America is suffering a big budget deficit. It is not collecting enough taxes to pay for the cost of government and the social programs. The deficit is partly due to the weak economy, which reduces the tax revenue and the cost of the economic stimulus.to boost the economy.
An important contributing factor (which the Obama Administration is now targeting) is the tax avoidance by American companies which use a variety of ways to avoid tax, using "tax vehicles" and taking advantage of tax loopholes. They shift their profits to countries with low tax rate, including Singapore.
By reducing our income tax rates to attract these companies, Singapore has to introduce the Goods & Services Tax to make up this shortfall. It has its other negative consequences for the people and for the cost of doing business. GST is another layer of tax and is wasteful and costly to administer.
America and other developed countries are taking action on the tax avoidance. While Singapore will lose its value as a tax hub, I believe that it is better to have a fairer world, and countries do not try to compete on offering "tax incentives" to businesses to reduce or avoid paying tax.
I hope that Singapore can go back to the days of higher income tax and removal of the wasteful Goods & Services Tax (GST)
Tan Kin Lian
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