Tuesday 21 November 2017

Singapore to raise taxes as govt spending increases: PM Lee Hsien Loong at People’s Action Party Convention 2017

PM Lee highlights need to invest in economy, infrastructure and social safety nets
By Joanna Seow, The Straits Times, 20 Nov 2017

Singapore will be raising its taxes as government spending on investments and social services grows, Prime Minister Lee Hsien Loong said yesterday.

"(Finance Minister) Heng Swee Keat was right when he said raising taxes is not a matter of whether, but when," he said at the People's Action Party (PAP) convention.

PM Lee was referring to Mr Heng's remarks during his Budget speech earlier this year, where the minister outlined how spending on healthcare and infrastructure will rise rapidly, and spoke of the need for new taxes or higher tax rates.

He told some 2,000 party members that "well before that time comes, we have to plan ahead, explain to Singaporeans what the money is needed for, and how the money we earn and we spend will benefit everyone, young and old".

The spending on Singapore's economy, infrastructure and social safety nets is necessary, and is a vote of confidence in the country's future, said PM Lee, who is the PAP's secretary-general.

Just as older generations saved and invested, this generation must "plant trees in order that our sons and daughters, and their sons and daughters, will be able to enjoy the shade", he added.

Economists said a rise in the goods and services tax (GST) could be in the works. It was last raised in 2007 by two percentage points to 7 per cent.

UOB economist Francis Tan said it is the second-largest generator of government revenue, after corporate and personal income tax, so even a one-point increase will mean very large revenue increases.

As a broad-based tax, the GST is hard to evade and is collected from locals and foreigners, said Singapore University of Social Sciences economist Walter Theseira. He suggested cutting income tax exemptions as an alternative.

In terms of timing, Mr Tan said the Government is unlikely to raise taxes in the year before a general election, and hence may act soon.

"Mr Lee said we are nearly halfway through the term, so it would probably be announced in next year's Budget," he said, adding that the move would come on the back of stronger economic growth, which provides some leeway to implement the change.

Both he and Dr Theseira said a rise in taxes should be combined with measures like GST vouchers to help the lower-income group cope.

In his speech at Big Box in Jurong, PM Lee explained why a tax increase is needed.

First, the Government is investing in infrastructure, including in the country's rail and ports.

Second, it is helping workers and companies through economic restructuring.

For now, the economy is doing well. Growth this year may even exceed 3 per cent, better than the forecast of 2 per cent to 3 per cent, said PM Lee.

But to sustain this growth, workers must acquire the right skills and be matched to quality jobs. Companies must also adapt to compete globally, he said.

Finally, on the social side, annual spending on pre-schools will double to $1.7 billion by 2022.

At the same time, the population is ageing, creating greater demand for affordable healthcare.

* Taxes: 'No contradiction' between PM Lee and DPM Tharman's comments
By Seow Bei Yi, The Straits Times, 22 Nov 2017

There is no contradiction between Prime Minister Lee Hsien Loong's comments on Sunday about an impending tax hike and what Deputy Prime Minister Tharman Shanmugaratnam had said in 2015 on the adequacy of revenue, the Ministry of Finance (MOF) said yesterday.

Its statement - in response to queries from The Straits Times - comes in the wake of online accusations that the Government is making a U-turn on raising taxes.

Mr Tharman, who was then Finance Minister, said in 2015 that the revenue measures the Government had already undertaken would provide sufficiently for increased spending planned until the end of the decade. MOF said: "This is in line with PM Lee's speech at the PAP convention on Nov 19, 2017, where the Prime Minister said, 'For this current term of government, we have enough revenue'."

The current term ends in 2021, unless a general election is called before that.

Mr Lee triggered public discussion when he said on Sunday that "raising taxes is not a matter of whether, but a matter of when".

Yesterday, MOF said that while any decision to raise taxes will not be taken lightly, "necessary investments in the future are needed".

"The Government has to remain forward-looking, planning beyond this decade, and will study all options carefully, doing it with least impact on the less well-off and on Singapore's economy," it said. "Planning for the issue now will allow us to better ease in the needed measures, and to give our people and businesses some time to adjust."

