Posted by: bigtalksingapore | March 3, 2011

GST fine the way it is, says Tharman

  • Mr Tharman said the bulk of GST is collected from higher-income groups and foreigners, so cutting the rate would benefit them more.
  • He (MP Low Thia Khiang) suggested that the Government consider cutting the GST from the current 7 per cent to 5 per cent and also exempting basic necessities from GST.

(The above are extracted from http://www.straitstimes.com/BreakingNews/Singapore/Story/STIStory_640905.html on 3 Mar 2011, 10.22am)

  • Mr Tharman said that a multi-rate GST system would not work as it would only further subsidise the spending of the higher-income groups, distort consumption and production, and raise administrative and compliance costs for businesses.

(The above are extracted from http://mypaper.sg/ on 3 Mar 2011, Page A6)

I have a suggestion,

  • If it is not cost effective to cut GST for basis necessities, why not allow tax reclaim for these goods.
  • For example, Mr Seng (someone from a poor families) pay $10 GST for every kilo of rice.
    Over a period of 3 months, Mr Seng consume 3 kilogram of rice.
    Mr Seng collect the receipt (total of 3×10 = $30).
    Mr Seng go to a Singapore GST department and submit an application for the GST reclaim ($30).
    The admin cost of this reclaim is lets say 10% or (10% of $30 = $3)
    Mr Seng get back 30-3 = $27 credited back into his bank account.
  • In this case, the burden of this operation fall mainly on the shoulder of the consumer.
  • Poor families will likely take the effort to reclaim the GST because it is a significant amount of money.
  • Where-else for rich families, the GST reclaim is too little to worth their time and effort.
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