Thursday, December 14, 2006

Could tax revenue from IRs decrease need for GST hike?

Tax revenues from the two integrated resorts could reach up to S$3.1 billion a year. According to a Citigroup analyst, the government can expect the money influx within the first two years of operation.

Chua Hak Bin, Director, Asia Pacific Economic and Market Analysis, Citigroup, said, "When the two integrated resorts come onstream in 2010, they are expected to generate some S$2.7 billion in value-add for Singapore's GDP, and create 35,000 new jobs."

"I think that if you do some estimation of the possibility of the betting duties that can be raised from that, and looking from the experience of Macau, that can be quite substantial."

Many observers believe that the Singapore government can expect gaming tax revenues from the two resorts in the range of S$1.5 and S$3.1 billion.

"I think betting duties in Singapore now is S$1 billion, but there's a possibility of it going up to about US$2 to US$3 billion. For example, in Macau, it actually tripled over a span of three or four years. So looking at that, that's actually equivalent to a 2 to 4 percent GST hike, and that's quite substantial," said Mr Chua.

The assumption by Citigroup is based on 10 percent of the Singapore population visiting the integrated resorts per year. Membership fees for the casinos are projected at S$2,000 each for locals, and entry tax at about S$100 each.

With these numbers, Citigroup argues that gaming tax revenues could be equivalent to the proposed two percentage point hike in the Goods and Services Tax. Thus, there may be less of a need for a GST rise.

Mr Chua added, "We did have Hong Kong come out to say that the GST hike on their side is not a possibility now. That, therefore, rules out the possibility of Hong Kong also cutting their corporate tax rate. Does this mean that there's less need for Singapore to increase the GST as a consequence?"

The government plans to raise the GST to 7 percent from the current 5 percent to build up its resources for the future and fund social programmes for the elderly and lower income.

It has also said there will be an assistance package for the lower income that will more than offset the effect of the GST hike.

The government is set to gain huge amounts revenue from the resorts. A good proposal would be to actually increase the projected GST hike at a lower rate since there is expected revenue for the government from another source.

I believe what Singaporeans ultimately want to see would be the revenue from the GST increase as well as the revenues from the resorts be put back into them. They want to see tangible and transparent proof that the money has been invested back to the people. If this can be achieved, then all will be smiles.

It's hard to keep everybody happy, but with that kind of expected income, I bet the Singapore government would not disappoint. What are your opinions on this?