One argument put forward for GST is that it broadens the tax base. Why is it necessary to broaden the tax base? What cause the tax base to be narrow anyway?
Let us start with the primary purpose of taxation. A government needs tax to pay for the cost of providing public services to the community. They are many ways to collect tax. Prior to GST, the government in Singapore collected tax from personal income tax, corporate tax, vehicle tax, worker's levy, sale of land, stamp duties, cigarette and liquox tax, betting tax, estate duty among others. The tax collected from these sources had been more than sufficient to pay for the cost of running the government, leading to large budget surplus.
Why are so many people not paying income taxes in Singapore? Here is the most likely reason. Most of them do not earn enough to meet their living expenses, due to low wages. There is really no need to ask them to pay tax, as they are already taxed indirectly through low wages and high cost of living. Why ask them to pay GST and then give them GST offset packages?
There were some arguments that some hawkers have high earnings and do not pay tax. I believe that this issue has been blown out of proportion. They are not many rich hawkers and if the government wishes to tax them, it would be quite easy to do so.
Some countries have a broader tax base because there is a high wages, and everyone can earn enough to pay their share of the tax. The countries which has a broad tax base and levy GST are also those that provide high welfare benefits (which is not the case in Singapore). They also do not have the high revenue from sale of land and vehicle tax that is levied in Singapore.
I do not understand the argument about the need to broaden the tax base or to levy tax on consumption. These are the "secondary" arguments that leave to an inefficient and wasteful system, which is called GST.
Tan Kin Lian
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