Mr Lee said tax hikes are needed due to rising infrastructure investments and social spending.

Social expenditure, in areas such as healthcare and education, has almost tripled to $34 billion over the past decade.

Investments in infrastructure are also expected to grow to about $30 billion by the decade's end.

Since Mr Lee's remarks on Sunday, economists and tax experts have suggested that the goods and services tax (GST) is the tax most likely to be raised, with many expecting an announcement as soon as Budget 2018.

GST was introduced in 1994 at 3 per cent. It was raised to 4 per cent in 2003, to 5 per cent in 2004, then finally to 7 per cent - the current level - in 2007.

GST hike announcement could be on the cards for Budget 2018, say economists and tax specialists
By Chia Yan Min, Economics Correspondent, The Straits Times, 21 Nov 2017

Economists and tax experts expect the goods and services tax (GST) to go up within the next few years, with an announcement expected as soon as Budget 2018.

Their predictions follow comments by Prime Minister Lee Hsien Loong, who told the People's Action Party (PAP) convention on Sunday that Singapore will be raising its taxes as government spending grows.

Besides a GST hike, the Government could be exploring alternative avenues for raising revenue, including taxes on e-commerce spending, experts say.

Finance Minister Heng Swee Keat had hinted at upcoming tax hikes in his Budget speech in February, saying Singapore's expenditure needs are expected to rise rapidly in the years to come, particularly in healthcare and infrastructure.

The Government's expenditure already far outstrips revenue - it expects a primary deficit of $5.62 billion for financial year 2017.

Experts say higher tax revenues are unlikely to come from raising corporate tax rates, given the need for Singapore's economy to stay competitive. Broad-based hikes in personal income tax rates are also unlikely, because the Government plans to keep taxes progressive.

This makes GST the top candidate for a tax increase.

CIMB Private Bank economist Song Seng Wun said: "The straightforward one is the GST, which has not been touched in a decade.

"At the moment, there is no pressing need to raise it. But it has been more than a decade, and 7 per cent is very low relative to the global average," he said.

Mr Loh Eng Kiat, a tax partner at accountancy and business advisory firm Baker Tilly, said: "Globally, there is an increasing shift from direct taxes to indirect taxes as governments relook the composition of their tax base and the efficiencies of the relevant taxes.

"In line with these underlying trends, I expect it is more likely for Singapore to raise the GST rate rather than to raise the tax rate for corporates."

Mr Chia Seng Chye, tax services partner at Ernst & Young Solutions, said the increase is likely to come "fairly soon, within the next one to two years".

"Our GST rates are considered low relative to some other countries in the region. The average is about 10 per cent.

"Whether it is an immediate step-up or a phased increase remains to be seen," he said.

The GST was implemented at a single rate of 3 per cent on April 1, 1994. It was raised to 4 per cent in 2003, and to 5 per cent the following year. The last hike to 7 per cent came in 2007.

Each increase was accompanied by an offset package to help households cope with the higher costs of living.

As for taxing the growing digital economy, Associate Professor Simon Poh of the Department of Accounting at the National University of Singapore's Business School said imposing GST on e-commerce transactions could come next year.

"This would level the playing field in retail for online and bricks-and-mortar sellers," he said.

** Customers might have to pay tax on goods and services bought online: Indranee Rajah
Experts expect GST to be levied on online purchases
Big e-commerce players may have to register for GST here, or buyers may have to pay tax
By Yasmine Yahya, Assistant Business Editor, The Straits Times, 23 Nov 2017

Goods and services tax (GST) could soon be levied on e-commerce purchases as the Government looks to diversify its tax base and capture value from this fast-growing sector, experts said.

This could mean getting big e-commerce players to register for GST here if they sell to Singapore consumers, or getting the customers themselves to pay tax on the goods and services they buy online.

Their comments come after Senior Minister of State for Law and Finance Indranee Rajah told Bloomberg on Tuesday that e-commerce will likely come under the local tax regime soon. "You can imagine, 20 years from now, the way people purchase is very different, and by that time, online platforms will be mainstays, so if that is not part of the tax regime, there is going to be a lot of holes there," she said.

