Wednesday, November 16, 2011

Rates of GST

Here are the current rates of GST adopted in various countries:

Australia 10%
Canada 5%
Hong Kong (abandoned)
India (to be introduced in 2012, rate not decided)
New Zealand 15%
Singapore 7%
Germany 19%
Japan 7%
Sweden 25%
UK 20%

I am not able to draw any conclusion on this matter. I dislike GST and prefer the government revenue to come from income tax. But, it seemed that many countries are implementing GST.

My view: In Singapore's case, there is no need to have GST as the government collects a lot of revenue on sale of land and vehicle tax. Furthermore, welfare benefits in Singapore is quite low. We are in a similar situation as Hong Kong, which does not have GST. 

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7 comments:

  1. icedwaterNovember 16, 2011 7:15 PM

    Dear Mr. Tan,

    I'd like to raise a point of information. I'm living in Germany now and there are 2 tiers of GST depending on whether the good/service is considered as essential to daily life (e.g. food) or a "luxury" (for want of a more appropriate translation). The first tier has 7% GST and the second 19%.

    This is apparently a topic of constant debate in Parliament and can be illogical sometimes, perhaps due to commercial interests. For instance, fruit is subject to 7%, but fruit juice is in the 19% class. Ice-cream, gummy bears and potato chips are considered together with meat and cheese in the 7% class, but mineral water 19%. It's not a simple flat rate of 19% as you mention.

    I don't think we need to waste time in Parliament debating what goes into which category, so a flat rate might be more useful in some ways, but I can see the benefits of having a two-tiered GST.

    Thanks for collecting this information, though.

    http://www.focus.de/finanzen/steuern/mehrwertsteuer/tid-18933/mehrwertsteuer-wann-gibts-sieben-wann-19-prozent_aid_526918.html

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  2. yujuanNovember 16, 2011 8:55 PM

    Think the figure for Canada is incorrect. In the 90s it was something like 12 half per cent, can't be reduced to only 5% now.
    Even though Singapore has low income taxes, there are many other revenue based taxes, which added together made this country one of the highest taxed in the world.

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  3. Tan Choon HongNovember 16, 2011 10:18 PM

    Experts say GST is regressive. It impacts the poor whose income is supposedly tax exempt by making them pay anyway. Because the low wage earners spend practically every cent of their salaries, it follows that they are paying 7% income tax via GST where they paid no tax before.

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  4. Tan Kin LianNovember 16, 2011 11:12 PM

    Reply to icedwater
    Thanks for clarifying the situation in Germany. I do not like GST due to its complications - not only the problems that you have described but also the work involved in computing the amount to be collected and paid to the Government. It is better to rely on the income tax system, rather than GST. The argument that GST encourages savings is just a diversion.

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  5. KimiNovember 17, 2011 12:47 AM

    I don't like the GST policy in singapore too, as Mr.Tan said the social welfare in singapore is quite low and it's situation is as similar as HK. Nowadays I do shopping the items I wanted from HK whenever I go there for business trip.

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  6. hanglianNovember 17, 2011 2:57 AM

    I always wonder if there is no GST, will that 7% "saving" actually goes into the pockets of the people or the businesses selling the goods and services.

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  7. Tan Kin LianNovember 17, 2011 8:40 AM

    @hanglian
    In a competitive market, the retailer has to reduce the price by 7% if their competitors are doing so, to get the business.
    Some products and services are not transparent, so the merchant will pocket the 7%. But over time, the competition will come in to reduce the price.

    ReplyDelete