The Online Citizen

Is the Goods and Services Tax really fair?

February 19
13:56 2012

~By: Ghui~

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam has said that the purpose of the Goods and Services Tax (GST) is to ensure that the tax system is fair (see HERE). This statement certainly raises a few questions.
 
GST is a broad based value added tax which is levied on almost everything save for sales and leases of residential properties, most financial services and the export of goods and international services which are zero-rated.
 
This would mean that necessities such as food and healthcare are subject to GST. Given that rich and poor alike need to eat and that illnesses do not distinguish between income levels, how does the current GST system ensure that the tax system is fair? In fact, the less well off end up contributing a bigger proportion of their income under the current system.
 
I note that the government has introduced a raft of reforms to the GST in the form of vouchers whereby various incentives will be given to Singaporeans who fall within certain preset categories (see HERE).
  1. Cash amounts will be given to Singaporeans whose incomes fall within the bottom 40 percent and who reside in HDB flats or the bottom 15 percent of private home dwellers.
  2. Annual top-ups will be given to the Medisave Accounts of older Singaporeans who are above 65 and living in HDB flats or who are above 65 and live in the lower-end of the private property spectrum.
  3. Lower and middle income households will benefit from permanent U-Save rebates which will permit such households to offset part of their utility bills.
To the layman, these amendments are needlessly confusing. If the intention is indeed to alleviate the financial burdens of those who are less well off, why not just a simple straight forward GST exemption for necessities such as basic food items and healthcare? 
 
Secondly, the cash amounts and top ups do not seem to be in significant amounts either. In the examples Mr Tharman cited, the cash amounts will range between $100 to $250 per annum and “a 75 year old Singaporean will receive $350 if he lives in an HDB flat, or $250 if he lives in a lower-end private property”.  
 
I am not against GST per se. There is some merit to the argument that a combination of indirect and direct taxes are essential to ensure that Singapore remains competitive. However, for the tax system to be truly fair, the GST system must accurately reflect the purchasing power of the tax contributor. 
 
The GST is a consumer tax. The more one consumes, the more one pays. Theoretically, this would mean that the rich would pay more since they would have more money with which to consume. However, this would only work practically if GST is only levied on non essential goods because there isn’t an option not to consume the necessities. Take for instance rice. Rice makes up the staple diet of most Singaporeans. Both the rich and poor will therefore consume rice and you end up with a situation whereby GST is more punitive for the poor because he would be spending a larger proportion of his income on paying the GST levied on the rice.
 
I am not suggesting that there be a blanket exemption of GST on all foodstuffs. There is clearly a difference between caviar and bread. However, I do believe that there should be a list of GST exempt foodstuffs. Many  countries the world over implement this system. The UK for example provides a list of items which are zero rated for the purposes of VAT (para 3.1 of HM Revenue & Customs).
 
For our tax system to be more equitable, it might be more direct to simply introduce a list of necessities which are exempt from GST. This would go a longer way to aiding the lower income group than a raft of amendments that appear perplexing and complicated.
  • Agreeing

    Fully agree with the writer. Very good suggestions. 

  • rokawa

    yea since the ministers are having reduced pay now.
    pretty sure the country "earning" can be reduced too.
    if country is spending less on minister income, it can receive less income from GST. after all this fiscal year they mention 3-4b surplus and next fiscal year abt 1b surplus.

  • iVOTEahBENGs

    the GST/VAT must be taxed in all countries, but it must tweaked(in singapoor..xcuses was that tweakin the system cost alot of manhours) based on catagory…
    in thailand..gst is not taxed on medicines..so is china..in europe even food(takeaway foods is not vat charged), books/medicine is not gst chargeable
    so mas towkay..what says you? do you hav the capability to differentiate what is gst taxable or not?

  • Hirosue

    Have the writer read the response below, and can he find ways to counter the arguments that a multi-tiered GST system does not work as well? Is the writer more inclined to think that the UK economy is in a very good shape now?
    http://www.mof.gov.sg/budget_2011/download/Transcript%20Should%20we%20exempt%20basic%20necessities%20from%20GST.pdf
    A key component about taxation policies is to reduce the administration cost of implementing it. A mult-tiered rate system will lead to lots of controversy over whether certain items are GST exempt. For example, is spaghetti exempt? Are fish fillets and nuggets exempt? Are all the fishes out there exempt? Are restaurants exempt from paying GST?
    Already there have been tax reforms to push to reduce the tax complexity, and here we are proposing to make the tax structure more complicated than what it already is.
    http://www.oecd.org/dataoecd/48/34/35622908.pdf
     

  • AT

    @iVOTEahBENGs
    If so many items are going to be GST-exempt, then we have to raise the overall GST rate from 7% to 10% or 12%, or else how are we going to balacne the budget? Remember, corporate & personal income tax rates must continue to be reduced to enhance the competitiveness of our nation. Seems like you are asking for handouts without considering the greater impact on the nation.

  • iworkhardsometimes

    @AT
    the [balance budget]-excuse that you kept peddling these few days as a counter argument to suggestions others had made is a false dilemma since the basic position of the budget is a surplus position of 1.2billion (approx.)
    unless you can prove or provide a crediable estimate of sum of money the government is going to forgo in GST revenue by re-rating some items to 0% is going to be greater than 1.2billion,
    your [balance budget]-excuse isn't much of an argument.
     

  • Another idiot PAP Minister

    GST is not fair because of the PAP's incompetence as shown by its policies that depress wages and/or lead to escalating inflation.  The Government sells goods and services to Singaporeans substantially above actual cost, e.g., price of new HDB flat.  This can also be considered  a "tax".  Moreover, the Govenrment has massive (billions) financial resources available to it.  Why does it need to have such a high GST?  In Singapore the fairness issue in taxation should be viewed from two ways: (1) between Singaporeans; and (2) between the people and the Government.  Tharman only looks at the first and ignore the second.   Another idiot PAP minister.  
     
     

  • Neutral

    There’s no GST in HK & yet they managed to balance their much larger budget by including proceeds from land sales. GST rebates on the surface seem to offset the rise in prices but the reality is different as prices generally rises more than GST due to the multiplier effect – accumulating increases, to put it simply, are due to transport, manufacturing, marketing costs etc.

