I have been trying not to gripe about the increase in the GST (Goods and Services Tax) from 5% to 7% since Tuesday. But not griping here in this blog means that I talk incessantly about the tax increase to my friends, which isn't very pleasant for them, because they can't walk away from me in mid-conversation without offending me, while you can easily do so with absolutely no consequences. Just click on that little "x" button. :)
Just so that I can be a better dinner companion, I'm going to have to say what I have to say here:
WHATEVER HAPPENED TO 6%?? and
WHAT KIND OF A BULL EXCUSE IS IT TO SAY THAT YOU ARE RAISING TAXES TO HELP THE POOR??
Okay, I feel better now.
The GST is the kind of tax that pinches the lower-income more than the higher. For example, you buy rice, oil, meat, vegetables, fruits, detergent, and other daily necessities from your local grocery store and your bill comes up to $100. When the GST goes up to 7%, you will pay $7 in taxes. If you earn $1000, $7 is 0.7% of your income. If you earn $10,000, and you buy that same bag of groceries, you pay a GST that is only 0.07% of your income.
So it is a little ironical to say that we are implementing this tax to help the lower income, is it not?
Of course the scenario above is too idealistic. In the real world, those with more money usually spend more and hence are taxed more. Also, there is the income tax which taxes the higher income earners more than the low -- ironically, the government wants to lower the income tax percentage for the highest income earners in the bid to attract more business to our sunny island state, hence skewing it against the poor that little bit more.
On the whole, we have low taxes and a good government that gives back to her people through spending in infrastructure, education, etc. So it is not like I'm pretending that I know how to run this place better. Just be more frank with us, can? And whatever happened to 6%?
(Some ideas I have: make certain necessities such as plain rice, salt, white bread, water GST-exempt. Actually, come to think about it, that is the only idea I have.)
Technorati Tags: GST
Thursday, November 16, 2006
The post on the tax increase
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4 comments:
It is interesting to read and hear about the tax structures in other countries. In the states, as I'm sure you've heard, we've talked about going to a pure consumption tax, similar to the GST (and our present sales tax). There is some logic to it that makes perfect sense, but I whole heartedly agree that the basics should be exempt. I know this leads to other problems of where to draw the line, abuse, etc. but it makes more sense than taxing income, imho.
Hmm, I think if it were up to me, I would draw the line at the most basic of basic. Like not all bread, but just the plain non-enriched white bread (that is already very cheap). This way, the bulk of people who can afford it will buy the better bread and pay taxes, while the poorest of the poor always has an option. Regarding abuse.. hmm. Maybe we can have special GST-exempt stores that have to apply for a license and can only sell these basic goods. Then you don't run into the problem of having to monitor every grocery store (and their cunning managers) in the country.. Just thinking aloud.
I'm curious to know why you think a pure consumption tax makes more sense than taxing income? (I love talking to accountants! They always give me a new perspective to things. :) ) Is this the rationale of taxing income: the country has provided you the means and context to make this money, therefore it wants a cut back?
I was thinking of making more of the basics exempt from tax, like all bread instead of just one kind. To my way of thinking, which probably means it is not thought all the way through, it makes more sense to tax the outflow of money, based on choices (especially luxurious choices...if someone has the money to buy a new Ferrari, they should also have to pay taxes), rather than the inflow that is earned (I guess you have to then get into the difference between earned and unearned interest income, but still). There's the whole mentality of disincentivising workers by taking so much of every dime they make, when I don't think people who can afford luxury items would be so deterred in making purchases just because there is an added tax (i.e. I don't think a consumption tax would negatively impact demand and thus stall a free-market economy while I do think that a heavy income tax burden has this effect).
Ah I see. That makes sense. That is probably part of the reasoning why the government here is planning to cut taxes for corporations and the highest income earners. Partly to stay competitive in the region and to attract high earners, with the hope that the increased business will have a trickle-down effect to the rest of society.
Thanks for the explanation!
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