Most business and hawkers have not used the 2 per cent increase in the goods and service tax (GST) as an excuse to raise prices.
A government survey of 1,300 hawkers across the island, has shown that more than nine in 10 did not raise their prices after the GST hike to 7 per cent which came into force on July 1.
In a written reply yesterday to a question from an MP in Parliament, who had asked if current measures taken to combat GST profiteering were enough, Trade and Industry Minister Lim Hng Kiang said the situation is under control.
He said: "Our study of other countries' experience shows legislation against profiteering is difficult and expensive to implement and the effectiveness inconclusive."
He added that the best way to stabilise prices is to encourage free competition. "When there are many sellers, and many buyers, prices will find their own equilibrium."
Mr Lim also gave an update on the work done by the Committee Against Profiteering (CAP). In the first two weeks of July, 49 complaints were received on alleged GST profiteering, surpassing the 30 complaints received in May. By Aug 24, it had received 115 complaints.
On top of investigating complaints, Mr Lim said members of the CAP have visited hawker and business centres to raise public awareness of profiteering.
More than 10 businesses and industry associations have also pledged to maintain price stability during the transition of the GST increase. For example, all the major supermarket chains have absorbed the GST increase for basic items for a period of time to help consumers in transition.
"The Government takes a serious view of profiteering using the GST increase as an excuse," said Mr Lim.
He also pointed out that prices here are also affected by price changes globally as Singapore imports most of its goods.
He advised consumers to "exercise choice" and "save by switching to cheaper brands." For example, a drought in Australia earlier this year had caused prices of condensed milk to shoot up to 11 per cent.
"Between house brands and the so-called premium brands, the price of condensed milk can range from $1 to $1.90 per can," said the Minister.
Mr Lim said that the committee is "not against price increases per se, nor is its job to interfere with the functioning of a free market and to institute price control.
"Our role is to ensure that businesses do not use the GST increase as an excuse to raise prices indiscriminately and unreasonably. Not all price increases are due to profiteering," he explained.
"In fact, price movements, both up and down, are important signals in a free market to tell producers how resources should be re-allocated to meet changing market demands. Price movements are happening all the time following local and worldwide supply and demand patterns. Since Singapore imports most of our consumption goods and raw materials, we are usually price takers rather than price setters.
"Of course, local factors of production, such as manpower costs and rental, will also have a bearing on the final price of the goods and services produced or delivered here."
On whether there is a need for tougher preventive and punitive measures, the minister said that legislation against GST profiteering is not necessary at this point in time.
"Our study of other countries' experience shows that legislation against profiteering is difficult and expensive to implement and the effectiveness inconclusive. We believe therefore that the best way to bring about price stability is to remove impediments to competition, and encourage free competition," he said.
"When there are many sellers, and many buyers, prices will find their own equilibrium. Many countries share this view. This is why few countries have such legislation."
