Singapore Settee

GST does not help lower income Singaporean

The Singapore Prime Minister wants to increase the GST (Goods & Services Tax) from the current rate of 5% to 7% and use the added income to provide help schemes to the lower income Singaporeans. While it is heartening to note that the government is now willing to consider more concrete help schemes instead of hodge-podge schemes, financing such help schemes by increasing GST is counterproductive.

GST is a consumption tax. People are taxed on the income they spend. The lower income would spend a larger proportion of their income on necessities and with the added GST, they would be paying more tax for the same amount of goods or services.

The Prime Minister is saying that this would not happen as the added income gain from the tax would be return to the lower income via subsidies so they would not be paying less. But in order for the lower income to pay less, the amount of subsidy provided has to be much higher - it has to take into account that the amount will have to include the amount added and this has to go on perpetually as once the amount of subsidy is reduced, the impact would be that much more harder for them. After all, it is expected that these lower income will not be able to gain much increase in their salary.

The Prime Minister has also said the income tax for businesses may have to come down to make Singapore more attrative for businesses. If this happens, the amount of GST would then help to cushion the government from the amount of tax it is expected to lose from the lower income tax. So how much more income is the government expecting from GST alone and how much lower will the new business income tax be.

Another issue with GST is that there are almost no exemption. Hospital charges and other necessities are charged GST. The government should review this and exempt those lower income from GST. For example, all 3-room HDB units could be exempted from paying GST for their light and water supply. This would immediately provide at least a 5% savings (current GST rate). This can also be implemented for the town councils conservancy charges.

We are all trying to help but we need also to make sure that in helping, we do not rob Peter to pay Paul. We must also continue to provide them a helping hand so they can break away from their current state.

But having said all this; there will always be those that are less than you and there will always be those that are better than you.

posted by JHG J Chang @ 2:19 pm