the government would rather not have made public. And they have held their own or fought the matter.

You can read one veteran journalist’s anecdotes here.

It is an unwritten pact between officialdom and journalists that official confirmation is needed for a tip-off before an article about the government sees the light of day. In this case, according to ST, the journalist had the consent of her supervisors to “chase’’ the tip-off that the HDB officer had given her while they were on a date.

“In the course of checking out the story, Ms Tai approached various parties, including property agents and the Singapore Institute of Surveyors & Valuers (SISV), for their views. She also sent HDB a list of questions. This raised the alarm within the Government about a leak after both SISV and Ms Tai approached them about the story.

“According to Ms Tai, she told Ng she was planning to e-mail questions to HDB officials and others in the private sector to get their views. He noted this and asked her to let him know what their responses were.

“In July, when the sensitive nature of the information became clearer, Straits Times editors decided to hold off on the story till an official announcement was made.’’

You can read ST’s full  version of events here:

The above account is normal in the day-to-day operations of journalists. As a journalist, I have been told many times not to chase a story because, among other things, a minister wanted to announce it first. Editors don’t always agree to the request, especially if the matter is already widely known or “in the public domain’’, and some bargaining will take place. We might ask to break the story the day before, or bargain for an even fuller story or exclusive when the announcement is finally made.

In the HDB case, all those unwritten rules were followed, going by the ST report..

I believe most editors take the line that reporters must “report’’ and get to the bottom of any story they are chasing. They are urged to do their jobs to the best of their ability, and leave the editing decisions – including whether to publish/broadcast – to the higher-ups who deal with the political ramifications and what-not. It’s not in the DNA of editors to tell reporters to nip their reporting in the bud, unless editors had already agreed with officials to lay off the story for some reason.

Of course, journalists know about the OSA and how wide and sweeping it is. It is easy for any G agency to cry “OSA” because it seems that anything and everything about the G can be secret information so long as the person giving it and receiving it aren’t authorized to do so.

But work carried on because an OB marker seemed to have been settled between officialdom and journalists. The line was drawn on the publication of information, rather than based on the letter of the law.

Yet the G continued its investigations even after ST decided to hold off the story. Why? Did it get wind that ST would be publishing the story? Despite the editors’ decision to hold off the story, did Ms Tai continue to ask questions about it? ST’s own timeline isn’t clear.

In the light of what has happened, I wouldn’t be surprised if editors and reporters re-think the way they do their work since asking questions or calling for confirmation can land you in breach of the OSA.

In other words, the HDB case has set a new benchmark for the practice of journalism in Singapore. The OB markers have been pushed inwards.

This is so terribly bad.

It would easier for all if the Official Secrets Act was more closely defined so that both officials and journalists are left in no doubt about what is secret and what is not. Is it a secret because very few people know of it? Or is it sensitive information that affects the financial markets or national security? Or both?

During the court case, the prosecutor didn’t dwell on the sensitivity of the information disclosed even though he might have cited its impact on the HDB resale market like potential sellers or buyers withholding their actions. Instead the concern was about giving confidential information that he was not supposed to give.

Rather, the prosecutor said that the HDB had been “significantly inconvenienced’’ by the leak because it had to push forward its announcement  to October even though it was slated for launch in January 2018.

I consider this a bad turn of phrase because it implies that the G should not be subject to “inconvenience”. The fact that the announcement had been brought forward also showed that early publication can be made without too much untoward impact. In the usual course of things, a bargain could have been struck for ST to obtain the exclusive in October, or to be given more information than other media if this was intended for wider dissemination. Nothing like this appeared to have happened.

Should Ms Tai have gone to the HDB first, rather than canvass other players for information? Note that Ms Tai’s probing led the SISV to ask  questions of the HDB, which must have been surprised or annoyed at the leak. Truth to tell, I have always advised reporters to get as much information from other sources, before going for official information. This is because of a game of “no comment’’ that some officials play, in the hope that with too little information or no confirmation, the reporter will “drop” the story.

I am giving this insight into the profession as practised in Singapore to show that journalists have a mighty tough job extracting information from officialdom. Yes, the OSA (or some form of it) is also used in other jurisdictions, such as the United States. But I echo what lawyer Jack Lee said in a  TODAY article about how in contrast to Singapore, the default position in some countries is that “governmental information should be publicly disclosed, and withholding such information is seen as the exception rather than the norm”.

How are we to deal with the phenomenon of deliberate fake news when it is not easy to get real information from the G in the first place?

Or if the mainstream media itself is coy about reporting constraints on its profession?  I note, for example, that a second reporter was involved, but whom ST did not name in its article. Nor did ST  report, until Mr Ng was charged in November, that it was being investigated or that its reporter had been held overnight in a cell.  The media usually doesn’t refrain from reporting that other people are being investigated – and they do so assiduously – so why stop when it’s about itself?

