Comments

Entry: Brief Thoughts on the GST Hike Tuesday, November 14, 2006

Since my next exams is the Econs essay paper I thought it would be relevant to pass some brief comments on the GST hike -- just vague impressions and nothing fully developed, but some food for thought. Be warned.. econs not my best subject.

Looks like the government is trying to improve things for the lower income groups (I found it amusing how I heard that repeated about 10 times over and over again on the News last night as if to make sure we Really Get The Message). Ok, that's a good thing in principle. So apparently, it needs to increase its budget by increasing taxes. It has three choices -- increase direct income tax, increase direct corporate tax, and increase indirect tax (GST).

Increase direct corporate tax cannot -- foreign direct investment and business outlook will suffer. Singapore's economy very open, must attract lots of big MNCs. In fact PM Lee hinted that corporate taxes will be -lowered- (so maybe the GST hike will go towards compensating for that, as well as being channelled into safety nets).

Increase direct income tax, interesting policy -- it will hurt the rich more than the poor because our taxes are progressive (in terms of proportion, we tax the rich more than we tax the poor). So maybe they don't want to hurt the rich so much. Income tax also another problem: CPF. They may SAY our taxes are among the lowest in the world, but in my humble opinion CPF is just a way of taxing us and compensating for it with delayed and conditional welfare services -- just a matter of viewpoint. Anyway, CPF so high, plus income tax some more, our disposable income will shrink even more -- reducing consumption, hence bad for our economy.

So how? Increase indirect taxes lah. Indirect taxes are also interesting because they are regressive -- they hurt the poor more than they do the rich, because both the poor and the rich must pay the same amount of tax for a certain good, but that amount will take a larger proportion out of the poor person's income than it will for the rich. However, this can be offset by greater safety nets and services for the poor. This is where the gahmen's grand plan comes in. A lot rides on the quality and extensiveness of the services they will introduce. If the balance is truly tilted towards the lower income, then the impact can be minimized, and there may even be a net benefit for the poor.

So, don't get too angry about the GST hike just yet. It may be ok, depending on the quality of the package introduced for the poor. Or it may just make things worse if impossible conditions, red tape and bloated bureaucracy makes it difficult for the poor to access the new measures.

I'm not convinced it's the best way to deal with it though. I think what we really need is a comprehensive rehaul of the CPF/enforced savings system. Sucks to give up so much money that you can only use if you are dead or dying.

In the meantime though, I would urge everyone to look at things objectively. If we really want to help the poor more than we currently do, then something must give. There must be some kind of trade-off involved. Just wondering if we are trading off the right things. Seems like we are taking from the poor to give to the poor, right now -- bizarre.

P.S. For all those who nag me about my studies everytime I post here or on the tagboard, it's relevant to my paper and only took like 9 minutes ok? So don't scold! :)

71 comments


	debbielam March 21, 2007 01:28 AM PDT totally agree with you too. Gayle, form a party and I'll vote for you.


	Pok-a-mon December 27, 2006 10:02 PM PST Pop-by youir BLOG site from a reference point at MrBrownShow.com (yes, I was rather crazy about Mr. Brown Show, but feel that it has turned to be more and more commercialized than ever before). I read this GST thingy with great interest, and with all the comments here, I thought I just want to put in a statement that has been made by lots of poor old folks: "Garment gif Progressive package first, then increase to take back what the garment has given to you. This is not the first time lar, Singaporeans no stupid one, they just kia-si oni, no ball to talk the garment, just keep quiet".


	lennyboy December 12, 2006 04:10 AM PST came by your blog entry by chance, but here's something to add... i think e gst hike is a diversion to a more fundamentally significant policy change initiated by the government in conjunction with the revision to the penal code and other like activities recently... if i'm not mistaken, the MIW are actually intending to pull of a constitutional amendment WITHOUT referendum. as it is, people in singapore are probably the least aware of the rights to which they are entitled as well as those laws and statutes put in place by our constitution to regulate the government. this needs special attention, of which i cannot partake in as i am currently overseas but i remember reading it briefly on channel newsasia. can't find any info now but would be helpful if someone home could look it up...


	whybegay December 8, 2006 11:02 PM PST Gayle, you said, "Indirect taxes are also interesting because they are regressive -- they hurt the poor more than they do the rich, because both the poor and the rich must pay the same amount of tax for a certain good, but that amount will take a larger proportion out of the poor person's income than it will for the rich." However I don't see this as a problem actually because both groups are taxed according to how much they buy. I only see a problem when the poor's living condition become so bad that they turn rich and success envy, when they start to hate rich people because their despair make them feel life is very unfair towards them. So the important problem to me right now is to better the poor's living conditions. It is not just the effects of GST that we should be worried about, but more so on the general effects living in Singapore's society has on the different types of people who are most affected. Because after we have talk after GST affecting the one group of people, other issues that will affect others will also come up. Then people will make moulds out of mountains and distort anything to be seem as problems to them. Any little thing in life can be seen as a problem therefore it is important to recognise the crucial ones.