  • Ian

    Should be done on luxuries, non-daily neccessities like clothes and junk food, probably on a tier system which entertainment services should be taxed at a highest rate.
    Coming down would be clothes(non-designers perhaps?) as they are quite important but cannot be categorised as a daily neccessity.
    Lastly there are daily neccessities which should have 0% tax, like staple food, some dairys like milk, veggies and fruits as well as medical bills/medications.
    Of course this is just a suggestion and it is not up to me to give the exact details on how the gov't should implement it, i'm paying them to do this.

  • lim

    The author is almost a decade late. Just ask Steve Chia, he might remember this discussion in ST. Besides food, the other item brought up for discussion was public transport where bus and MRT both attract GST, though one may not see it due to the card use.
     
    The Government does not entirely have it wrong. A person spending $10k a year on GSTable products would pay $700. A poor person doesn't spend $10k a year. Most spending goes to housing which is exempt from GST. So the raft of GST vouchers would more than offset the GST. The MOF would have a good case to argue that this system of returns may be more efficient compared to exemptions (as the rich may buy the same products). 
     
    The problem is that most poor people don't see it the same way. The poor and most people see the returns and the GST payments as separate. It is also a tenuous link as there is no evidence other than that the Government says there is a link. Therein lies the rub for the Government.

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  • My Opinion

    GST hit those middle income families who have to spent substantially a lot of their income on essential items but yet do not qualify to receive enough of the offsets.

  • aSingaporean

    The UK VAT-exemption system is a very good argument for _not_ having exemptions. Otherwise, we go down the route of whether Jaffa cakes are cakes (VAT-exempt) or chocolate-covered biscuits (and therefore not VAT-exempt). Or whether Pringles are potato chips (and therefore subject to VAT) or if they are _not_ potato chips (and therefore VAT-exempt foodstuff). I think that our courts have better things to do than to rule on such issues. Our businesses also have better things to do than to keep lists of GST-exempt and non-GST-exempt foods, and to train employees on which is which. The only people who would celebrate are accountants. Better just to give direct monetary transfers to households in need, than to muck around with GST exemption on household goods.

  • tiredsingaporean

    Is the Goods and Services Tax really fair?
    Fair my ass! its a daylight robbery by the incumbent party to rip wahtever they can come across. How do you explain on your SP bills when they taxed you on the water and electricity and some more what fuck sewage toilet jumban fee and bottom line still got GST. All these goes into whose pocket?

  • iVOTEahBENGs

    AT
     Seems like you are asking for handouts without considering the greater impact on the nation.
    …………………………………
    am i?
    when you are sck..which you barely can afford to see a government doctor..you still need to pay a gangster fees to the ministers?
    when you need to send your kids to nusery or school..you still hav to feed the overpaid minister 
    and do TAKE note when your SONs serve the country by protectin their backsides includin their families..
     
    do the government pay YOU as a parent?so what NATION are you harpin ere? and what handouts are you discussin? did i or did i NOT says GST is a MUST

  • http://pinktitaniumcard.wordpress.com pinktitaniumcard

    That depends on how you define fair.
    Seeing how pretty much everything other than hawker center food has GST imposed on it, GST is certainly very fair with regard to consumption. Consumption is also precisely what the GST is taxing.
    Perhaps fairness of a consumption tax isn’t good enough. You want it to impact the poor less, become a sort of low-tier luxury tax. Rice, oil, bread…free of taxation. Chicken to caviar…taxed. This is certainly very unfair. In fact, it’s already unfair that businesses with a turnover not exceeding $1M per year do not have to register and thereby charge or absorb GST. This lets them sell at prices lower than otherwise. I don’t know why we aren’t pushing GST on them in the name of fairness. Administrative costs perhaps?
    If the rich should feel more taxation sting than the poor, there are ways to do that. For example, the income tax. The vouchers are marvelous. Understanding that the poor need financial assistance and that they are regular payers of the GST, the voucher waives their GST obligation on the basis that they are poor, and not on the basis of their consumption habits
    What do you think? Is the consumer tax we know as GST fair?
     
    Do visit my website at pinktitaniumcard.wordpress.com

  • BlackDot

    What the world tax system  needs is to restore back to what we call Ronald Regan Taxation System which is a flat income tas system!
    So assume the tax rate is 20% all incomes will be taxed at a flat 20%. All other indirect taxes like GST and all forms of indirect personal taxes be abolished.

  • Anonymous

    IMHO, we could exempt GST from unbranded essential goods (sugar, milk, rice, cooking oil)…so that high-end essential goods (imported top quality basmati rice, quinoa, etc) remains their current GST…while the poor get to save $. However, this could be disadvantageous for companies involved in branded essential goods as this would steer consumers away from their brands, with such a price difference. Therefore, current statistics regarding public & industrial (eg. mass production involving such essential goods) consumption is needed to move things forward.

  • Tan Kin Lian

    GST has the following negative impacts:
    > unfair to the low income
    > adds signficantly to the cost of doing business, due to the compliance costs
    > unnecessary 
    > confusing
    Singapore's competitiveness has been eroding over the years, compared to Hong Kong (which has no GST). My friend told me that electronic products in Hong Kong cost 20% less than Singapore. GST accounts for 7% and the compliance cost probably account for another 3% (or more).
    Singapore does not need GST because of our high taxes on COE, foreign worker's levy, property tax and revenue from sale of land. Hong Kong has revenue from sale of land (and not COE or foreign workers lev) and they do not need GST. 
    Furthermore, Singapore has little welfare – so there is no need for so much tax. Hong Kong has more welfare than Singapore and no GST.
    Singapore has a bad habit of creating a confusing and troublesome tax, like GST, and introducing complicated measures to offset GST. All this troublesome work just to create high operating costs in Singapore.
    There is no point in just removing some items from GST. I believe that GST should be abolished. We should follow the example of Hong Kong.
     

