Saturday, November 18, 2006

It's payback time!

So, the Singapore government has raised GST from 5% to 7% and the people are complaining that the increase has come at an inopportune time.

Well, quit whining! Remember this is the same PAP government that you voted in during the recent General Election in May? You get the government you deserve. The next time the government hikes GST, transport fares, school fees, hospital charges, et cetera, et cetera, remember you are the one who voted for those idiots who made the policies. Besides, you fell for the carrot called "Progress Package" so shut the fuck up and admit that you sold your principles for short-term gains. By the way, if you had used your pee-wee brain to think about it, you'll realise that there's no free lunch.

And remember this when the next election comes around: If shit could be sold, the PAP government would tax your asshole!

Related stories:
GST - Get Screwed Tomorrow
Raising GST hurts poor people
First World Taxes without First World Governance?
Flogging the wrong horse
That stoic Singaporean
Why the government’s logical roller coaster is part of bigger plans

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3 comments:

justin said...

Pretty harsh words eh, Stephen? Remember many of us don't have a chance to vote cos we're in walkover wards.

Anonymous said...

A blog that meantion rich should pay higher tax:

http://jobscopevsreliance.blogspot.com


Another nasty but realsitic blog
http://sipeiboeysong.blogspot.com

Anonymous said...

GST Hike - An Incredible Tale Of Taxing The Poor To Help The Poor

A. Another Post Election Bad News

Singaporeans woke up one Tuesday morning in November 2006 to a nightmare which the Opposition had forewarned during the General Election in May 2006.

Prime Minister Lee Hsien Loong announced in Parliament that the Goods And Service Tax (GST) will be elevated to 7% sometime in 2007, up from the present 5%.

PM Lee justified that the GST hike was necessary to finance the enhanced social safety nets to help the lower-income group. He further exclaimed that "it's better to do this now when the economy is doing
well."

He opted not to elaborate which class of Singaporean is benefiting from the economy.

The last increase in GST was from 3% to 4% in January 2003, and then rapidly from 4% to 5% in January 2004. Singapore was then barely out of the economic downturn and pushing a lingering high unemployment rate.

Clearly, the government decision to raise GST rate has nothing to do with the state of the economy.

The 2006 annual report from the tax agency IRAS revealed an intake of $10 billion in income tax, and $3.5 billion from GST. The increase of 2% will mean an additional $1.5 billion each year in GST revenue, or more if the economy improves for the high earners.

B. Why GST Hike Hurts The Poor More

The GST is called a regressive tax. It is a fixed tax which is applied to every person equally regardless of their state of financial well-being. That means the less money you have, the bigger the percentage of your income paid to this form of tax.

This is unlike the income tax which is a progressive tax where people with more disposable income pay a higher percentage of that income in tax than do those with less income.

Consequently, the GST will actually hit poor people harder. It is ironical that the government should adopt a measure to ostensibly aid the poor by taxing the poor proportionately more than the rich.

C. Is The Government Broke?

On the last count, the Singapore Government Investment Corporation (GIC) has over US$130 billion in Singapore's foreign reserves (including gold).

According to a GIC disclosure in 2006, the investment has an annual return of 9.5% in US dollars for the past 25 years. The annual return in Singapore dollars was 8.2%.

Similarly for Temasek Holdings, the government's direct investment arm with over US$80 billion in its grasp, the 'good news' to the shareholders was a "robust" total shareholder's return (TSR) of 18% annually over the last 30 years.

The government is also yielding a generous surplus from such activities as the sale of state land to property developers and posh investors (like the Integrated 'casino' Resort operators), the Electronic Road Pricing (ERP), the Certificate of Entitlement (COE), and an assortment of fees, charges, and levies on almost every conceivable aspect of life in Singapore.

The astounding net revenue coupled with the government's regular assurance of prudent expenditure should not necessitate the GST hike. Yet, beyond explanation, the government does not think Singapore's accumulated wealth should be utilised for a good social cause. Nor does the government think it has enough revenue.

Every call to tap prudently into the bloating reserves to assist the poor is met with harsh accusation of reserves-raiding and apocalyptic fairy tales of how Singapore will sink into some imaginary hardship.

One of the giveaway signs of dubious investment returns is the regular need for more capital injections through an increase in tax on the population. And the GST hike bears that uncomfortable signature.

D. Is The Government Prudent On Expenditure?

So where is the money entrusted by the people to the government?

The money usually becomes more obvious during an election period, packaged as an inducement by the incumbent to "buy" the votes of taxpayers (as the Prime Minister admitted) - Baby Bonus, CPF top-ups, shares, direct rewards for National Service, and more.

But government expenditure is evident daily, reported in the newspapers and seen around housing estates and downtown.

It suffices to think about the ultra-million dollar projects – Sports Hub, Marina Downtown, Orchard Remaking, the mega Kallang-Marina makeover, Jurong Island Underground Oil Cavern, Liquefied Natural Gas storage terminal, Circle Line, overseas industrial parks, funds to build infrastructure to support the population explosion resulting from influx of Immigrants, and more.

It is also useful not to forget the questionable spending of hard-earned public funds through a few useful examples - $7million project to win an uneatable Olympic gold medal for Singapore, $400,000 exercise resulting in Marina Bay being renamed "Marina Bay", the $630 million Esplanade which requires an injection of about $40 million government fund each year to cover recurring operating losses, $208 million new Supreme Court Bldg designed by a "renowned British architect" commanding an expensive fee (a design commonly mistaken as a shopping centre with a revolving rooftop restaurant and viewing gallery), $250,000 image-survey to find out what people think of the Land Transport Authority (LTA) after the Nicoll Highway incident, and more.

