If GST is not rising, where is the money coming from?


The government had come out to address the point about GST increasing to 10% straight away after the elections:


And even then, some netizens continued to spread rumours that GST was going to increase. So Tharman had to come out himself to address the point:


So all right, GST is not going to increase…at least not in the next couple of years. But how else is the government going to get its money apart from raising taxes?

In case you missed out on a few speeches, Tharman had already got this clarified at the last East Coast GRC rally.

Here are the important bits:

(highlighted in red are Tharman’s words)

“…I didn’t intend to talk about this under the East Coast guys but I notice that there have been several speeches in the last week about how there’s this wonderful money available from reserves which can be used to expand our social spending. And I made a few quips about it earlier on but looking at the recent speeches, I thought I better just address the points quite squarely.”

He’s referring to the proposals by some politicians that wanted money being spent in all manner of ways, as if the money just fell from the sky.


“First, there is this idea that the Govt is actually making a very large surplus and hiding it away in reserves. And why don’t we use this secret surplus and spend it instead on all the good things we want to spend on.”


“Let me put it this way: …there’s this idea of a IMF statistics showing a much larger surplus. It’s not IMF statistics. It’s our statistics. We give it to the IMF and we publish it ourselves. Those statistics showing a surplus include the monies the Govt gets from selling land.”



“Now, why do we do that? Why do we not spend the monies that we get from selling land but instead put it into reserves where it can earn an income?”


“This is simply prudent long-term budgeting. It doesn’t mean we’re hiding the money in reserves.”

“It means that we will draw continually on the reserves every year, by using the income on reserves. This way you never have a govt that will go and sell land quickly, particularly when there’s a property boom in order to get money and spend more.”

Too cheem to understand? It basically means the country now makes money from money, rather than go do stupid things like sell land to get money.

Still too cheem? It means now the government has free money that’s paid for by the magic of investing.


“We have written it into the Constitution, that government cannot spend money obtained from selling land. The money has to go into reserves because this was an asset you had. If you sell it you keep it as an asset in your financial reserves.”

“This is not about saving money for great, great, great, grandchildren. This is about money we’re already benefiting from today. “


“Because we have been prudent all along and have put the monies from selling land in reserves, today we have much higher investment income coming each year into our budget.”

“This year, for instance, we have $9 billion of investment income.”


“It’s called Net Investment Returns Contribution, NIRC, $9 billion to be spent on social spending, infrastructure, anything.

$9 billion dollars. 


“Of that $9 billion, $4 billion is attributable to the accumulated surpluses that went into our reserves due to the sale of land over the years. 

Had we spent it before, we would not now have this $9 billion. $4 billion comes from the reserves that were attributable to land sales.

Very significant.”


“So it’s not just about benefiting our great, great, great grandchildren. Today’s generation, including today’s older generation is benefiting from this prudent budgeting. 

And it is a way in which we are fair to today’s generation but make sure that this same fairness extends to our children’s generation and for all future generations. Stick to prudent budgeting, it is fair.


And then he addresses all the #ReturnOurCPF and Roy Ngerng stuff:

“Second idea that has come up is that the Govt makes some excess returns on top of what it pays the CPF, and this too is being stored away in reserves. It is not being stored away in reserves.”

“Firstly, the Govt or the GIC if it was simply managing CPF monies, it would not be investing long-term and taking significant risks in order to earn high returns

If you’re managing only CPF monies, you have to be very careful because it’s guaranteed.”


“There’s a guaranteed principle and interest. You will have to invest in govt bonds and maybe a bit of equities but very safe portfolio not earning very much…

…maybe just enough to pay the CPF. But in fact the GIC is investing the surpluses from sale of land and many years of earlier govt’s surpluses. 

And we’ve very lucky that when Sg was young and growing rapidly, our leaders decided to run budget surpluses and not spend it immediately. We had 30 years, more than 30 years of budget surpluses until year 2000, which together with the sale of land has given us significant reserves.”

Translation: If the government were to simply use CPF money to invest, it would have been a very stupid thing to do. How in the world is the government able to guarantee CPF payouts if it was exposed to risk all day long?


That is why GIC can invest long term because it’s managing govt monies earned from past surpluses, not just CPF monies. If it was just CPF monies, it will not be earning very much. The investments will have to be very safe. But because it’s managing significant govt monies for the long term, GIC takes higher risks in order to earn higher returns. What happens to the returns? 50 per cent of returns comes back into the Budget for spending.”

“This is the system. Today’s generation benefits, the pioneers of today who were young before, they benefit and tomorrow’s generation benefits. Fair system. 

So let’s not think that the Govt is squirrelling away some savings in reserves and denying the people of benefits. We are already benefiting today from it but we’re doing it in a way that makes sure that future generations will get the same benefit.”









About the author

Benjamin Chiang

Benjamin Chiang is an enthusiast of good advertising, deep thinking, labour issues and chocolate. He writes also at www.rangosteen.com and occasionally on Yahoo!

The views expressed are his own.

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1 Comment

  • I was at the East Coast rally and DPM Tharman was brilliant as usual. Very clear, concise, precise explanation.

    What some people advocate reminds me of what some of my young poly students might naively say. One once said that the government should just ‘print more money’! The rest of us laughed good-naturedly, pointing to one major world power in particular that has been doing that for a long time. Ahem, not quite the ‘best’ solution, is it??

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