  • Bryan

    No, the Minister did not say that GST was a progressive tax system. In his presentation of the Budget to parliament, he distinctly said that GST was a *regressive* tax system, with a greater burden on the poor. But that it was counterweighted and more than countermanded by the income taxes and the innumerable programs to help the poor put in place, such that the tax and spending system as a whole is progressive, with the poor receivin more benefits than taxes.

  • Yeoh Lian Chuan

    The article is pure economic drivel, and it is disappointing that TOC has published it.

    This is what Jeffrey Owen, until very recently the OECD's Head of the Centre for Tax Policy and Administration,  has written about the subject of multiple versus single rates of VAT (see http://www.oecdobserver.org/news/fullstory.php/aid/3509/VAT_s_next_half_century:_Towards_a_single-rate_system_.html):

    "OECD economists have long supported the view that, all things being equal, a broad base, single-rate VAT is the preferred tax approach …

    But what about equity and redistributive issues? After all, many countries justify reduced rates as a way of not penalising the poorest households for buying daily essentials, since these households spend more of their income on food and clothing. However, research on the merits of reduced rates suggests that they are rarely effective in achieving distributional objectives.

    Reduced rates are not an effective way of alleviating the tax burden on low income individuals. Indeed, the wealthy also benefit from reduced rates and, as they consume more, they benefit more too. A more effective policy would be to apply a single VAT rate and to implement compensatory measures that are directly targeted at increasing the real income of poorer households …

    In addition, a single standard rate decreases the cost of administration whereas multiple VAT rate structures with numerous exemptions make compliance more difficult for taxpayers and for tax administrations. Furthermore, they may lead to legal uncertainty, as similar products can be subject to the standard or reduced rate depending on their nature, as one famous UK case on whether a potato crisp should be taxed at the same low rate as a biscuit showed. Very recently a French high court decided that margarine should be taxed at the standard rate instead of the reduced rate that applies to butter, on the basis that public interest requires favouring dairy products. Such disputes can be time consuming, and open up opportunities for lobbying and unwarranted tax planning or avoidance …

    Political leadership is the value-added ingredient needed to make such reforms happen."

    The last point by Mr Owen et al is spot on.

    The Government can either do the right thing and show political leadership, or it can follow proponents of unsound and stale ideas, long ago debunked.

    I forward am happy the Government continues to do the right thing.

    And in this regard the Permanent GST Vouchers are a great step forward. I fully support them.

  • My Comment

    The rich do not bother with GST and the very poor get most of the offsets.

    So, it end up with the broad spectrum in the middle getting all the shit.

  • Jimmy

    Yeoh Lian Chuan
    19 February 2012

    In addition, a single standard rate decreases the cost of administration whereas multiple VAT rate structures with numerous exemptions make compliance more difficult for taxpayers and for tax administrations.
    ——————————-
    Same goes to personal income tax with many different reliefs & the tiered progressive tax brackets for high income earners for different situations and corporate tax schemes for different sectoral players & income sources. 

  • Overseas sg

    Should follow Australia where there are basic items like milk is GST free.
    See this website
    http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/00221985.htm&page=9#P258_15879
     

  • iworkhardsometimes

    @ Bryan
    to be fair to the author or the article, Ghui did not explicitly state that Mr Tharman said the GST is not regressive.
    and Mr Tharman did say in his budget address in parliament that GST as a standalone system is a "flat" tax and therefore regressive.
    conclusion, Mr Tharman and Ghui both agree that GST is regressive.
    Mr Tharman thinks that although GST is regressive on it's own, GST cash offsets for the less well off makes the whole tax system fair when all the components are taken into account.
    apparently the author, Ghui, either disagrees with the 'method of delivery' to make it "fair".
    and the main argument is advanced from the word "confusing", which I do not think it is a strong one.
     
     
     

  • iworkhardsometimes

    correction, last part:
    Ghui disagrees with Mr Tharman on the 'method of delivery' to make it "fair" and the main argument is advanced from the word "confusing", which I do not think it is a strong one.
     

  • Why charge GST on Real Money?

    Lately, people began to realise that our PAPer currency, the legal-tender Dollar notes, are not real money. It is merely pieces of paper with numbers on it i.e. $2, $5, $10, $50, $100, etc, printed by Central Banks and with IMF mandate, these notes must not be backed by Gold. Therefore, people soon realise that the Dollar notes that they are earning (as salary), spending & saving, are not backed by anything but thin air. Hence, PAPer currency is bogus money and will worth(less) every day… The question here – I decided to exchange my bogus Dollar PAPer currency from my savings account into Real Money such as Gold & Silver. I bought many ounces of pure Gold and many ounces of pure Silver but was charged with 7% GST!!! What on earth has GST got to do with this when I am merely exchanging from bogus money (PAPer currency) into Real Money (Gold & Silver)?? GST must not be charged on Real Money because it is neither Goods nor Services… period.

  • No GST on acquiring Gold & Silver

    Please remember this – Only Gold & Silver is Real Money, and the rest is Currency. Say NO to 7% GST on Gold & Silver.

  • mice is nice

    maybe complex & confusing policies are the scholars way of selectively highlighting the positive aspects of those policies while trivialising the negative ones?
     
    its this method of making things complicated that the common folks & maybe even quite sophisticated ones being able to make a strong case that something somewhere is not right, a tactical move (advantage?). i remember people who bought the toxic investments or sold them also dun really know what's it about, citing complex clauses. and some of the clueless ones are lay people (supposed to know but dunno), IIRC.
     
    its situations where one admits one does not fully know, that opens a window of opportunity for others to take advantage by asking to be trusted- trust based system. simplifying things makes it harder to conceal ugly truths & facts?

  • blacktryst

    I can tell you that the GST system is really one of the more fairer taxation options. It is extremely hard to craft a taxation system that is balanced and fair to all society. However having said that, I would like to have the GST eliminated Or slashed for essential goods and services like essential foodstuffs (e.g milk, rice, eggs, bread etc) and  transit passes for students and elderly. Also some healthcare services like doctors consultation fees and some medication should also be exempt from GST. 

  • andrew leung

    PAP must implement a graduated GST +/- 3% for essential / luxury goods and moderate inflation and cost of living. Minister Lim Swee Say must give 100 ideas to upturn the downturn.