Finance Minister Heng Swee Keat had also said in the Budget earlier this year that the Government was studying ways to tax e-commerce.

Online purchases of goods and services under $400 are not taxed in Singapore now. "The $400 GST exemption threshold could be reviewed for the purposes of capturing online shopping transactions," said KPMG Singapore's head of tax Chiu Wu Hong. "Digital services (for example, music downloads, e-books) rendered by foreign companies could be brought into the GST net by using a 'reverse charge' mechanism, or by way of requiring them to register for GST if they were to provide to end consumers in Singapore."

A reverse charge mechanism requires the customer to account for tax on items from foreign suppliers.

PwC Singapore's Asia-Pacific indirect tax leader Koh Soo How noted that the Government has said the main intention of bringing online shopping within the tax regime is to make it a level playing field between local GST-registered retailers and overseas sellers.

"There are different collection models for imposing the GST on cross-border transactions. However, what most countries have settled on when taxing the digital economy is the vendor collection model, which is seen to be most feasible in terms of practicality and costs," he said. This means the overseas vendor is required to register for GST to collect and account for GST on sales to consumers in the local country.

Mr Yeo Kai Eng, a GST services partner at Ernst & Young Solutions, noted that this is common in several countries, which have introduced simplified GST registration for overseas suppliers to make it less onerous on e-commerce players.

"The key for Singapore is not to rush into it," he said. "Consultation with key stakeholders should be made to study the impact and effectiveness of any new measures to impose GST on overseas suppliers of digital services and low-value goods before they are introduced."

Tax kitty must grow with needs
By Chia Yan Min, Economics Correspondent, The Straits Times, 23 Nov 2017

Singapore's spending needs will continue to rise in the coming years, even as it becomes tougher to raise revenue in a maturing economy.

This is why higher taxes - while unpalatable - are inevitable. Prime Minister Lee Hsien Loong told the People's Action Party convention on Sunday that Singapore will be raising taxes as government spending grows.

There has been a great deal of speculation over what form this tax hike might take.

Most economists and tax specialists are expecting an eventual increase in the goods and services tax, which last went up in 2007 and is low relative to its peers in the region.

There have also been other possibilities raised, including taxes on e-commerce spending.

Regardless of the policy tool that will eventually be chosen, it is clear that higher taxes are necessary to keep Singapore in good fiscal shape.

Singapore's Budget spending has exceeded operating revenues since the 2015 financial year.

The population is ageing and healthcare expenditure is on the rise, even as infrastructure needs are growing.

Singapore has been able to produce overall Budget surpluses in recent years only by drawing on the net investment returns framework, which allows the Government to spend up to half of the long-term expected real returns from the GIC, the Monetary Authority of Singapore and Temasek Holdings.

The Government has made some moves to manage costs, including implementing a permanent 2 per cent downward adjustment to the budget caps of all ministries and organs of state from this April.

In addition to prudent spending, however, government revenue also needs to grow in a sustainable way.

This means Singaporeans will have to get used to contributing more for these resources.

Tax increase 'must be handled with caution'
By Seow Bei Yi, The Straits Times, 21 Nov 2017

The impending tax hike signalled by Prime Minister Lee Hsien Loong at the weekend will exact a political price on the ruling party - unless Singaporeans can be persuaded of its necessity, said People's Action Party (PAP) MPs and political observers.

And the way to do so, they said, is with "open and honest" communication, like through dialogues to explain why such a move is required.

More aid for needy residents, like bursaries, could also help.

"There is always a political cost if you cannot persuade the ground that a hike in taxes is necessary," said Mountbatten MP Lim Biow Chuan. "Nobody likes it, and if people think you are just doing it for no valid reason... they get angry."

Nominated MP Randolph Tan added: "Tax is a very sensitive area, and it can change things for any government."

Public sensitivity to a tax hike - the form of which PM Lee did not specify but which some economists believe could be a goods and services tax (GST) increase - is also heightened, given that the Finance Ministry had said two years ago there was no basis to claims that the Government would raise the GST after the 2015 General Election. It then referred to Deputy Prime Minister Tharman Shanmugaratnam's comments that increased spending planned for the rest of this decade is sufficiently provided for by existing measures.