	Anthony December 8, 2006 02:03 PM PST I am just a random stranger passing by, after seeing your address mentioned by my sister's CLEO magazine as the 'best undiscovered blog'. I like your blog. Very intelligent and lucid. I agree with many of your opinions on Singapore. While I have many friends who hold similar opinions as to the governance and nature of Singapore society, many are either too cynical or too pragmatic to voice such views aloud. I particularly appreciated your post on the foreigners not being allowed to live in HDB flats. That was an eye-opener, and further proof to support cynics all over the world (hurray). Likely I won't ever know you, but I hope this bit of encouragement helps to keep your thoughts going and your voice strong. Truth be told from my impression of most blogs I came here expecting something 'poseur-intellectual' but was pleasantly surprised. :) Thanks for sharing your thoughts. And kudos for the lucidity and simplicity (felicity!) of expression, clear language is a greater indicator of an intelligent speaker than circumlocution. - Anthony, another like-minded individual.


	Papless December 7, 2006 09:02 PM PST COE prices are way down...thats the largest tax in the world...so naturally it needs to turn to GST again...other countries have only GST/VAT. Yes, ministers' pay (which is incidently the largest also in the world) needs revision once the GST is in place again... the poors' welfare from the GST is just a sweetener to make it looks good... they could have just kept the ministers' pay as it is & take the increase to the poor instead... for the kind of money they are already getting...there is no convincing who will not step up to join...


	OS December 7, 2006 03:10 PM PST Since you wrote this, 2 events had happened. 1. Govt announced ministers' salaries again lagging behind private sector (so ministers' salaries will go up again?) and 2. HK has rejected GST implementation. If we follow HK's lead, it appears GST is not really necessary. So why 2% more? Fund Shin investment losses as some suggested? Or fund ministers' salaries increase? Anyone can think of other good reasons?


	john riemann soong December 1, 2006 06:40 AM PST Personally, I think that sales tax is generally the more straightforward and perhaps more just option. Income tax has a downside - bureaucracy - and then we also people who often evade their income tax. The poor then perhaps should have a chance of being given refunds if needed. From my perspective, a 10% or 15% GST isn't bad if all other taxes were eliminated. I think my sentiment is like most people - it's not the fact that sales tax is being raised, or that perhaps sales tax is regressive. Rather, it is because of something, far, far, more pertinent. What is that old cry? NO TAXATION WITHOUT REPRESENTATION Where are the citizens' representation in government, pray tell? When only 600,000 citizens cast lots for the PAP this year, out of a population of 4.5 million? I'm also reminded of a certain fable, concerning a frog in a pot ...


	whybegay December 1, 2006 12:31 AM PST It is never possible to reduce the income gap as long as there are highly productive people and less productive people. So might as well help the poor.


	Am November 30, 2006 05:05 PM PST upping direct income tax would've been the best way, especially if they are really sincere about reducing the ever-widening income gap. but of course, they would never do that, for reasons too obvious to have to mention


	whybegay November 26, 2006 03:33 PM PST And michael who commented at SingaporeAngle, my deleted comment was, "And michael, quick run to Huichieh daddy before whybegay the tormentor come and snatch away your candy!" So there michael, go on and suck on it.


	whybegay November 26, 2006 03:14 PM PST Joshua I'm glad people like you got it, unlike some math-failed brain-dead morons commenting at SingaporeAngle about the GST hike. Maybe they, the middle-class don't get to claim back their 2% and they're pissed. They think they are the ones who are most psychologically affected. Pay a dime, help the poor, they should be proud of alleviating poverty instead of being whiny and selfish. They can now put their money where their mouths are and help the poor from their own pocket instead of always demanding others to do it for them.