It is even more dutiful to respect the fact that the Singapore Prime Minister earns in excess of $2.3 million a year, higher than the COMBINED salary of the President of the United States of America, the Prime Minister of the United Kingdoms, and the Prime Minister of Australia. And it is also pertinent to think about the remunerations of other Ministers (including 2 Ministers without portfolio in the Prime Minister's Office), some of whom are eligible for both a salary and a generous state pension when they attained 55-years old. And taxpayers' money will have to upkeep the President, Senior Minister, and Minister Mentor of the land.

It is often hard to frame the rationality of government expenditure within anything but extravagance for the wrong reasons.

The Economy Drive movement which began in May 2003 had seen some noteworthy government savings - $602 million in 2005, $687 million in 2003, and $736 million in 2004. The Work Improvement Team Scheme (WITS) and Staff Suggestion Schemes alone (SSS) saved $435 million in public money. And in 2004, the government afforded a 3% budget cut across all ministries (except the Ministry of Defence).

All these show that the government has much to do to optimise taxpayers' money before stretching out their hands for more. It has the ethical obligation to prioritise expenditure with accountable and tangible direct benefits to the citizens, especially to the nearly 40% of households earning $2,000 per month or less.

Without fuller disclosure, the sums on government revenue and expenditure simply do not add up to suggest a genuine financial crisis.

E. Cutting Corporate Tax Increases Government Burden Of Getting Revenue

Oddly, the government chose to inflict more pain on their fiscal difficulty.

In 2002, the corporate and top personal income tax rates were reduced to 22%, with a further cut 3 years later to 20%. The measure was implemented in tandem with the increase in GST rate to 5%. The government attempted to 'soften' the punishing regime with an aid package - Economic Restructuring Shares (ERS), rebates on rental and service & conservancy charges (S&CC), full absorption of GST by the Government for subsidised healthcare and state education charges, to name a few.

In a fearful rehash of that horror, the government has once again this time promised a financial package to placate the people. But short term aid relieves the pains only in the short term.

Minister of Defence Teo Chee Hean argued on behalf of the government that reducing the company taxes and personal income taxes would "encourage more people to be more innovative and to create businesses" and that "with a good growing economy, (the government) will be able to deal with the increases that may come with the increases of 2 percent in GST."

Besides the incoherent logic and bold assumptions in that statement, there was the unmistakable hint of government protection of the rich.

Corporate tax cut benefits businesses and investors without proportionate or assured benefit to Singaporeans. Upping the GST to offset the reduction in government revenue hurts the people. There is simply no proof that when economy grows, poverty will be linearly eliminated. The channel for the distribution of wealth is not a well-paved highway.

Furthermore, while a few big businesses will be affected by the GST hike, consumers at the end of the chain will bear the full brunt of the GST, often a few times over. Passing the business cost down to consumers is a common cost-recovery measure of businesses.

The other reason why the government prefers to tinker with the GST instead of the income tax to fatten their account might rest in the realisation that many people are simply earning too little to pay income tax. But with GST, income-earners of all levels are taxed one way or another.

Again, it is hard not to conclude that the main aim of the government is not to help the poor but rather to favour medium and large corporations. To compensate for the loss in tax revenue, they have to increase the GST, thus hurting the poor.

It makes little sense to return to the poor what was reaped from them, and then call it charity.

F. Pitfalls And Safety Measures

The GST hike is a form of "tax and spend", where the government conveniently raises tax in a hurry to address immediate spending needs.

Tax and spend however instils a nasty cyclic habit which will see tax rates spiral up as and when the government demands more funds. In this case, it means the GST and some other forms of indirect tax will continue to increase over the years, justifiably or otherwise. And it has been demonstrated to be true.

Moreover, by responding to public calls to spend more to improve the lives and living conditions of citizens (especially of the needy, elderly, disabled, and jobless) with fiscal punishment such as a GST hike, the government invariably contributes to the deepening of social disengagement and social apathy of Singaporean who sooner of later will associate social good intention with self-punishment.

If the government is indeed sincere about building a caring society, it will need to be mindful of its actions.

16 days after the bombshell announcement, Second Finance Minister Tharman Shanmugaratnam attempted to whitewash the initial justification given by the Prime Minister for the GST hike by brazenly stating that the increased revenue collected from the GST hike would not entirely be used for redistribution to the needy.

The speed with which the government retracts its promise is disgraceful and insulting. It blemishes their credibility and reduces their moral trustworthiness.

To eliminate the distrust and demonstrate truthfulness, the government must address the concern over how the revenue resulting from the GST increase will actually go towards strengthening the social safety net as initially promised.

For a start, it has to pledge a binding commitment which goes beyond lip services in Parliament and to the media. Next, it must set up a public fund to manage the revenue collected from the GST increment. And finally, it has to install a disciplined structure of transparency, accountability, and trustworthiness to assure the public that the entire GST revenue indeed goes to serve its intended purpose of helping the low-income.

Regular public audits must be conducted, and so must the demonstration of tangible benefits actually experienced by the target group of people.

A merry-go-round show of public compassion from the various government institutions (such as the promise by the Ministry of Health and NTUC to 'fight' for exemption from GST for the needy) only achieves its political point-scoring objective and little else.

The government must above all spend within its means, and prioritise its expenditure to fit the needs of the people. It is crucial for the government to understand that if it is honest about the true reason for the GST hike, it must do all that is necessary to concretely actualise their intention.


(Mr) Law Sin Ling

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