At the PAP convention on Sunday, PM Lee noted that investments and social spending are costly, and the Government has to make sure "we can afford them".

"For this current term of government, we have enough revenue," he added. But as spending needs will grow, he forewarned that "raising taxes is not a matter of whether, but a matter of when".

Some people view PM Lee's comments as a U-turn. But as MP Liang Eng Hwa, chairman of the Government Parliamentary Committee for Finance and Trade and Industry, noted, Mr Tharman's timeframe was the end of the decade, "which I suppose is 2019 or 2020".

PM Lee did not say when the tax hike could kick in, except that the current term of government, which ends in 2021, had enough revenue.

Dr Tan said PM Lee's speech could be a way to inform the public early of such measures.

Workers' Party MPs did not respond to queries for comment.

On Sunday, when explaining why a tax hike is necessary, PM Lee referred to Finance Minister Heng Swee Keat's Budget speech this year, in which he said social expenditure, in areas such as healthcare and education, almost tripled to $34 billion over a decade.

Investments in infrastructure will also grow; in 2015, Mr Tharman said this would swell to about $30 billion by the decade's end.

Dr Mustafa Izzuddin of the ISEAS - Yusof Ishak Institute said that with public confidence shaken by recent events such as major MRT incidents, "any tax hike... must be handled with caution, tact and effective communication, as there could be a political cost of domestic resentment".

MPs said communication is key to reducing unhappiness.

This echoed PM Lee's promise on Sunday, when he said: "Well before that time comes, we have to plan ahead, explain to Singaporeans what the money is needed for, and how the money we earn and we spend will benefit everyone young and old."

Mr Lim said with messages potentially distorted over social media, the authorities need to explain their position clearly.

Mr Liang noted that the Government is in a basic deficit position that will likely widen after 2020: "It is important to explain the expenditure, what the projection will be like and how the increase will be funded."

MacPherson MP Tin Pei Ling said if the hike was in the GST, now at 7 per cent, MPs could help those hardest hit by giving financial aid like bursaries to children.

Observers said a lengthy timeline could be how the PAP is preparing the ground. Law don Eugene Tan said: "They may be preparing the ground for a tax increase, but there is also the larger game plan, in trying to set the narrative: With the need for increased expenditure, how are we going to pay for it, and who is going to pay for it?"

Learn right lessons from MRT incidents: PM Lee
He outlines work ahead, including boosting train reliability and upgrading economy
By Charissa Yong, The Straits Times, 20 Nov 2017

Major rail disruptions such as the flooding at Bishan and a train collision last week at Joo Koon have shaken public confidence and should not have happened, said Prime Minister Lee Hsien Loong.

"But they have, and we must learn the right lessons from them, get to the root of the problems and put things right," PM Lee, who is secretary-general of the People's Action Party (PAP), said yesterday at its annual convention.

In a wide-ranging speech that had the tenor of a mid-term report card, he recapped the Government's work since it began its term in January last year, and told the 2,000 people at the PAP's year-end convention of the work to come.

Improving Singapore's train reliability is a priority, he said, weighing in for the first time on the recent MRT woes.

There is, however, light at the end of the tunnel as delays should go away once the resignalling upgrade is completed, hopefully in a year's time, he added.

The Government is upgrading the economy as well, and maintaining Singapore's place in the world.

PM Lee also said Parliament will take a mid-term break after the national Budget is passed next year, usually by end-March.

Parliament will reopen a month later, when the President will outline the Government's agenda for the second half of its term.

Noting the brightening economy, PM Lee said productivity has picked up and economic growth may exceed 3 per cent this year.

But social spending is on the rise, and will rise even more, particularly in healthcare as the population ages. "(Finance Minister) Heng Swee Keat was right when he said raising taxes is not a matter of whether, but when," PM Lee said.

"To implement these policies, we must get our politics right," he said, adding that the party would have to gain the people's support and trust.