	Joshua November 26, 2006 02:48 AM PST Uhm... I have some thoughts... Dunno if someone has expressed them already since I haven't read through all the comments posted here... But here goes... Using packages to help the poor helps to increase the likelihood that only the rich are taxed. Look at it in this way. I take 2% more from everything everyone buys in singapore. I return the 2% to the poor. But the rich is still paying that additional 2%. The rich is likely to have a higher net consumption amount than the poor. Using the income tax to directly take money from them is not that popular because the rich (cosmopolitan , or otherwise) felt that it is imposed upon them. GST allows them a limited choice; it allows them to decide if they wanna pay 2% more for that luxury car or to pay 2% more for a cheaper car. They are still paying but they have a wider range of choices on how much to pay... Moreover, since the rich spend more, they will be taxed more. Isn't that a brillant move by our gahment? =) P.S. I am not working for th PAP. I am just a broke, kay poh blogger. =p


	whybegay November 24, 2006 02:29 PM PST John, to suggest robbing more from the Rich is mere criminal mindset. The Rich already pays a progressive amount from the GST tax. To get what I mean, read the comments I wrote at http://www.singaporeangle.com/2006/11/nearing-eye-of-gst-hike-storm.html


	john maynard keynes November 24, 2006 01:10 AM PST In order to build a safety net for the poor, I would recommend an income tax (progressive tax structure) increase and a decrease in GST (regressive tax structure) Reason is simple. Recently, there was this Foreign Sharapova Talent who commented that Singapore's tax is very little as compared to his F-land. So why not to achieve the macroeconomic distribution function of equity, the government increase the income tax of the higher end of the spectrum and leave the bottom and middle ranged untouched. Since the rich has a lower mpc, and since Singapore's tax is so low in the eyes of these FTs, a small increase won't dampen their rampant infestation. I believe. Since Singapore is a small and open economy with a high marginal propensity to withdraw and hence a low multiplier, a small decrease in aggregate demand can be compensated by the larger amount of tax revenue (increase in 1% of income tax of the rich is like 2000 assuming a 200k annual income). This larger amount of tax revenue can then be channeled to welfare benefits (transfer payments) which will be spent more than kept. Since the poor has a high mpc. This I believe would be a better safety net. The effect of GST, as those who claim affects the rich as much as the poor, can thus be lowered for the greater good of society's welfare and standard of living. Since both benefit equally. This benefit is likely to offset the hike in income tax faced by the rich and aid the poor. This I believe would be a better safety net.


	The Human Battery November 23, 2006 03:02 PM PST Why are you people complaining so much? Look at me! I am a happy Human Battery living blissfully on my peaceful matrix island, governed by my all-knowing Matrix Master (MM). <B>Come my blog and pick the blue pill. You will be happy too :)</B>


	emigre November 23, 2006 11:46 AM PST You know what REALLY irritates me? LTA spending $34million building a tunnel at Fort Canning so that motorists can save 4 minutes of travelling time. Parliament should seriously cut down the budget for LTA if they have problems spending it on worthwhile projects. And if they have to ask what I mean by worthwhile, they should make me management and I will tell them.


	whybegay November 22, 2006 08:47 PM PST That's the spirit! And no more students with donation cans on "flag day" bugging people on the streets to donate! Tell them stop bugging you and to go get it from the govt! DONATION CANS AND BEGGARS ARE NOW OFFICIALLY BANNED!!


	Multi-Million-Air November 22, 2006 01:03 AM PST Now that the Govt is taking responsibility to help the poor by increasing GST 40%, from now on I will stiop donating to any charity organisations, not even those begging in the streets and at MRT stations. I will tell all of them to go and seek help from the Govt.


	freemason November 21, 2006 11:17 PM PST ginny: better still, ask any m'sian, thai, or indo'sian if they are want to pay RM1.2 million, THB5,529,000 or IDR3.96 Billion, for a 120 sq.m. cell, they will look at you, move on and never even remember you.


	pap Smearer November 20, 2006 04:30 PM PST If the PAP needs more money, any excuse will do. To all you slaves of Singapore, please don't comprain, just suffer in silence lah.


	Ginny November 20, 2006 04:23 PM PST "the CPF can be used to pay for mortgages" is the fallacy that leads to folks ending up with zilch for retirement. Thanks to the "asset enhancement" poison of the MIW, the then 40% set aside for every dollar we earned (now cut down mercilessly to 20+ % depending on your age), should have been growing the nest egg for a comfortable retirement. Instead, every other senior person you meet are asset rich and cash broke. As an example, some of the follks at Bedok Reservoir HUDC may have $660,000 for their $200,000 purchase at launch, but they will need to cough up at least $300,000 for a similar size dwelling. So the only option for those who have retired will be to "downgrade" to a 4 room or 5 room HDB flat. You call this progress?