  • andrew leung

    PAP must allow those who cannot pay tax to be tax free. Those who can pay 50% tax must be taxed. If Singapore is too expensive PAP must not try to ignore the situation and give fake statistics.

  • Balanced Budget

    Singapore spent 25 percent of her budget on defense which is ridiculous since it has a basically conscript army that get a pittance allowance. Much of the money is spent on providing the regulars with a very high pay especially those in senior ranks. There is definitely room to slash the defence budget by trimming those excessive pay of the regulars. Does it make sense for a family on a $1500 combined income to pay GST so that a BG can get $30K per month???

    There are also a lot of white elephant type of projects and systems in defense consuming tons of dollars per year without delivering any tangible returns. All these should also go.

  • my7percent

    Who says the poor do not pay tax in singapore? EVERYBODY who has an income, rich and poor, pays a minimum of 7% tax(GST). The govt likes to brag that our Income Tax is one of the lowest in  Asia.It says that our income tax is 'comparable' to HKG. We may a couple of points lower than HKG, but , remember HKG does not have GST.They also have budget surpluses and their politicians are paid a fraction of ours.They were managing a population of 5 million people years ago WITHOUT 3 Ministers-without-portfoilio etc AND to top it all, they have/allow street demonstrations.Do you see their country going down the drain because of that? Their airport, sea port, MTR, infrastructures, to name  a few, are just as good if not better. Entrepreneurship is alive and well.Their govt does not have a finger a every pie, unlike here in Singapore. When our govt involves itself in business and run them like private corp with profit as the only motivation, then it basically,with its strong financial backing, kills the competion and entrepreneurship.

  • lim

    With due respect, I disagree with Mr Tan Kin Lian's link on competitiveness & GST. All exported goods are zero-rated. Tourist shopping in Singapore still qualify for tourist refund scheme as well. International competitiveness has zero-impact from GST.
     
    I suspect the cost inflation in Singapore has little to do with GST but more so on overall foreign-plus policies. Hong Kong has access to an influx of cheap chinese goods that can keep prices down. Importers and local retailers see Singaporeans as cash cows so prices keep going up.
     
    The prime example is residential property prices. Residential property is exempt from GST yet prices have gone up 50% in 2 years. Little impact from GST but many can guess the root cause of this inflation.

  • Carl

    I think this is nit-picking on the part of the author. Let's give credit where its due. The move to make GST transfers to the poor a PERMANENT feature is truly a step in the right direction.

    We all know GST on its own is regressive. And i, like many others, have been very upset by the impact of this regressive tax on the poor. But by introducing permanent transfers that more than offset GST payments made by the poor, I am really happy the government is finally addressing this issue.

    What can be done to improve this is boosting the cash portion and slowly increasing the payments made depending on the surplus (yes, I know the government cheats by excluding land sales, but that is another argument entirely).

  • Bent

    Remember how GST was pushed, its a tax revenue to help the poor. Same as Casinos…revenue.
    In the end, nothing much to poor, and with so much surpluses, they also not doing much for the people!!!

  • lim

    @ balanced budget. The figure is actually 20.8% of SG government operating budget on defence. Its 15.4% when one counts in financial transfers (excess). Its also 3.76% of GDP. Comparatively, US spends 20% of its budget on defence. That's when it has to borrow to fund 40% of its expenditure. Also its 4.76% of GDP in US case, same year.
     
    US no conscription yet so high expenditure. Singapore got conscripts = higher expenditure to house conscripts, manage IPPT, reservist etc.
     
    As important is that one can actually see where the expenditure goes. Besides conscript cost, equipment purchase can be seen. Tanks, IFVs, artillyer, fighters, helicopters, AWACS, tankers, frigates, submarines are all tools of war. Some may think white elephants but most people know the poison shrimp strategy works.
     
    Also, DSTA/Mindef had major plus projects in management experience compared to some neighbours e.g. Australia (air tanker, AWACs late at cost overruns, submarines don't work, under utilised etc). Many projects are came in on-time, faster and at less cost to those monitoring defence matters. Air tankers, tanks, submarines bought second hand to save cost. Many regional armed forces have far less high end equipment per dollar spent.

  • Godwin

    How is taxing a person for spending money when you don't provide anything in return ever fair?

  • Saycheese

    Cash givebacks, vouchers and U-Save rebates are more effective in buying votes especially in an election year. The MIWs view the poor as those who cannot make it in our meritocracy and are therefore too dumb to make the connection that those cash topups, rebates and whatever is the left hand returning some of what the right hand has taken but instead will view them as handouts from a good party that they are obligated to vote for. And in all likelihood, with dwinding support for the PAP, the MIWs will rebate higher quantum to regain some support from the daft; after raising the GST of course.

  • Balanced Budget

    @lim
    I personally find spending 25% of the national budget on a demo army hilarious. Singapore is going the way of the ancient State Of Sparta if this mentality persist.
     
     
     
     
     

  • lim

    @ balanced budget. Its actually 20.8% in SG. US = 20%. Not much difference per capita basis.
     
    Historically, Sparta did not collapse due to defense overspending. Sparta's end came when it was conquered by Rome, a much larger empire.

  • jonny

    Fully agree. Fairprice housebrands of basic necessities should be GST exempt. Opposition should keep on hammering on this literally bread and butter issue.

  • lim

    Some opposition has been hammering away at getting rid of GST coming to 18 years this april liao (since GST introduction on 1 April 1994). 19 years if one counts since white paper.
     
    The standard rebuttal from Government is that Rich also buy NTUC housebrands (they may send their maids to do it). If you exempt it, Rich earns also. In fact, Rich buys from from NTUC than poor. And if the Rich buy from Colds Storage, Cold Storage will complain why no exemption for Cold Storage, Sheng Siong, Safe etc. Then Gahmen will then say, best way = GST voucher. Directly give to poor = no Rich get exemption lah. Can't stop Rich from buying housebrands either.
     
    No rebuttal to that other than my previous = Hard sell.

  • lim

    Politically, one got to admire that move. Fix it as an exemption into the system = once off feel good boost. Give GST vouchers every year… Poor say Gahmen give money every year. No wonder, Other Gahmens with VAT/GST all looking at Singapore and saying why didn't we do that first….

