GST (or VAT value added tax) is one type of consumption tax. The other type of consumption tax is sales tax. I do not like both types of taxes. I prefer to have income tax, even a flat rate tax, instead of consumption tax. Between GST and sales tax, I prefer a sales tax as it can be applied more selectively, e.g. sale of luxury goods. GST is the worst among all the options. That is why I write against GST. Read this article for my views: http://tankinlian.com/admin/file.aspx?id=626
GST might be one mechanism to offset lost revenue from a lower income tax rate (and also to partly plug the leak through tax evasion) by clawing it back when the people consume their income.
ReplyDeleteUnfortunately for the low wage group, GST also sucks up 7% of their earnings as they spend practically all of it, leaving nothing for a rainy day. A typical worker earning $1000 pm stands to lose up to $840 which is a heavy burden not felt at the cash counter on a daily basis, but adds up to this big amount annually. While low wages are ostensibly exempt from income tax, in reality the GST squeezes revenue from the poor. Even a bowl of white rice has a GST component, just that it is not expressed in black and white.
Rich people have many ways to minimise their tax burden, but poor folks cannot escape the GST.