	Ah Dang November 20, 2006 04:22 PM PST Hi Luddite, Just to highlight that I'm not an advocate of minimum wage system... But if the govt wants to prevent free-riding on the minimum wage system, they can reduce the import of foreign lowly-skilled workers. This will push up the wages of these pple as the supply is lesser now. And since the wages of these jobs are more attractive now, it will also entice more locals to work in these sectors. Hence, even if the govt subsidies them, at least i'm assured that the subsidy flows to the locals...


	Luddite November 20, 2006 03:20 PM PST To Ah Dang, Obviously this only applies to low wage workers - that goes without saying. u think what..the situation so extreme until the government got to pay for the salaries of all private sector workers? Duh of course not. Nevertheless, when we implement welfare policies or any policy for that matter, we want to make sure that our resources are used cost-effectively. The policy proposed by name will ironically result in companies paying an even lower wage to low wage workers than they currently do, since they know the government will fill in anyway. This means they will pay these workers less than what they even consider to be their competitive market wage. This results in the government spending an unnecessarily large amount on welfare - the government would be spending a large amount of money not only on people who, in a competitive market, were originally earning less than the minimum wage, but also on people who before the policy was implemented, were earning more than the minimum wage, but now earning less (due to crowding out of company spending). An efficient welfare policy would not only be 1 that targets those who really need it and not those who are simply free-riding, but also one that does not cause an increasing number of people to need welfare, simply because companies would rely on this policy to pay them less. It is simply put, an absurdly imprudent prolicy.


	Mick November 20, 2006 11:53 AM PST Good cover for increasing pay packages of ministers.


	Ah Dang November 20, 2006 10:10 AM PST To Luddite, The scenario u proposed below will only happen if there are a huge pool of workers and they have to be those really lowest skilled and least paid kind. Cos company will bid for talents and salary will have to increase (above the minimum level) in order to attract the right pple. Hence, if the minimum wage scheme will only affect the lower income sector (as the skilled sector will definitely be paid above the minimum wage, according to my argument above) it really wouldn't drain our reserves to the extent u envisage.


	Luddite November 20, 2006 05:17 AM PST To Name: Proposing a minimum wage policy in which companies are not required to pay minimum wage but where the government will step in and pay whoever does not get paid minimum wage is definitely not going to work well. Firstly, it seems rather strange to have a minimum wage policy which companies don't need to adhere to. Secondly and more importantly, your proposed policy will result in what is known as 'crowd out'. Say the minimum wage is X dollars. Companies will realize that the government will subsidize all wages that fall below X dollars. Regardless of whether companies pay workers X dollars or less than X dollars, the workers will still earn X dollars. This being the case, the companies would have every incentive to pay their workers far less than X dollars, and even pay a lower amount than what they currently do without the minimum wage. Because these workers will still get paid X dollars whether it is funded by the government or the company, they will continue to stay in the company even if the company pays far far less than X dollars, with the government paying the rest. This incentive for 'crowd-out' is extremely great and will result in the government spending an inefficiently large amount on welfare.


	Psudo November 19, 2006 05:07 PM PST What ever happened to helping the poor via voluntary donations to private charities? Isn't it shameful to have the government forcing you to help the poor because you will not do so yourself? Here in the USA we have the same problem. The government forcibly takes our money to give to the poor because they don't trust us to donate our own money to charities. However, every time income taxes are cut, donations to private charities increase.


	vanessa November 19, 2006 08:44 AM PST haha robin-hood, singapore style! jeez.


	Anibodi November 18, 2006 03:39 PM PST What ever the MIW may try to convince us, I think by now we know what they take us as and what how they are treating us. My family and I will never believe in them again. Once bitten, twice shy. Many times bitten, forever shy.


	Anibodi November 18, 2006 03:39 PM PST What ever the MIW may try to convince us, I think by now we know what they take us as and what how they are treating us. My family and I will never believe in them again. Once bitten, twice shy. Many times bitten, forever shy.


	You reap what you sowed November 18, 2006 10:59 AM PST 66.6% voted, 100% suffered! Don't forget to remember that you could have the power to change all these by voting intelligently!!!


	Ah Seng November 17, 2006 11:50 PM PST Wat u say abt a 1st world garmen spending 2% of its GDP on its citizen's welfare and 3-4% on healthcare? That REALLY show how much they care abt us. Also, my FT colleagues from our neighbours said they will not give up their citizenship b'cos they retire comformtably in the towns at a faction of our cost, not to worry abt PUB, bus fare, GST hikes... n now postage hike!!! (n wat-ever-hikes in the coming days)... How clever of them!!! BTW, do study well... get a gd result n move on to uni... you will need that toilet paper to be a FT in future 1st world countries...that wat i told my daughter(btw, she aso taking her "A" n told me abt 66% her local schmates intend to quit local rat race as they had been swarmed by FS - Foreign Scholars). Life can be better IF..............