  • Balanced Budget

    @lim
    There are many ways to look at figures. I look at the expenditures tables. Defence take up $12.3b out of a total expenditure of $48.1b. So it is slightly above 25%. You may try to creatively argue that it is 20% but it does not change the facts.
    Also, Sparta already declined before the Roman came in. The key reasons are the decline of the sparta population and increase of the helot (non-citizen) population (sounds familiar) and a major war they lost to a neighbouring state led by the Thebans. Along the way, numerous revolts among the helots drained the energy out of the state.

  • lim

    http://www.singaporebudget.gov.sg/budget_2012/revenue_expenditure/attachment/05%20Government%20Expenditure%202012.pdf
    $48b because one minus off special transfers and financial transfers. This includes all the GST voucher offset etcs which still form part of the cost. Total exp = $59b or $79b if count financial transfers (not actual spending).
     
    The lesson from Sparta's history is don't fight wars. That doesn't mean no defence. From history, countries with no defence get taken over. Those are far more cases and includes Tibet, Sikkim etc. Countries that maintain defences no guarantee but often last longer.
     
    Countries that failed eg Kuwait, ultimately managed to survive but went thru occupation bought safety. Kuwait spent 10% of GDP in 1990s to buy safety from big brother. Iraq certainly laughed until Big brother went in. You think Big brother want to protect Singapore like Kuwait without Singapore paying protection fee?

  • http://Website(optional) iworkhardsometimes

    @ lim

    first of all, i find it hilarious that u two actually went along with all that squabble over 20odd% when u did not even justify why singapore have to follow US in defence expenditure expressed in %.

    a case of monkey see monkey do?

    US as an example is not even relevant, US is a superpower with military bases all over the world, singapore is a red dot, the role each has to play on the global military scene could not be more different.

    a case of cherry picking a convenient example to suit an argument?

    why not use an example which is more relevant to singapore, comparable countries which would realistically go to war with singapore.

  • http://Website(optional) iworkhardsometimes

    @ lim

    secondly, u said:
    “US no conscription yet so high expenditure. Singapore got conscripts = higher expenditure to house conscripts, manage IPPT, reservist etc.”

    i am baffled by your wild argument, u better be able to prove that conscript army is more expensive than full professional army.

    the idea of conscription in SG has always been that we cannot afford a full time professional army of the same size.

    to say that cost of conscripts+watever releavant conscript expenses in total sum > professional army of the same number

    is, pure nonsense.

  • lim

    Actually, no to that of following US. I'm just highlighting that the expenditures aren't really that surprising nor surprisingly high. Singapore defence expenditure is probably based on local needs rather than US policy.
     
    Cherry picking would be to ignore that 3.76% of GDP as a defence expenditure is not very high. US defence spending at the height of cold war reached 9% of GDP (or 6% during Reagan years).
     
    A more reasonable explanation is that social security expenditure is not part of Singapore Government expenditure. In most countries, social security (eg Australia, US etc) are included in Government expenditure hence the lower defence %. Hence taking a benchmark of government spending to argue needs to be clarified first.
     
    Secondly, it ignores economies of scale. When one buys less, a small country would have to spend more.
     
    Lastly and most importantly, it would take a very long discussion on force structure to explain why the current military structure is in place. Nothing on this thread does any justice to the level of military balance required to maintain military security in Singapore. A simple reading for an initial basic understanding would be Tim Huxley's landmark book.

  • Kumar

    lim 20 February 2012

    Actually, no to that of following US. I'm just highlighting that the expenditures aren't really that surprising nor surprisingly high. Singapore defence expenditure is probably based on local needs rather than US policy.
     
    Cherry picking would be to ignore that 3.76% of GDP as a defence expenditure is not very high. US defence spending at the height of cold war reached 9% of GDP (or 6% during Reagan years).
     
    ========================================
     
    First, u say u r not following US, then you go ahead and compare our defence expenditure to US. We are not in cold war now or Reagan years now. What the f r u comparing?
    Our defence expenditure 3.76% vs US 4.76% when US is superpower with  huge military commitments overseas? Japan under US security umbrella. US also committed to South Korea & Taiwan. Support of Israel in Middle East. Wars in Iraq & Afghanistan. Support to some Eastern European countries against Russian influence.

     

  • lim

    As to the idea of conscription, that's intentionally changing my words and facts.
     
    Conscription is part of Singapore's expenditure. That's a fact. Singapore has to pay for conscription. That's a fact. US does not need to pay for conscription. That's a fact. It used to pay for conscription, that's also a fact.
     
    The simple comparison is that Singapore defence budget includes conscription cost whilst the US doesn't. That's also factual. If you can't understand that, that's your problem, not mine.

  • Kumar

     lim 20 February 2012

     The simple comparison is that Singapore defence budget includes conscription cost whilst the US doesn't.
     
    =========================================
     
    So? Still defence spending, isn't it? As a % of GDP, the tiny red dot is still spending close to superpower. How do you justify that?

     

  • andrew leung

    People feel that their tax dollars are being invested in lemons. They are troubled and vexed. No money for bread. Mr Dhanabalan must confer the nations highest award for best investor to Temasek and benchmark their performance to Global Sovereign Funds to allay fears of negative perception. He should advise the most powerful woman in Singapore to take up Politics and shoulder the burdens of Finance Minister/PM or President in the future for the sake of the nation and Temasek self renewal.

  • Balanced Budget

    @lim

    Bottom line is spending one dollar out of every four on defense in Singapore is insane no matter how you argue it. look at Taiwan with more serious defense requirements. Taiwan is actually going to do away with conscription!!!

    We have in most likelihood overfed the poison shrimp that it now turn into a over bloated shrimp.

    Nobody is arguing that you cut defense totally but it cannot persistently take the lion share if the nation expenditure year in and year out. It sap the vitality out of the country. Look at the Soviet Union, it build a massive military machine but a third world economy.

  • Kumar

    Balanced Budget 20 February 2012

    Nobody is arguing that you cut defense totally but it cannot persistently take the lion share if the nation expenditure year in and year out.
     