He told party activists not to take the people's trust in the PAP for granted. With the next general election two to three years away, he called on them to start working hard now to get a strong mandate.

"(Singaporeans) must know the party cares for them and is working to improve their lives," said PM Lee, whose speech was broadcast live on the party's Facebook page.

He said his Government makes hard choices from time to time, and must be upfront with Singaporeans when it does.

"Even if people may not like a specific policy, we must convince them that we are doing it with good intentions and for good reasons."

The "strong trust" between the PAP and the people was painstakingly built in a span of more than 60 years, he said. It was done not only by delivering results, but also by working through difficult policies, like the goods and services tax.

The PAP earned the people's trust the hard way, and must never fritter it away, he said.

PM Lee drew cautionary tales from politics in Britain and America, where mainstream parties are no longer seen to represent the common man's interests, and the elite is disconnected from the population.

The PAP must never let this happen here and must always pursue policies that benefit the broad majority of Singaporeans, he said.

"We must always hold the ground, stay close to Singaporeans, and maintain their trust and confidence," he added.

In the coming years, this trust will be tested by economic and social disruptions, and will be more important than ever, he said, adding: "We must hold together, not pull apart."

PM Lee told the activists: "If you push your weight around, behave arrogantly or take advantage of your position, you bring disrepute to yourself and do harm to the party.

"But if you uphold the party's ideals... you will strengthen the trust between the party and the people, consolidate the party's support base and help keep Singapore successful."

PM Lee: It will take time to improve MRT system
By Seow Bei Yi, The Straits Times, 20 Nov 2017

Prime Minister Lee Hsien Loong sought to give the beleaguered MRT system a boost yesterday when he pointed out that it ranks among the top four metro systems worldwide for reliability.

Citing a Nov 18 New York Times article that slammed New York City's subway, he said data on the world's 20 biggest metros shows that Singapore ranks with Taipei, Hong Kong and Los Angeles as cities with trains arriving on time more than 99 per cent of the time.

Singapore's MRT network has been hit by a spate of serious incidents, including the train collision at Joo Koon station last week which left 38 people injured.

In his first comments on the matter at the annual People's Action Party convention, PM Lee said such disruptions "loom large in the public consciousness", and are one reason commuters do not feel rail reliability has improved, even as statistics show there are "fewer delays and breakdowns than before".

He also said it will take time to improve the rail system, as improving train reliability "is a very complicated problem".

Apart from complex technical issues, there is also a need to strengthen the operators to deliver consistent high performance, he said. It requires them to reinforce their engineering and maintenance teams, and keep staff morale high.

The ongoing upgrading of the signalling systems on the older North-South and East-West lines will cause their own set of delays, he noted, adding: "Once the signalling upgrade is fully completed, hopefully within a year's time, these delays should go away."

Commuters should then see train reliability improve, he said.

"The Transport Minister has one of the toughest jobs," he said. "I want Boon Wan and his team to know they have our full support and confidence," he added, referring to Transport Minister Khaw Boon Wan.

"The best thing we can now do is to give our transport team the time and the space to work these problems out."

Besides improving reliability, the Government is expanding the rail network and investing in major infrastructure projects like the High Speed Rail line to Kuala Lumpur, said PM Lee.

Singapore will double the capacities of its air and sea ports as well, with Changi's Terminal 5 and a mega port in Tuas. Shifting the sea ports from Tanjong Pagar and Pasir Panjang to Tuas will free up an area thrice the size of Marina Bay for future developments, he said.

Earlier, Mr Khaw, PAP's chairman, said he promised commuters the Government would complete its work on the MRT. He said he took the North-South Line to the convention, and commuters had encouraged him.

"I thanked and promised them, we shall complete this work. And we will. This is a promise."

Singapore 'must never fall under foreign control'
By Charissa Yong, The Straits Times, 20 Nov 2017

Singapore must never let another country influence its domestic debate and politics, Prime Minister Lee Hsien Loong said at the People's Action Party (PAP) convention yesterday.

"While we are friends with many countries, we must never inadvertently fall under foreign control or influence," said PM Lee, who is the PAP's secretary-general.

Such influence can be open or covert, and can divide and weaken Singapore, he said.

