Posted by: bigtalksingapore | March 4, 2011

Is Singapore GST (Goods and Service Tax) good ?

  1. First, the overall tax burden is one of the lowest in the world. Taking together income taxes, the GST and all other taxes, the total paid by the average Singaporean is about two-thirds the taxes paid in the United States, and significantly lower than that in other developed countries.
  2. Third, the system is fair. Those who are well-off pay the bulk of the taxes, and the lower and middle income groups receive the bulk of the benefits.
  3. The GST on its own is a flat tax, not a progressive tax. GST therefore takes up more of the pay of those with low incomes than those with high incomes. But what we have introduced is not just the GST but ‘GST plus’: The GST plus Workfare and other schemes targeted at helping the less well-off.

The above are extracted from http://www.todayonline.com (Article taken from 4 Mar 2011, Page 18).

I have a few comments on the above points….

Issue#1:

  • While I agreed that Singapore tax is considerably lower than many developed nation, we should not overlook the fact that this is because Singapore is not a welfare nations. Because of this, it become irrelevant to compare Singapore low tax to nations with welfare benefits like US and many europe countries.
  • For a non-welfare nation like Singapore, it is logical that Singapore tax system should be low.

Issue#2:

  • While it is true that the well-off pay the bulk of the taxes (In absolute figure), we should never ignore the fact that the so called “Bulk of the taxes” is a small percentage of their disposable income compare to the less well-off.

Issue#3:

  • By saying that GST is flat rate and therefore not a progressive tax can be difficult for many to chew on. This is because $10 is considered a drip in the ocean for the well-off but not the less well-off. So still, it is like a progressive tax because it hit the less well-off harder.
  • I think the Government is very smart in saying that the various scheme are in place to off-set the effect of GST on the less well-off. This is because these scheme are not fixed and may be taken off anytime the government want to. Where-else GST are here to stay and will not be taken off or reduced.
  • This is like saying “I will tax you $100. To make it easy for you, I give you $200 for the first year. So you are in fact better off. But I will continue to tax you $100 for the rest of your life. If I like your behavior, I may continue to give you some money to lessen your burden.”

 

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