    ====================================
     
    Dun forget, the military is also a political tool:
    1. Inculcating "yes sir" attitude; never ever question superiors. After 2 years, people don't bother questioning the government as well
    2. The military is a parallel economy providing jobs
    3. If military service were to be reduced to 1 year, the economy cannot absorb the new entrants into the labour force. Unemployment will creep up.

     

  • http://Website(optional) iworkhardsometimes

    @ lim

    well, apart from

    1) stating the obvious
    2) repeating the word [fact]
    3) claiming that your opponent does not even understand the obvious

    you have not made any counter argument in reality, therefore your objections are merely verbal.

  • http://Website(optional) iworkhardsometimes

    @ lim

    my point is simple,

    if US replace part of it’s current professional forces with conscripts, with all other things staying constant, the total cost of the defence budget will go down.

    lets be reminded again what u said:
    “Singapore got conscripts = higher expenditure”

    it means:
    1) if singapore do away with conscripts, the cost will be lower

    or

    2)if singapore replace conscripts with professional soldiers 1 for 1, the cost will be lower

    which of the above is more likely to be what u meant?

  • http://tanchoonhongcreative.blogspot.com Tan Choon Hong

     
    GST is simply a mechanism to partially offset revenue lost through income tax evaders by clawing it back when they consume it, which happens sooner or later. Whether it is daily necessities or luxury items like holidays, cars and homes, no one escapes the tax collector.
     
    It also allows a lower income tax rate which attracts foreign talent, but makes up for some of the loss by collecting it at the consumption stage.
     
    Unfortunately for the low income group, GST sucks off 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, but adds up to this big amount. While low wages are ostensibly exempt from income tax, in reality the GST is a heartless way of squeezing revenue from the poor. Even a bowl of white rice has a GST component, just that it is not expressed in black and white. The GST offset is therefore not a gift from the government, but a refund of an unfair tax practice, and after the government has rolled your money to earn some interest during the preceding 12 months. 
     
    GST can be said to be a regressive tax which a progressive administration like Hong Kong has seen fit not to implement.

  • may all be well and happy

    fair my foot!!!

  • Fish

    Hirosue, I do not think that the state of the economy in the UK is due to a multi tiered tax rate…. Separate issue. Australia has the same system in place.

  • To Yeoh Lian Chuan

    There is certainly merit in what you say but you are also one sided. It seems that you and the writer/TOC have polar points of views. Somewhere in the middle would probably be what's best for Singapore. TOC's points are excellent and fair but then probably idealistic. But still, its good to discuss given that the budget is just out etc etc. Your points are based upon studies done in a few countries which may or may not apply to our context. At the end of the day, we must remember that many countries from Ireland to Australia have a multi tiered VAT system which have alleviated the burdens on the poor. Before anyone says anything, VAT is not the reason why the UK is in recession….

  • Gladys

    I think this system of offsets is confusing true and its not the best way to ensure that the poor are helped because an individual can be living in say a HDB with no income per se but with children who give them quite a good allowance . This would increase their spending power but they would still get the benefits as opposed to someone who works but because he has an income, ends up more financially strapped…. As such, as the writer says it is more straightforward to just exempt certain items from GST. that way, a person who has less will stick to those items which are exempt. That benefits everyone and gives people a choice what they want to consume….

  • mice is nice

    dear Ghui,
     
    i'll like to add to your suggestion that even staple foods be categorised into 3 grades, as budget, mid-priced & premium when GST is applied. the purpose is to make a distinction between the grades where those who can afford would opt for the finer (read as costlier) things in life.
     
    i just wonder if its socially acceptable to push for a higher GST for restaurents while at the same time doing away with the mandatory service charge that may never end up going to the service staff- an anormaly that needs to be addressed in an effort to be more fair.
     
    ^.^

  • Gladys

    Iworksometimes, I agree with your earlier comments that Mr Minister and the writer agree that gst is regressive but I dont think that the vouchers being confusing is the cruz of the argument… The crux of the argument proffered is that the most straightforward way to help the poor is to introduce a direct gst exempt list. Someone said that the classification would be confusing but I disagree because we can stick to raw products. I am not talking about an extensive list. Just a few items. Rice, sugar, salt, raw chicken, local vegetables. No derivative products. just in their raw form.

  • mice is nice

    dear Gladys,
     
    i was wondering if GST exemption should lso apply to some other foods like powdered drinks or those 2/3-in-1 drinks. living on a GST exemption on just a few basic food staples is quite miserable. while these are nitty gritty details, it does affect the quality of life of the poor for example.
     
    not forgetting that as society progresses, modern conveniences that once was luxury items (an exception) are but now hard to live without (societal norms do evolve). examples are cell phones, fridges & washing machines, maybe a table fan & even a computer with internet access.
     
    technological advances does put the poor at a greater disadvantage, not being able to afford the said items. the lack of a cell phone makes one harder to contact, & the lack of a computer with internet access means one has to run errands physically in place of online transactions. i believe that technological advancement does excerbate inequality rather than narrow the gap.
     
    what are your opinions? 

  • Balanced Budget

    The government should seriously consider slashing the defense budget and bring down GST to 5 percent or even less.

    There is no need for the saf to keep insisting on buying the latest toys at above average prices. It is fallacious to assume that you can keep the country safe with these toys in the long term when birth rate are declining, immigration are increasing, productivity stagnating, cost of living increasing, industries becoming uncompetitive vis-a-vis competitors like Taiwan, HK, Korea and upcoming china, India, Vietnam, etc.

  • question

    According to Today's report "http://www.todayonline.com/Business/EDC120221-0000056/Singapore-the-next-gold-hub"

    Investment-grade gold and other precious metals from a 7% GST.
    If gold and other precious metals can be exempted from the GST, why can't basic necessities, which will benefit the lower income and sandwich class?

  • lim

    I agree in part with mice is nice. The breakdown of a lower-income family expenditure will comprise a multitude of expenses that would not be simply covered by a few items. That may include phone bills, public utilities, public transport, S&CC which is also paid by the Rich. Can't exempt everything. Hence the problem for the opposition is that they can't mathematically say that the GST voucher concept isn't more effective in targeting GST offsets as compared to say exempting GST on a few bags of rice.
     
