Monday, March 15, 2010

Review of GST

Malaysia has decided to defer the implementation of GST (goods and services tax or value added tax) for the forseeable future. They cited the burden and difficulty to low and middle income earners. A similar move by Hong Kong a few years ago was shelved for the same reason.

Why is GST, which is a part of the taxation landscape in the western countries, not acceptable to these Asian countries? I guess the key reason is the lack of a minimum wage and the wide disparity of income in the Asian countries. In this economic environment, GST will be a burden to the low income earners.

I have another strong objection to GST. It is a wasteful tax. It adds to the cost of doing business. The actual cost to business (and ultimately paid by consumers) is much higher than the revenue collected by the state. This situation applies to Singapore as well.

I suggest that GST in Singapore should be replaced by a flat rate tax of 4 percent on salaries and profits. A special approach will have to be taken for investment income (to be discussed separately). The employer can be allowed to recover the flat rate tax of 4% on salaries earned above $1,000 per month and will absorb this cost for employees earning below this salary.

Tan Kin Lian

8 comments:

  1. I'm a 63 yr. old retiree and dislike the term GST.
    GST to me is "GASAK SAMPAI TEROK" means "whack until broke"
    GST is a burden to retirees,housewives & those unemployed people.

    I avoid going to restaurants,
    The restaureneur buys all his groceries paying GST, now we eat at restaurants and surely the restaureneur will recover his GST from his cooked food. At the end we have to settle our bills with GST/Svc. Tax.
    GOT SUCK TWICE???

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  2. Yea, GST has a tendency to rise over the years, very soon we would have to pay 15%.
    We retirees and unemployed are the
    victims, while the Ministers are
    protected by pay increases every year.

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  3. I pity those retirees who depend only on their savings and FDs and interest for their daily living due to the high and still rising cost of living, GST and miserable bank interest.

    If their savings are not large (less than $100 to 200K), these can be depleted quite fast even if they lead frugal lifestyle and have to sustain for the next 20 years or longer.

    One solution may be to migrate to other countries to stretch their money. For instance Malaysia has the silver hair scheme (above X age) for foreigners. Deposit RM500K, inclusive of house to qualify I think. Not a problem for many Singaporeans if they sell their HDB pigeon holes and take out all their CPF. How's that? Welcome comments.

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  4. Ghim Moh ResidentMarch 16, 2010 12:33 AM

    Hi Mr Tan,

    I can inform you 1 good advantage of GST. Make no mistake, I do not like GST nor income tax.

    GST unlike personal income tax does not provide the government our personal information like wages or benefits or bonus from working. The government will have no way to find who they are actually taxing. Its less evasive in getting private information of its citizens.

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  5. To Ghim Moh Resident

    The trouble is that we have GST and income tax. The government already knows each person's income through income tax. So GST is another layer of hassle. It is a wasteful tax - it cause a lot of burden, cost and pain.

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  6. If you are rich, it is an honour for you to pay more income tax to help the poor.
    Asking the poor who can't afford to pay more is not right or logical.

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  7. Even rick ppl like Janine Tay of Retail Association also asked the govt. to reduce the GST during this recession so ppl will spend. Why can't the govt listen to the ppl & scrape GST during the recession?

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  8. Income tax is still better than GST, you earn more your govt will tax you more to help the poor.

    But GST is "blind" to rich and poor. After the "deaf frog", we should have a "blind bat"? This "bat" besides "blind" he is also a "blood sucker"...

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