No need to raise GST if land sales seen as revenue

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Feb 3, 2007
No need to raise GST if land sales seen as revenue
THERE has been much debate in the media about the proposed Goods and Services Tax (GST) hike.
The crux of the official argument is that the hike is needed to fund Workfare, and a cut in corporate-tax rates for Singapore to remain attractive to investors.
I am all in favour of a balanced Budget but we have unfortunately adopted a super- conservative approach in budgeting that fails to present a fair view of the true economics of the numbers. Government land 'sales', which contribute a huge chunk of revenue, have been ignored.
I am convinced that the Budget can be balanced without a GST hike if land 'sales', which are a true cash inflow, are included in Budget calculations.
The Government does not actually sell land; it sells leases, most of which are 99 years or less. In due course, the land reverts to the state or the leases are topped up, for example, the Marina Bay integrated resort has delivered $1 billion to the Treasury on a 30-year lease.
Hence, the cash inflow is similar to rental income and thus recurring in nature. Indeed, not including government land sales in Budget calculations as part of operating revenue is an economic distortion.
The impending two-point hike in GST will raise an additional $1.5 billion in revenue but data from the Ministry of Finance website shows that proceeds from land sales are in excess of this amount. At $4 billion per annum, revenue from land sales is about 2 per cent of GDP or about 14 per cent of government expenditure.
Ignoring the value of land sales is like a household with an income of $100,000 per annum refusing to bank $14,000 cheques.
The GST hike is also expected to further stunt the domestic economy which, despite its small size relative to GDP, employs the majority of the workforce. We need a vibrant domestic economy for local entrepreneurship to flourish. Also, virtually all the MNCs that we court today and local big boys were once small companies selling to the domestic community.
Joseph Chong Thiam Fook

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