I presume the G knows that this episode will cause, to use a popular phrase, “a chilling effect’’ on journalists. It might well brush this off by saying this is a one-off instance or that “good’’ journalists will know what to do and not to do.

I think the whole episode is regretful because it means that it would be prudent of journalists to wait for G announcements, rather than “scoop’’ it.  Such a practice would blunt the inquisitiveness of journalists, especially since a lot of news in Singapore emanates from the G. While this would be convenient for the G as it can schedule its timing of announcements with no disruption of its workings, I don’t think this is what the G wants or should want.

It only reduces the credibility of journalists at a time when good journalism should be supported. The problem in Singapore is not that there is too much fake news, but getting more people to believe that real news is coming out from the duopoly without fear or favour.

I think that when the G talks about fake news, we should also ask whether it is putting more obstacles in the way of obtaining real news or creating a climate in which the process of finding the truth, which is already laborious, is also dangerous.


It should not be Young versus Old

In News Reports on February 9, 2018 at 2:19 am

A long, long time ago, I sat on a panel that was supposed to look at the sort of trade-offs the country would have to make to cater to both the young and the old. Note that this was at a time when lifts did not stop at every floor and there was no clamour for wheelchair accessible buses. We came up with a list of everything we thought should be done for both the young and the old. We assumed then, as I think some people do now, that we had access to a bottomless pit of money.

We didn’t think about how raising the retirement age might retard the career progression of young people. We didn’t worry about whether the young should start financing the retirement needs of the elderly who may not have enough CPF savings put by.

Unlike today, when we’re constantly warned about crossing the demographic rubicon, we simply did not think deeply about the emergence of a tussle for resources between young and old or the development of a “silver’’ lobby. That point seemed a long way coming.

Now, the infrastructure for the old has been put in place (lifts at every floor, ramps and so forth) and I consider the implementation of CPF Life and Medishield Life among the best achievements of the current government. I applaud its foresight especially when I see how my neighbourhood has turned grey with so many wheelchair bound uncles and aunties buying groceries and hawker food. I will be one of them some day, I always say to myself.

Having crossed the middle-age line, I can’t help but be annoyed when I read about young people raising questions about their own future because the elderly are in existence. I wonder if they’ve watched Solyent Green.

I have an old-fashioned view when it comes to the elderly – that what they want, they should get. I suppose I will change my mind if their voice becomes so loud that they hurt the rest of society with their demands. (More old age homes, fewer kindergartens!) But the elderly in Singapore aren’t like that at all. They would rather do manual labour than ask their children for help because they will always say their children have their own families to take care of.

There will, of course, be exceptions.

I doubt that those who are past their 40s and married with children would take the same view of financing the needs of the elderly as some young people, because they probably already do so in some way in giving monthly allowances or drawing on their own Medisave accounts for their parents’ healthcare. They will cheer attempts to lighten their burden, like the Pioneer Generation benefits that their elderly parents can draw upon for medical bills. And frankly, they probably wouldn’t want their parents to work till retirement age because old people should enjoy the twilight of their lives.

But times they are a-changing.

Singapore is going through a very interesting period where it’s become more common for those same parents to help their children set up home, than for children to give them allowances once they start work. It’s because both parents usually work and can afford to lavish more on their children – and for longer. In fact, it can be argued that the usual age-dependency ratio might not apply because the future-old are in a far better position to support themselves than the current-old. The flip side, however, is that if they can’t, they have only one or two children to call upon for help given the small family structure of today.

Will our future-old be like our current-old in terms of attitude towards help? I don’t think they will turn to their own children for handouts, but they will not be as uncomplaining. They will ask for more government support from that bottomless pit,  or Pioneer Generation benefits even if they aren’t pioneers.

I somehow think this would be less of a problem if some old-fashioned values stay intact.

I worry when we go great guns about having the young reach for the skies and fulfill their potential and aspirations. It’s a noble thing, but searching for this road to the end of the rainbow cannot be at the expense of the children’s duty to their parents. Even if parents don’t ask for anything, the children should just “do’’.

I am amazed when I hear would-be graduates talk about the kinds of jobs they would like to have and whether they will be paid a good enough salary for their needs and wants. I doubt that many factored in what amount of their salary they should give to their parents. Their parents might not need it, but it could be looked at as the cost of defraying food and lodging which they would have to pay for if they moved out of the family home. It is a good habit and brings young people slap against the reality of having to fend for a household, which they would have to do in good time. Frankly, even a token sum would do and most parents are likely to spend the money on the children, than on something for themselves.

If this sounds old-fashioned, it is. It’s filial piety.