Tan Kin Lian's Blog: GST and inefficiency in our economy

Sunday, November 08, 2009

GST and inefficiency in our economy

Someone argued that as many countries (except Malaysia, Hong Kong and Brunei) have adopted Goods and Services tax, this must be a good tax.

I argue that GST is a bad tax for Singapore for the following reasons:
a) There is no need for GST as the government has sufficient tax revenue from other sources
b) It is more efficient to collect any needed tax revenue from income and corporate tax rather than GST
c) GST requires an additional expensive layer of administration and imposes compliance cost to business
d) Singapore does not provide the costly welfare benefits (e.g. pension, unemployment) that is provided in other high tax countries
e) It is a bad idea to lower income and corporate tax and replace by GST - just to attract some high income foreigners to move their tax base to Singapore.

We should not have followed other countries blindly in adopting GST. We could have stayed with our system of taxation and be a more efficient economy.

Tan Kin Lian

8 comments:

Anonymous said...: I agree with you. But to the govt, it is good. And to make it better (for the govt) they even raise the GST through the years.

Maybe they know something that you and I don't.

Or maybe the opposition or any NMPs should put the same argument in Parliament and it will be interesting to see what is the response.; November 08, 2009 11:21 AM
Anonymous said...: We can add on more reasons against the GST as follows:
1.The purpose of "broaden the tax base" is to target majority of people even most are drawing salaries just enough for housing and food. Whenever you consume in any goods and service, you have to be taxed.
2.The enormous amount of GST collection adds on govt surplus on the expense of paying more tax by people. What is the amount of relieve helps in terms of % we really don't know.If only a small portion were given for relief, where are the rest gone to? It seems the fat cats are still not satisfied with their super world class pays. The only easy way to satisfie them is GST collection.; November 08, 2009 11:53 AM
Anonymous said...: From the tax collection perspetive, the most important advantage is that you have opposite parties making submissions. By comparing and finding inconsistencies, it is quite easy to detect if there has been any cheating.

For income based taxes on the other hand, the government has to deploy a large amount of resources to detect those who are cheating on their taxes.

By imposing GST, the government therefore indirectly passes on the burden of enforcement onto business.

If you look at thr history of governance in Singapore, you will find many other examples of such clever "tai-chi".; November 08, 2009 3:21 PM
Anonymous said...: GST, which is based on consumption, provides a more stable stream of tax revenue to the government vs. corporate and personal income tax, which are subjected to economic cycle fluctuations.; November 08, 2009 3:35 PM
Tan Kin Lian said...: Some people say that GST is good for the government. Yes, this is true.

But the government should be able to see the wider view, and look for something that is better for BOTH the government and the people.

My complaint about GST is that it is wasteful to create another set of administration to collect tax that can be collected through income and personal tax.

Some countries need both types of taxes to collect enough money. This does not apply to Singapore.; November 08, 2009 3:56 PM
Anonymous said...: For lesser mortals, reduction of income & corporate tax, including offering tax incentives and tax holidays to MNCs, while at the same time increasing consumption tax (GST, ERP) may not make sense. But this regressive tax regime is perfectly logical and sensible if you're an elite whose income, wealth & bonuses are tied to GDP rate and asset price appreciation.

If you are a multi-million dollar minister whose pay is proportional to GDP performance, then you'll want to create a low cost environment to corporations -- that means low taxes, including low personal income tax to attract highly paid CEOs, CFOs and ang moh expats, and plenty of cheap labour. Even better is that most s'poreans are sheep and kia si, kia su -- they rather their neighbour die than to fight and take risk for themselves.

Not grumbling here -- just stating the real & stark truth -- the type that gives you a kick in the balls, as stated by the offspring of one of our elites.; November 08, 2009 6:27 PM
SD said...: To be honest, I never hoped for GST to be removed. I will be glad if the GST just remain as it is and don't increase to 10%.; November 09, 2009 8:03 AM
Anonymous said...: GST will never be removed as long as PAP runs Singapore. It is likely to increase because Ministers pay will have to increase because they are doing a damn fine onderful job. The 90% of the population support 10%.
We are the slaves and they are the Gods (God the father, God the Son and God the Holy Goh).

We are doomed to worship these Gods or we go to hell(the like of the opposition); November 12, 2009 1:39 PM