	Aygee November 17, 2006 06:30 PM PST also, what surprises me, no acedemic or third-party has come up to look into the 7% GST rise. how will it impact singapore - from consumers, SMBs etc, how the rasied tax gains will be used to help the poor, etc.


	Aygee November 17, 2006 06:28 PM PST Interesting story from Macau. The overwhelming increase in gamblers to Macau has dramatically raised the Macau government's tax gains. Thus the Macau government announced that they will double their social welfare support, from less than 10% to 16.5% of their annual budget. They are also setting a minimum wage scheme. There's something we can learn from Macau on this. Now - with Singapore launching two casinos, and the raised tax gains, i wonder what are we going to do with the money. All along, this point was never raised in the feedback sessions on casinos. When GST comes up again for debate in parliament, I hope some MPs would discuss Macau's model as an alternative to raising GST.


	Name November 17, 2006 04:54 PM PST Here's a radical and unpopular (to the govt) idea: 1. Set a minimum wage (and include methodology on how this is derived). 2. Link minimum wage to low-income support. So long as you earn less than minimum wage, the govt will give you social support package. singaporeans don't need to go on the streets to protest when they don't earn minimum wage cos kind ol govt will step in and make sure you earn enough from the goodness of its stiff ol heart Doesn't that sound like a win-win situation? :)


	Name November 17, 2006 04:47 PM PST To Aaron: It's impossible not to COE even if you don't own a car. Every form of transport you take has to pay COE - be it buses, taxis or your own car. The only difference is whether you pay for it directly (you own car) or indirectly (bus or taxi), since COE represents a cost to the bus/taxi companies that they MUST pass on. Similarly for ERP - every business that uses the roads will pay for it, and pass on that cost to you.


	Live November 17, 2006 03:18 PM PST I am against GST hike for the benefit of the poor. I mean the govt tax the poor more so they can return the money to help the poor? How much can the poor gain from this if the money comes majority from them in the first place? This would also mean if sufficent amount is needed to help one poor, not many will be qualified. Income tax is the best way to tax the people since many FT are here working. The local loses their jobs to these FTs. So it makes sense for FT to contribute back to the society and help the poor. Fair and square. This is my personal amatuer opinion as I am no economist.


	a senior November 17, 2006 10:37 AM PST actually, income tax is a slightly more viable option, for now. while it's true it may hurt consumption, so would the gst. and in any case, domestic consumption isn't important to sg's economy; we're mainly export oriented. so if we're going to hurt a possibly not that significant consumption, why not choose the progressive option? admittedly though, raising income tax will only work for a short time. with the ageing population, the tax base from income taxes will decrease, so in order to off set that, there has to be a switch to indirect taxes like the gst. not too sure how grey our population is of yet though; maybe they're laying the groundwork for this. our focus on meeting changes of globalisation etc has been to make the pie grow bigger, instead of increasing the proportion of the pie that goes to the poor. thus theoretically, everyone is better off. but something like increasing the gst may actually be growing the pie (if they cut corporate tax, making for increased competitiveness), while decreasing the proportion of the poor, so it's a balancing act that can easily go awry.


	Ah Dang November 17, 2006 09:49 AM PST I have always thot our govt had it easy. 1) When the roads got congested, they come up with ERP (even tho it was proven that it dun work on CTE, they will never going to give it up... and why shld they since it is the perfect scenario they wanted -- price increase, dd stable 2) Reduce COE prices on the pretext of allowing more S'poreans to owe their car, yet increasing taxes on the usage. They is essentially a scam to lure u into buying a car, and since u will be lock in for for 10 years, they can slowly skim more $$ out of you 3) When the economy is doing well, it's all the efforts and results of PAP's hard work. When the economy is not doing well, the govt blames it on globalisation, the structural problems our workforce faces (hence, the re-training campaign). So it's really quite easy being the govt -- Economy good, take credit; Economy bad -- blame the world and of course, its pple. Sorry, i think i've veered too much from the topic..


	Hor Fun Man November 17, 2006 09:03 AM PST I feel so relieved that "educated non-elites" (i think) like KTM support "brilliant" schemes like COE and declares GST hike "not neccessarily bad". There is hope for Singapore after all! http://trisha-reloaded.blogspot.com/2006/10/2-hours-that-change-me.html


	adek November 16, 2006 10:10 PM PST yeah. and how much of that gst is really going to benefit the poor they that are ostensibly helping? and more importantly, how much is going to go into ministers' pockets?