PM Lee cited Australia's worries about foreign influence, and America's accusations against Russia of trying to influence its presidential elections last year "quietly and secretly" through social media.

"Can it happen to us? Yes, it can. But we must prevent it from happening," he said.

His comments come three months after Lee Kuan Yew School of Public Policy academic Huang Jing was identified as "an agent of influence of a foreign country" by the Government and expelled.

"When we are put to the test, we will stay united and back the Government. Then we can... defend Singapore's interests as one single, cohesive country," he said.

Right now, Singapore has good relations with the United States and China, and with its immediate neighbours, he said. While relationships will see ups and downs, Singapore's approach is a long-term one: to neither take good relations for granted, nor "get flustered or cower" when relations are down.

PM Lee recounted his September visit to China at the big power's invitation even though it was just before the 19th Party Congress, the largest event in China's political calendar. "Both sides value the relationship, and I discussed with the Chinese leaders new areas of cooperation."

He also visited the US last month, meeting President Donald Trump and his key officials."It is not always easy to be good friends with both the US and China at the same time but, as a small nation, we have to make friends with as many as we can.

"So, we have to work hard... while upholding Singapore's own interests. And I think we have not done too badly," PM Lee added.

Ties with Indonesia and Malaysia are also good, with Singapore investing heavily in both and taking part in major projects with them, he said.

Singapore and Johor are working on a rapid transit link and will sign the agreement for it next month. PM Lee will also play host to Malaysian Prime Minister Najib Razak at a retreat in Singapore next month.

But PM Lee noted that issues will crop up from time to time.

For example, the Pedra Branca case appeared to be settled for good, with the International Court of Justice (ICJ) awarding the rocky outcrop to Singapore in 2008. Almost 10 years later, Malaysia is seeking to reopen the case with the ICJ.

"I am not sure what Malaysia's motive is, but their general election is coming, and maybe that has something to do with it," said PM Lee.

In Indonesia, politicians want to take back control of the flight information region. Singapore manages a flight information region around Changi Airport, including parts of Indonesian airspace.

"Who controls the flight information region is a technical matter of making the best arrangements for air safety. But it has been politicised and made into an issue of sovereignty and national pride... that unfortunately makes the problem much harder to solve," he said.

Vital to maintain symbiotic ties between party, NTUC
By Joanna Seow, The Straits Times, 20 Nov 2017

The longstanding "symbiotic relationship" between the People's Action Party (PAP) and the labour movement will become even more crucial as workers face economic disruption, Prime Minister Lee Hsien Loong said yesterday.

This partnership must be nurtured at the leadership level, which is why PM Lee said he has asked younger ministers to work more closely with the National Trades Union Congress (NTUC).

Each fourth-generation minister will take on a specific partnership with NTUC, and younger MPs will also be involved, he said.

"This will be a key testing ground for us to identify and develop future leaders, and to maintain the close partnership between the party and unions for succeeding generations," he said at the PAP convention in Jurong.

The party's beginnings were with the unions, said PM Lee, the PAP secretary-general.

Founding prime minister Lee Kuan Yew was lawyer and spokesman for the postal workers' union during a strike in 1953, winning its case against the colonial government. When he launched the PAP in 1954, many founding members were unionists.

The unionists carried the PAP into power, and many stood for election on the PAP ticket - a practice that continues today, he said.

Since independence, the PAP Government, unions and employers have worked together to make harmonious labour relations a lasting competitive advantage for Singapore, attracting investments and creating jobs, said PM Lee.

NTUC reaches out to workers at difficult times. On its part, the PAP makes policies with the workers' interests at heart, he said.

In the coming years, union leaders must work with the PAP to help workers cope with disruption and job losses, he added.

Later, PM Lee missed a step when going down the stairs after his speech and the party pledge. His near-trip prompted a gasp, then relieved applause from party members as he steadied himself and then waved to show all was well.

NTUC sent a larger than usual contingent to this year's convention. One of the 240 who attended was Mr David Tay of the Creative Media and Publishing Union, who said in a speech that unionists and party activists can work more closely together. "Coming together to strategise on joint projects may allow us to better understand the concerns and aspirations of all Singaporeans," he said.