    Looking from another perspective, one might on the other hand, make an argument that every little helps. Why not GST vouchers + some essentials exemption…That may be an opposition basis for a platform on the subject.

  • Disagree With GST Vocuhers

    I personally disagree with the GST vouchers idea. There a lot of people who are not rich but pay a lot of GST through expenditure on essentials. However, the rebate from the GST vouchers (even if they are eligible) are too little to compensate for what they pay for GST.
    Better to have  a system that remove GST from essentials. If they can do it for GOLD, it should not be difficult to do it for essentials.

  • http://Website(optional) iworkhardsometimes

    @Gladys

    i quote myself: “the main argument is advanced from the word “confusing” ”

    if Mr Tharman’s system is A and the author’s system is B, the author argues that B is superior to A via the following points:

    1) To the layman, these amendments are needlessly confusing. [quoted]

    2) Secondly, the cash amounts and top ups do not seem to be in significant amounts either. [quoted]

    i am saying that the main argument for B against A is (1)

    you are saying that the “crux” is B not (1)

    (1) & (2) are arguments

    A & B are competing candidates in the marketplace

    you have stated that u think the crux of the argument (for the article i guess) is B

    i have not stated what the crux of the argument for the article is and i do not intend to do so.

  • 1965-1994: There was NO GST

    From 1965 to 1994, the Republic was a duty-free country, there was no GST, and it still prospered very well. Cost of living were good & quality of life improved in its first 30 years. Then in 1994, PM GCT announced GST introducing at 3%. (Rhyme GCT=GST). I don’t see a need to it, as there were more than enough government surpluses. Till this date, I still want this GST policy to be abolished. You must not tax your Citizens when you have more than enough… period.

  • Abolish GST

    Agree with doing away the GST altogether. It will benefit the 99%, like you & me.

  • Skewed Sataystics

    Manipulative Statistics are but numbers that are not real.

  • mice is nice

    just read in papers today that gold & other precious metals will be exempted from GST. makes me wonder where piriorities are… it does add fodder to do more for the poor & maybe even the retired who will not be joining the workforce due to age. if old is gold, so remove all GST related to gold can anot? no tax for old gold!
     
    the poor will consume not just basic staples (food), & depending on family size & age of the family make-up. one needs to include all things that modern family should be able to afford to avoid putting them in a greater disadvantage. this may end up to be a long laundry list, but if its for the people's good, is there a good reason not to do it?
     
    already, govt's under investment on its people is already showing its uglier side. the people are not happy, not as productive as they can, & are not producing enough babies cos living is like a constant battle. how to make love?  XD

  • iMINTgoldMINE

     
    mice is nice21 February 2012

     is no tax for old gold!
    …………………………………….
    in the ear 1970 when saigon falls..many vietcongs flee the country simply becoz hochimin would slaughtered them by the clans based on their belives
    so when these boat peoples comes ashore..only GOLD was the main currencies…
    now our pap ministers 1st NO gst tax on gold..why? is leekingyou gonna be the new breed of boatpeople when a new singapoor is bein reformed…we do know estateduties was bein removed base on these papian ideas..no TAX for them @ all

     

  • Gladys

    Hiya Iworkhardsometimes,
    I don't mean to deconstruct the article or your argument. All I intend to say is that I don't really think it is constructive to go down into tiny details on whether Mr Tharman is right or whether Mr Ghui agrees with Mr Tharman etc. Or whether Mr Ghui makes a successful rebuttal to Mr Tharman. What I do think is that Mr Ghui and TOC have raised a valid issue for discussion. I.e. the implications of the GST and whether it is useful; whether people want it etc. And I do think from the gist of the article, the point it is trying to make (without reading too much into the nitty gritty) is that the GST is not helpful as it is and that to really help the poor, some things should be exempt.
    Thanks:)

  • Gladys

    And just to add on, I sometimes think people overread or over expect things from TOC. TOC is run solely by volunteers. They do not proffer to be experts at the issues. All they try to do is to highlight issues and facilitate debate for the benefit of Singaporeans. By and large, I do believe they have done that and over the years have raised the profile of many issues that have simply been glossed over by the MSM. So I think some of the criticisms levelled against various articles that readers think the TOC should not have published are a little harsh. Many issues are the personal opinions of TOC but merely various opinions raised by various people to facilitate discussion and haven't we all been having a good discussion? Hence, purpose fulfilled. TOC does not exist to provide answers. It is merely a forum. We should remember that. Thanks!

  • Gladys

    are NOT the personal opinions I mean.:)
    Mice is Nice – I agree with your sentiments. I just worry that if white goods are added to the mix. How do you differentiate them? Different brands are priced differently. Unless you propose a list of brands that are Vat exempt and a list that are not? That would then cause problems between the brands. i.e. apple computer is more expensive than other brands so i would consider an apple a luxury but if you give cheaper brands Vat exempt status and not apple, apple will complain etc… therein lies the problem which is why I think the list should extend only to raw food such as chicken, rice, sugar and salt. No derivatives. White goods can be the subject of a GST voucher?

  • No help expected

    The GST was introduced to offset the loss in revenue from the income tax cut of the very hign wage earners. It is not fair to the poor because the GST forms a large proportion of the low-income earners. The fact that we also implemented GST for basic necessities such as rice, medicine and medical services made it even more unfair for the poor. PAP has never shown any compassion for the poor but from the policies they implement, they really know how to take care of the welfare of the rich which include themselves. Most citizens would prefer they cut defense budget and bring down GST to 5 percent or even less. The citizens are not concerned if the PAP are not in power as the ordinary citizens are expected to take care of everything themselved with no help form the PAP. Life may be better if  a more benevolent party, whether local or foreign take over.

  • Easy list

    The list can be so easy to make:
     
    - all food items sold at supermarkets
    - medical bills
    - educational bills
    - school textbooks n children's clothings
     
    Make the above changes and poor people life will be easier.
    And lets define poor people: no savings and cant survive 2 months without a job.