	Anak Singkapura November 16, 2006 09:41 PM PST I admire your social conscience and sincerely hope you will stay on course to continue to champion the cause you espouse. I say this because I have seen enough fire-breathing old and young social critics, on whom I had pinned hopes for a more liberal democratic Singapore to emerge, compromise their principles for ambassadorship and ministership. Your comments on GST makes interesting reading. Economic theories and taxation policies are complex matters difficult to fathom. On seeking the advice of Economists, the late US President Abrahim Lincoln (??) is reported to have said that he wants Economists with one hand and not two because they always make a statement and contradict it with another by adding the qualification "on the other hand" so that sums up everything. May the good lord bless you to do exceptionally well in your exams!


	Aaron November 16, 2006 07:39 PM PST Dear KTM, I just re-read your entry and yes, you are right. You were stating the assumptions. Theory has always been constructed on the basis of assumptions, and I'm very concerned about the application of theory to real-life situations. I think you made me realise why I'm so against the GST despite the theorectical under-pinnings of economics. And, no need to thank me. For now, the Internet is my perfect idea of a public sphere in Singapore where people can say what they think freely and we can all debate and develop intellectually. If nobody contributes, nobody learns. :)


	Kway Teow Man November 16, 2006 03:38 PM PST Aaron, The KTM didn't say anything about the GST not being regressive. He was simply highlighting the assumptions. Thanks for explaining on behalf of the KTM why consumption taxes need not necessarily be regressive. :-)


	Richard November 16, 2006 03:09 PM PST The lower income brackets ppls will suffer most when the GST is raised another 2% next year,2007. oops... is not 2% anyway,is actually 2 divided by 5,multiply by 100, equal 40%increase


	Aaron November 16, 2006 02:25 PM PST Erm KTM, The COE is a brilliant example of an indirect tax, but you only pay COE when you buy a car. With GST, when you buy a plate of chicken rice or a diamond ring, you will be taxed. There is no way to avoid being taxed with the GST, unless you don't consume at all. If I want to avoid being taxed by the COE, I can just take a bus or cab. But, I cannot substitute my chicken rice for something else, like, air?


	Moridin November 16, 2006 11:05 AM PST whybeillogical: Just because the government say that they will make use of the tax hike to help the poor doesn't mean that they WILL put proper schemes in place. The leopard doesn't change its spots after all. Thus far, all their "reduce income gap" schemes are all one-off, like that monetary payout before the elections (can't remember the name, sorry) But at that time, if you remember, the government was saying that they had "excess budget" and gave the money out to everyone. Why can't they let this excess accumulate instead and make a really PROPER help-the-poor strategy is beyond me. In this sense, I do not believe that the GST hike is justified. Moreover, check out the MPs pay: LHL has 5 times as much yearly pay as Bush. Even normal ministers got more pay than bush does. Even though last time it was justified on the basis of extraordinary progress, people are growing complacent. Such salaries are sucking our tax money, and no minister bothers to take the initiative to take a pay cut (why should they). They live their lives as rich people, and do not experience first-hand how the common workers fare. They think that the economy is running well, but the income of the average man says otherwise. The government is indeed very efficient and still effective in most areas, but they are really making life hard for us to live. PAP is going back on words they declared 40 years ago. They blackmail the Potong Pasair people to vote for them, and leave them to rot when they did not listen. Such acts make me wonder: is the PAP missing the plot? They have no considerations about how WE fare... this GST hike is yet another example of that, hitting the middle-income peeps hardest, since they may not benefit from whatever stuff the govt set up to soften the impact. Perhaps the hike is good for the country overall, giving more budget to the govt to carry out more stuff. However, my impression is that they had billions in reserve. Ok, that is not supposed to be touched, but it is an indication of the budget available to them. Singapore is a small place. With large budgets, you can do much more than those big countries can, since they have to take care of much greater areas of land. Why can't they channel more to internal affairs?


	Just'Passin November 16, 2006 10:19 AM PST The "package" may be only a one-off thing. The "tax" is there to stay.


	whybeillogical November 16, 2006 08:40 AM PST Look at the bright side people: you can now contribute to the welfare of the poor by just shopping. No donations to charities needed.


	anonymous November 16, 2006 08:17 AM PST Are we sure that the poor will really get help? In Singapore, the definition of poor is very stringent. Not many poor can even qualify as poor by the authorities. They are branded fussy and whining people. Is this 2% going to guarantee no more Jumping jacks at the MRT? No more old folks dying in their deserted and bug-infested flats? I may be a Singaporean but not stupid. In fact, the 2% will hit the middle-poor most and this will shrink the economy further, not grow. The well-to-do don't shop in Singapore. In fact, some of them don't even stay here! But, I agree it's a brilliant scam. Kudos to PAP.


