The Goods and Services Tax (GST) is a regressive tax. It takes a higher proportion of the income of the poor, compared to the rich. Most people felt that is is bad.
However, the proponents have put forward a few reasons why they felt that GST is good for Singapore. I like to state some of these reasons and point out why there are fallacious.
1. GST is a tax on spending. It is good to encourage people to save, instead of spend.
Fallacy: Most people, except the very rich, have to spend almost all of their wages to meet the daily necessities. They do not have any choice to avoid this spending. The tax hits them hard, by adding to their burden.
2. GST is an efficient tax, as it has a low cost of collection.
Fallacy: It may be low cost to the tax collectors, but it adds a high cost to the business to account for the input and output tax. Nearly all transactions have to be accounted for. The tax has to be computed for almost every transaction, adding significantly to the compliance cost.
3. By introducing GST, the government can reduce income tax and encourage rich people from around the world to migrate to Singapore.
Fallacy: The rich people do not have to pay income tax on their earnings outside of Singapore. We do not really know how much income tax that they contribute to Singapore, but I suspect that it is not that much. They did buy expensive property and in the process inflate the property prices and adding a burden to the local residents.
4. People can avoid income tax, but it is difficult to avoid GST.
Fallacy: Singapore has an efficient system of collecting tax and tax leakage is relatively small. We do not need GST to solve a non-existent problem.
5. The government needs to expands its tax base and collect sufficient tax to meet its obligations to the citizens.
Fallacy: The government already collects more than sufficient revenue from many other sources. It collects too much tax and have to make regular refunds. It is costly to collect the tax and make the refunds. Why not reduce or remove the tax in the first place?
Conclusion:
GST is unnecessary and harmful for Singapore. It has added to the cost of living and the cost of doing business. I hope to see, one day, that GST be abolished entirely.
However, the proponents have put forward a few reasons why they felt that GST is good for Singapore. I like to state some of these reasons and point out why there are fallacious.
1. GST is a tax on spending. It is good to encourage people to save, instead of spend.
Fallacy: Most people, except the very rich, have to spend almost all of their wages to meet the daily necessities. They do not have any choice to avoid this spending. The tax hits them hard, by adding to their burden.
2. GST is an efficient tax, as it has a low cost of collection.
Fallacy: It may be low cost to the tax collectors, but it adds a high cost to the business to account for the input and output tax. Nearly all transactions have to be accounted for. The tax has to be computed for almost every transaction, adding significantly to the compliance cost.
3. By introducing GST, the government can reduce income tax and encourage rich people from around the world to migrate to Singapore.
Fallacy: The rich people do not have to pay income tax on their earnings outside of Singapore. We do not really know how much income tax that they contribute to Singapore, but I suspect that it is not that much. They did buy expensive property and in the process inflate the property prices and adding a burden to the local residents.
4. People can avoid income tax, but it is difficult to avoid GST.
Fallacy: Singapore has an efficient system of collecting tax and tax leakage is relatively small. We do not need GST to solve a non-existent problem.
5. The government needs to expands its tax base and collect sufficient tax to meet its obligations to the citizens.
Fallacy: The government already collects more than sufficient revenue from many other sources. It collects too much tax and have to make regular refunds. It is costly to collect the tax and make the refunds. Why not reduce or remove the tax in the first place?
Conclusion:
GST is unnecessary and harmful for Singapore. It has added to the cost of living and the cost of doing business. I hope to see, one day, that GST be abolished entirely.
These are very valid points that are being neglected by the gov. Point 1 really hits hard for those retired, unemployed and poor, no income or no income and yet still being taxed. Don't understand why gov is still not listening, no heart, no compassion and no hope.
ReplyDeleteKin Lian, I propose you go to Hong Lim park to sell your message of anti-GST. They will make you president next time.
ReplyDeleteI bet you will not do it. No gut!
@2:11 PM
ReplyDeleteAdrian,
You must be a sick person to continue posting this type of insults for such a long time.
Mr Tan, please delete such nonsense comments from such sick people. No gut to put his name yet comment on others.