Mr Tay, a journalist with The Straits Times schools team, suggested that NTUC and the PAP participate in each other's work plan seminars, hold joint dialogues and have unionists help out at Meet-the-People Sessions, while PAP activists help out at NTUC events.

Importance of two-way trust between PAP and the people
By Elgin Toh, Insight Editor, The Straits Times, 20 Nov 2017

Trust was a big theme at the People's Action Party (PAP) convention yesterday.

Prime Minister Lee Hsien Loong, who is the party's secretary-general, devoted major segments of both his English and Mandarin speeches to the subject, and concluded with a call to PAP members: "We have a deep reservoir of trust with the people. We must continue to deepen this trust, and never break it."

Why did he choose to focus on trust this year? There are two hints in his speech.

The first was his reference to the general election, which he said will happen in two to three years. "This is not so fast, but it is also not a long time away. The time to work hard is now," he said in Mandarin.

At the 2015 election, the PAP surprised even itself by improving its vote share by nearly 10 points, to 69.9 per cent. It reclaimed one opposition seat - Punggol East - and nearly unseated the opposition incumbents in Aljunied GRC, coming within 3,000 votes of winning there.

After such a stirring victory, it is human nature for the party's rank and file to feel quietly confident about the PAP's prospects.

Mr Lee's strong reminder that trust can be broken unless everyone continues to work hard may be his way of helping them gear up for the election, which must be held by 2021.

The second hint was his point that taxes may have to be increased in the near future.

Spending needs are growing due to, among other things, infrastructure investments and an ageing population requiring more healthcare services, he noted. Tax increases are thus not a matter of "whether" but "when", he said, using a phrase of inevitability that some would associate with counter-terrorism posters that read "not if, but when".

This is not the first time Mr Lee and his ministers have warned about future tax increases. But what is notable about yesterday's mention is that it appears in the section of his speech covering the Government's plans for the second half of its term.

Given that he also cited the goods and services tax (GST) as one of the difficult policies the PAP had implemented in the past, Mr Lee is giving everyone a heads-up that GST or some other tax may go up before the next polls.

Trust, then, becomes important, because a tough, unpopular policy - like tax increases - can be done with least damage to the Government only if the people trust the Government.

As Mr Lee said: "We must be upfront with Singaporeans, explain to them why we need to do it, get their support for what we need to do. And even if people may not like a specific policy, we must convince them that we are doing it with good intentions, and for good reasons."

His emphasis on trust in the PAP's "good intentions" indicates a deep appreciation of how trust works. Voters must believe not just that the PAP is competent enough to deliver on what it says.

They must also believe that the PAP wants to deliver, which goes one level deeper, and that the PAP is ultimately doing all this for what it believes to be the good of the people, which goes yet another level deeper. It is not doing it, say, for some cynical reason.

Further, Mr Lee spoke about another dimension of trust: A trust in policies at the national level as well as at the individual level.

In his Mandarin speech, he said voters have to not just see the PAP implementing the right macro policies, but also see it resolving the "unavoidable problems" that individuals face as a downstream consequence of those policies.

This is why the 2,000 PAP members PM Lee rallied yesterday play such a critical role. Through them, voters come to know the PAP as "a human, personal presence" - people who will "help you through your difficulties and improve your lives" - not as a "remote and impersonal government", he said.

But there was a form of trust not covered yesterday, that some will want to see the PAP espouse more of. While much was said yesterday about the trust people have in the PAP Government - which, of course, needs to be deliberately nurtured - more perhaps should be said about the Government's willingness to trust the people.

This also requires time and effort to build up, and can bring many benefits to the country's long-term well-being.

Greater trust, for instance, can manifest itself in a more participative form of governance, because that would indicate confidence in ordinary people to have good ideas, and to want to contribute them in a sincere way towards the shaping of policies for the better.

When the people trust the Government and vice versa, a sturdier foundation is laid for Singapore to move with confidence into a future of many uncertainties.

Singapore raising taxes: 3 burning questions on the impending tax hike

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