	Whowho November 15, 2006 11:26 PM PST 2% as mandatory donation to the poor? Its like saying Martians are living among us. Tell us what are the welfare plans which will be introduced. Its the same, say say, wayang, then after that, keep quiet and let them walk all over.


	gamabunta November 15, 2006 11:15 PM PST GST is a flat rate tax on consumption by definition. Theoretically, if the rich and poor and middle buy the same basket of goods an services, then the tax is flat - you are taxed at a constant proportion of your consumption (now 5%). So in THEORY, everyone is hit equally. However, unless data proves otherwise, it is conceivable that the tax is in PRACTICE regressive (hits poorest hardest) because those who have $$ can find ways to avoid the higher consumption tax, by flying to bangkok to shop, for instance, or starting a company and having one's income taxed after expenses, or having the means to buy in bulk and etc.


	alex November 15, 2006 10:35 PM PST After losing a few billion from the Temasek-Shin Corp deal and other brilliant investments, of course need a hike in GST to offset lah!


	Kway Teow Man November 15, 2006 10:14 PM PST Hello Gayle, Your claim that CPF is a tax is inaccurate because a large proportion of the CPF can be used to pay for mortgages. This means that CPF is almost like cash, only somewhat more illiquid (alright, somewhat is an understatement. Illiquid, period). When you're done with your exams, perhaps we can chat about your new ideas on revamping the CPF. It's not quite so simple. :-P There is a fourth way to finance the new "welfare" policies (at least partially) and that is to reallocate from other areas. Mindef may have some fat. ;-P With regards to the regressiveness of consumption taxes, you have to understand that there is an assumption that the poor and the rich buy the same good. May not be true in practice. The COE, for example, is a brilliant indirect consumption tax. :-)


	Name November 15, 2006 08:50 PM PST It is taxes such the GST that will generate the most revenue for the govt, because they are recurring - not once in a year like income taxes - but every day! A one- or two-cent increase will translate into millions of income for the govt. People don't find it a big deal because it's just one or two cents. But if all 4 millions Singapore spend one dollar a day and 1 addtional cent goes into GST, that will translate into $40000 in revenue per day for the govt. Multiply that by one year, it's $14, 600, 000! Very cunning!


	freemason November 15, 2006 07:47 PM PST GST hike is not robbing poor peter to give to peter. its robbing peter to give to harry...


	Whowho November 15, 2006 05:21 PM PST Who ever says GST will affect the rich as much as the poor needs their head check. The rich have the option of downgrading from eating in a 5 Star Hotel Restaurant to a fancy restaurant at Ngee Ann City and thus offset the tax increase. While the poor spends a much greater porportion of their income on essential items. Secondly, the increasein tax passed on to the consumer will be a lot greater than 2%. Supplier to Store - 2%, Store to consumer 1.07*1.07. Then there is cost to inventory changes (changing those price tags, updating lists, etc). Finally, safety nets? Welfare programs? No one is kidding anybody. There isn't any to begin with. Will the Government give unemployment money to those who got laid off? Will the Government provide housing as a form of social goods? Cost of Education is rising, transport cost is rising. What visible social benefit programs were there even with a 5% GST? Would we actually need the tax if billions were not lost in 1 year overseas in GIC investments? How much profits (so they claimed) overseas actually went into social welfare programs? And if economics, taxes are a form of deadweight loss, same like Monopoly (just think transportation). That is not to say taxes are entirely bad, taxes helped to redistribute income, and by the looks of things, the Government certainly need the money to help the economy of another overseas country.


	SimpleSandra November 15, 2006 04:44 PM PST <i>Lucky Tan wrote: "PM Lee govt said whole idea of this 2% increase is help the poor. There is little choice, the PAP govt cannot afford it otherwise."<?i> Obviously, they can lose billions in shaky overseas investments (and with little accountability for those involved), spend four million on a wireless lamp system and $100,000 on drain murals, amongst other things. And is it not true that Singapore's millionaires increase at the fastest pace in the world? Yet when it comes to helping the poor, they have to rely on regressive taxes that's hardly going to help narrow the social gap? Well, maybe between the middle/middle-lower and the low-income groups only.