ReplyDeleteAdrian has been doing this more than 100 times during the past year. Sometimes, he post several insults in a day. He has plenty of free time and enjoy giving this type of insults.
ReplyDeleteI am all for GST and NO income tax because it is a system that is simpler and less prone to cheating. Income tax only tax on those honest salary owners. Businesses, the rich etc know how to claim max exemption and have other ways not to pay tax. The other group of 'small' businesses like hawkers, who do not keep good accounting records, also don't pay the right due taxes.
ReplyDeleteSmall business with revenues less than $1M need not handle GST and need not charge GST. It is good for them and consumers. Such a limit can be raised to say $3-5M to benefit small businesses.
For the poorer, we can eliminate GST for the necessities as done in most countries.
The gov can also give hangbo to the people as is done now.
What we need to challenge is the 7% GST tax. Should it not be less? Having an too much saving now, a surplus budget, it present generation subsidizing future generation. It is about as bad as a deficit budget with present generation eating into the wealth of future generation.
With so much collection of other taxes like COE, import car taxes, alcohol tax, cigerates tax etc, the gov should reduce and not increase GST.
I am all for a leaner government and a more vibrant private, operatives and listed enterprises, including the GLC, TLC and NTUCs.
If the gov is downsized, then you need too much direct, indirect taxes to have a balanced budget.
Liat,
ReplyDeleteIt is easy to tax business owners from the corporate profit. Just remove the exemptions.
Income and corporate tax is collected once a year. GST has to be counted for every transaction!
Don't worry about hawkers. Most of them are struggling. The few stall holders that make a lot of money can be easily tracked - if IRAS wants to do so. Otherwise, they cannot really earn much without setting up a company to employ people.
I think the two main reasons of GST in Singapore are
ReplyDelete1) The Government can lower corporate tax
2) The Government can lower personal income tax of high-impact professionals
This will encourage people and corporations to migrate to Singapore and hence create employement for all levels of society, from CEOs to cafeteria helpers.
I do tend to agree with Kin Lian about hawkers getting away with paying more taxes, but such cases can be easily tracked if IRAS wants to do so.
ReplyDeleteAnd I also know that some taxi drivers do earn much more than what they reported in their income taxes. Going by what some ofusually declare, it would be unthinkable that they would not want do any other job that can pay them much more. Why do they still stick to being taxi-drivers?
If anything, it is just a matter of whether the Government wants to do it or not. Take the case of Dr Chee's crime of using a few dollars of postage stamps illegally. How did they nabbed him? The answer is that when they want to put somdbody down, they have all the resources to do it.
That also brings me to talk about the recent cases of crimimal breach of trust committed by civil servants brought to justice. Are they telling us that only within the last two years or so were there such breaches, or did they just close one eye and let civil servants commit breaches without hauling them up? Sounds ludicrous!
If you want to tax taxi drivers, it is easy, as their takings are reported by the taxi meter. But, if they are not taxed, it is all right as they are already indirectly taxed through their rental rate. Quite likely, they do not earn enough to be in the taxable bracket.
ReplyDeleteMost people at modest income, e.g. office workers, taxi drivers, etc, are not likely to be in a taxed bracket. They are indirectly paying tax through the high price paid for their flats.
I am not convinced that low tax encourage companies and individuals to migrate to Singapore to create jobs for locals. They seem to be creating jobs for other foreigners on low wages.
ReplyDeleteI believe that the MNCs come to Singapore because of generous grants and tax incentives from the Government, and not due to low taxes.
Perhaps, I should add this as another fallacy?
Recall the government claim that the GST is (increased) to help the poor. And we know the poor has become poorer (relative to themselves and relative to others). If the government can get away with it, I trust that it will do more to help the poor.
ReplyDeletePanasonic come to Singapore probably not because of generous grants and tax incentives, nor low taxes. They also seem to enjoy paying low wages, whether it $500 per month as alleged by the China workers or $760 per month as claimed by the company. They are able to be cost competitive compared to neighbouring countries like Malaysia and it seems even China. With such companies taking up land and using up our resources, how do we expect to move up the value chain? How can we turn off the foreign worker tap? Wonder what our policy makers are thinking.
ReplyDelete