  • mice is nice

    dear Gladys,
     
    eh, is "white goods" the term for premium goods?
     
    can stick to GST on implimentation? rather than shifting to VAT? the idea of a tiered GST with none at the low budget range of certain goods is to acknowledge the fact that the poor do not only need to live on food alone, they too consume goods like electronic goods, clothes, household item, utilities, & so on.
     
    implimenting GST exemption on just basic staples alone is easier to impliment, though it is a good form of help to alleviate immediate cost concerns. its the big ticket items that one at one fell swoop will cost alot at one go. though there are installment plans available for some big ticket items like furniture, basic home appliances like fridges or washing machines, the poor ends up paying more in the end. & it may be a constant worry for them to keep tabs on paying the installments on time.
     
    a tiered GST system is my "laying the tracks" to get companies produce goods to meet a minimum standards of lifespan & real life durability as time goes by! just as food must have an expiry date printed? price differentiation already sets brands apart, its up to govt to find figures that will achieve a fair GST. it can also be made mandatory to print the GST rates (in %) categorised under the new GST scheme. like all things that keep up with times like energy efficient products (aircons) or "greener" products (car's emission standards), its up to govt to impose updated standards & phase out those that do not meet them.
     
    it just does not make sense to force the poor to buy the cheapest upfront only to need to buy again when things spoil pre-maturely since that's what they can only afford. setting such a standard also is my way of adding an additional criteria to make cost of living lower in the long run & a green affort to cut waste with ltems that dun last as long as they can be.
     
    ^.^

  • Gladys

    Hi Mice is Nice,
    I always thought that White Goods refer to basic household appliances like washing machines, ovens, hob etc. Of course, I could be wrong. I definitely acknowledge that big ticket items which are also necessary are things which really sting the poor because it is a huge outlay but the problem is with implementation and the need to keep Singapore competitive which is why perhaps the issue with these goods (which are not primary necessities but necessities in modern life all the same) should be addressed but with vouchers instead of with GST exemption? But then again, I am not an expert. Am just chipping away at what is a very stimulating discussion on what would work for Singapore. :)

  • mice is nice

    hi Gladys,
     
    i never heard the term white goods b4… is it a locally used term?
     
    i have reservations on the voucher system, as what is paid in cash may be refunded as CPF credits. still i guess the option should be considered.  though a system for claiming vouchers in cash or kind may be an additional hassle that if not implimented seamlessly, like issuing of vouchers on the spot. what i hope it will achieve is shifting the onus away from end stages of a sales transaction, reducing the hassle such measures are intended to help.
     
    while this topic is about GST being fair, i also hope GST can help mould consumer behaviour to one that promotes a greener culture by buying products that lasts longer, thereby have less environmental impact. & govt should play a bigger role ensuring products sold in our shores work towards that goal.
     
    the grading of food & products can use the current prices as a referance to gauge its grade. going further, industry feedback or input can be gathered to refine an ever evolving changes in industry standards. food & products that impact most on the poor most should be be given piriority.
     
    i too am no expert. as can be seen in my interests in a variety of articles in TOC. :)

  • lim

    As a history lesson, I would highlight the purpose of GST in Singapore as stated by Gahmen was to allow lower corporate tax rates (30% in 1994, 17% today) and income tax rates (33% to 20%). It was an intended shift from direct to indirect taxation.  

  • Gladys

    Hi Lim – And that was to ensure that Singapore remained competitive. That in itself is fair enough but we do need to address how this affects the middle classes and the lower income groups.

  • lim

    Not really needed to address. Every tax is negative by nature. No tax = no government. 100% tax on rich only = not feasible. The middle class has to expect taxes.
     
    Lower income, like it or not, now gets GST vouchers to offset GST. Middle class and Rich bears the burden of GST. Funnily enough, people seem more willing to accept paying $XX thousands in car taxes but complain over a few dollars of GST.
     
    More importantly imho is to control inflation. Higher cost = higher GST applicable since 7% GST applies to cost. That in itself will save more GST and something the Gahmen can do a lot more.

  • Cindy

    It is too little to cover high expenses that everything had increase expecially electrical, water & medical too.  Hospital had kept increasing $4 every year & even have to pay administrative fees for using our own Medisave.  Medisave are our hard earn income & still charge us for Admin fees at all hospital.
    Human in Singapore cannot get sick must die as it kept increase consultation fees @hospitals.  Moreover, those subsidize patient cannot see our senior consultant & I have been seeing senior consultant  @SGH/NCC specialist clinic for donkey years.  It is unfair to be transfer to see by registrar or Medical Officer.  I have to repeat history to different registrar or Medical Officer as it is very very tiring.
    Those subsidizes patient cannot get sick & it is better to die of kept changing registrar or Medical Officer.  As you know some registrar or Medical Officer are young & inexperience.
    Pls look into this matter.
     
     
     
     

  • Josh

    GST should be lowered and permanently capped at 5%.  Ideal if ASEAN countries could all work together and permanently cap GST at 5% ASEAN-wide and simply the GST refund claim process so that it is exactly the same for all departing passengers at airports in ASEAN.  Doing this will encourage tourists to do their shopping in ASEAN.  So if any ASEAN government needs to raise taxes, they will have to identify another tax source, and not raise GST.
    Some other taxes ASEAN governments can consider:
     
    Betting tax (just for placing bets whether on the phone, online or offline/in person)
    Gaming prizes and winnings tax
    Carbon tax  (look what Australia is doing)
    Tax on products that cause cancer
    Unhealthy fats, oils and ghee tax
    Sugar tax
    Tax on second, third, fourth etc passenger cars
    Fossil fuel vehicle tax
    Fossil fuel tax
    Biofuel fax
    Palm oil tax
    Printed materials tax
    Plastic shopping bag tax on non-biodegradable and slow to biodegrade shopping bags.
    Tax on large print ads and television ads
    Tax on residences with swimming pools, jacuzzis, saunas, fountains, waterfalls and water features
    Tax on jewels and precious stones transactions
    First class and business class air travel tax
    Franchise restaurant fast food tax
    Commercial rubbish and waste tax (residences exempt)
    Lightbulb tax
    2nd property capital gains tax
     
     

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