	SimpleSandra November 15, 2006 04:32 PM PST While all the talk is about the rich and poor, the GST is probably going to have a larger effect on the middle and lower-middle income group. If anything, it's only going to push these groups lower down the social scale - thus widening the social divide rather than narrowing it, as what LHL said. As for the new progress package, it's pointless if it's a one-off help package because things like fare GST hikes are for the long haul. Also, any help for the poor has to be easily available and tangible - not towards one's CPF and stuff like that. But really, a country that's supposedly doing well (well, for the GLCs and the economy, if not for its local workforce) and has over $100 billion in reserves - it's not like the country's going to go bankrupt overnight if the govt chips in more to "help the poor", rather than turning to regressive taxes? (And while I'm at it, who's going to help those folks in Potong Pasir and Hougang, my dear leaders? Somebody's obviously being left behind, despite what I hear and read in the news.)


	Anonymous November 15, 2006 02:39 PM PST Every gets taxed the same is correct. But, the rich buy more in quantity and value ($$). Hence, the rich do pay more GST than the poor. CPF is good; but for a young person like you, you will think that it is not good because you have years ahead of you before you get the money. Gut when you get on in life, you will want more CPF. That is because you need it to pay for your home. As for some one who is in the late 50s, the CPF is their retirement fund. They need that to survive.


	Koko November 15, 2006 02:20 PM PST I think this is a bad decision if gahmen really want to help the poor. For that purpose, I think raising the income tax for higher earners will be more appropriate. But why gahmen don't take that step? I'm afraid the answer is that the gahmen needs the rich more than they need the poor.


	Lucky Tan November 15, 2006 11:52 AM PST Gayle, PM Lee govt said whole idea of this 2% increase is help the poor. There is little choice, the PAP govt cannot afford it otherwise. There is no reason not to trust the PAP, their track record for helping the poor and implementing policies that favors the poor speak for itself.


	gayle November 15, 2006 11:11 AM PST what i'm afraid of is that the GST hike is just a cover to compensate for the apparently-soon-to-come corporate tax reduction; a way for the govt to keep up its budget surplus while still becoming more competitive.


	Lucky Tan November 15, 2006 09:44 AM PST Yes our govt can be trust to take the FULL 2% to give to the poor


	whybegay November 14, 2006 11:28 PM PST The 2% GST hike is a form of mandatory donation to the poor. So those who complain about it are stingy people who are indifferent of the poor. So I hope there will be less people on the streets asking me for money.


	whybegay November 14, 2006 11:11 PM PST Something's got to give like priorities. Introduce 1 is enough for the very poor. No money no honey.


	Moridin November 14, 2006 09:27 PM PST For once, the only thing I agree with you is that the welfare packages they are gonna introduce is crucial. These days, economy good only benefits the rich and the other ppl's income either stagnant or decrease. See the common taxi drivers, they all struggling against rising oil prices, rising rent, road tax, etc, and now got GST hike, dunno how they are gonna survive. No matter how "long term" our PM claims his welfare package to be, there is still a limit to who it affects, and benefit for how long. How about they reduce all the MPs pay? THAT will definitely help, esp when u got MPs who are paid more than Bush. Methinks that even a rehaul of the CPF system wun help, the govt will just put another system in place that sucks more money from us. But thats just my humble, bias opinion.


	valerie November 14, 2006 06:17 PM PST i can only agree with you. my parents,both working in private sector, dont receive any pay hike despite the economic growth. both their pay are average, thus GST hike can be an extra financial burden on them. somehow, i feel the the govt, should look at income per capita of workers in singapore of all industries and not just specific or make assumptions that everyone in economy is receiving higher pay. it doesnt mean that an increase in economic growth=pay hike in all workers in all industries,espe private.


	life November 14, 2006 05:34 PM PST Hi Gayle, Firstly good luck for your A levels. For someone who experienced living in a community that welcomes all races and nationality (malaysia) to live under "one roof", i do support this move. I don't see this as an attempt by the gomen to segregate ppl of diff roots, more of safety measures. In Kuala Lumpur you can see many foreign workers, namely Indonesians, Bangladeshi and Myanmars living in the same domain as the local residence. and this has given rise to many criminal activities namely snatch thefts and blatant robberies in broad day light in which the culprits are mainly these foreigners. The authorities are now busting their asses tryign to curb these criminal activities by banishing illegal immigrants to their homeland. but with more than 2mil of them here in Msia, its easier to close one eye. Therefore nipping it at the bud is a better precaution.


	vesance November 14, 2006 02:09 PM PST Totally with you on this. Good luck for your exams!

Leave a Comment:

Name

Homepage (optional)

Comments