Wednesday, November 15, 2006

GE Questions Finally Answered: Fare & GST UP!

GE Questions Finally Answered: Fare & GST UP!

Updates: Please note that the figures on GST collection is theoretical value. The actual value (from Ministry of Finance Budget 2006 figures) for GST collection per 1% is $702 million while for Income/Corporate Tax per 1% is $556 million. The tax base for GST is not as wide as I first thought. I have written another article on this little "mystery" posted in this blog.

During the May General Elections, I have asked the ruling party, PAP, to come clean with their plans for Singapore. The two main questions I have asked are:

1) Is the PAP government going to allow public transport fare increase?
2) Is the PAP government going to increase GST to 7%?

The local press did not publish my direct questions to PAP and PAP have chosen to keep silent on these questions but instead, they are more interested to continue harping on the James Gomez saga during the elections.

It is only 6 months after the May GE that I finally got my answers. The answers are Yes and Yes. I am very puzzled that if PAP is so confident that Singaporeans will support its intention to allow public transport fare hikes and GST to be increased to 7%, why didn't they say so during the May GE?

Unfortunately for Singaporeans, they have to make voting decisions with incomplete information. But I guess this is not the end yet. I believe that GST will be raised further to 10%. Why? PAP government wants to lower income tax from 20% to 16%. In thier calculations, this could only be achieved by increasing GST further by at least 3 percentage point.

I believe by now, most people will know that GST in itself, is a regressive tax. In essence, it is "robbing the poor to help the rich". It taxes on the poor so that the (income) tax on the rich could be reduced. From the news report, it is interesting to derive one simple fact: the tax base for GST is twice as big as Income tax. It means that for Income Tax, only the top 50% of income earners will be taxed. Let see how this could be derived:

It is said that for every 1% of Income tax, it equates to $700million tax revenue. Singapore's GDP is about $150 to $160 Billions. Government spending is about $20 to $30 Billions. Thus, for 1% income tax to derive $700million, its tax base must be about $70 billions.

As for GST, it is supposed to be value added tax, thus its tax base is the whole of GDP. This will mean that 1% of GST does not equate to 1% Income Tax. That means, in the simplest case when 1% of income tax is reduced, only roughly half a percentage increase in GST would be needed to cover the lost in tax revenue.

It will also mean that a 2% increase in GST will increase government revenue roughly by $3 billion. My question is this, is PAP going to spend $3 billion in welfare schemes since it claims that the increase in GST is to help finance social safety net?

Besides, PAP government has openly said that they do not believe in a "permanent" comprehensive welfare scheme but an increase in GST will definitely increase their tax revenue permanently! I am really puzzled by PAP's latest "selling point". PAP has never worked on the basis of direct financing; eg. road tax, ERP and COE revenues are not directly used in development of road networks and such. There is never a direct link in revenue to spending. All revenues collected will be pooled and redistribute accordingly. Thus it is a bit strange to me that PAP has in fact claimed that they will increase GST to finance the social safety network which is not a "permanent" system in their governing concept. In fact, if I could remember correctly, the highest government spending lies in Defence. Spending on welfare schemes hardly reach the billion mark! So what are they going to do with the potential increase of $3 billion of GST revenue? How many percentage of this increase will go to welfare scheme?

The reasoning that offset package will be in place to offset the increase of GST. But my question is, offset for how long? One year? Two year? GST will apply EACH AND EVERY YEAR, forever if it continued to be applied, not just one year! I really don't know how many Singaporeans will buy their reasoning of "offsetting" but don't they get tired of their stale marketing technique for so many years?

The most disturbing thing is that, since income gap has been widen throughout the years, is it right to further widen the income gap by taxing more (GST) on the poor and perhaps, reduce the income tax on the rich?

The most comical thing is for PAP to make comparisons with other welfare states' GST tax rate! Yes, they pay high tax but their welfare schemes are intensive and comprehensive. It seems to me that PAP government wants the best of both worlds... high GST tax rate but low welfare schemes!

Even for a capitalist city like Hong Kong, has its own side of welfarism which is more comprehensive and "permanent" than PAP's. The Hong Kong government has just announced that it will sponsor each child that goes to kindergarten HK$13000 (about $2600) every year. Out of this amount, HK$3000 is for the kindergarten to spend on their teachers' development while HK$10000 will offset the child's school fees. It would practically mean that each child will only need to pay a very neglible amount of a couple of hundred HK dollars each month for their kindergarten education. This scheme is set to solve the unequal opportunity available for those poorer families that could not afford to send their children to kindergarten and at the same time, encourage Hong Kongers to have more babies by reducing the cost of upbringing a child. Beside this scheme, Hong Kong's most impressive systems are their healthcare subsidies and unemployment benefits.

Granted that HK manages to save on defence spending but the fact still remains that it has one of the lowest rate of tax in Asia: 16%. Of course the welfare spending will create burden on its government's financial health but I think people would not mind to pay a little bit more tax when they know most of their taxes are spent on the benefits and welfare of its people. Thus, even though many Hong Kongers resisted their government's plan to implement GST, personally I am not really against the idea basically because I know the Hong Kong government really takes care of its people. It is just a matter of how much GST should be implemented.

But in Singapore's context, I do not think the PAP government is that generous in helping our citizens. They are more interested in the amount of surplus they could accumulate and how to win elections by utilizing government funds in providing HDB upgrading. In fact, when PAP government keeps promising hundreds of millions of dollars of upgrading programmes (in total, at least $2billions) during the elections time, it has never mentioned about how these upgrading programmes could be financed.

Given that the PAP government has not come up with any concrete plans on a more comprehensive welfare scheme or mention any increase in healthcare subsidies, I do not think it is justifiable for PAP to increase GST to 7% by giving such vague link to social safety net. PAP, please show us the beef and we will decide whether to buy your argument or not!

Goh Meng Seng

32 comments:

Anonymous said...

GMS,

Just to let you know this sad story.

My mother don't have to pay tax on whatever money I give her every month for allowance. Ever since GST was implemented, the allowance I gives her are taxes at 3% to 5% and going up to 7%. She is a non tax payer until GST was implemented. What can't the govt increase the GST slowly. Maybe 0.5% increased. This will be less painful.

I am not against GST but the increased is 40% if you calculate correctly.

3% to 5 % = 66.6% increased
5% to 7 % = 40% increased

Take my words - GST will be at 10% once the IR is up and running.

ccw said...

Hi Mr. Goh,

I would like to ask for your view. Is it possible for Mr. Low T K to quit his MP seat and force a by-election in Hougang? If that is possible, the WP can use the by-election and a referrendum regarding the rise in GST.

If the vote is increased by 10% of more. It will force the PAP govt to acknowledge the unhappiness of its people.

And the opposition parties can use the by-election rally as a platform to educate the people of Singapore.

Singapore Constitution

Filling of vacancies
49. —(1) Whenever the seat of a Member, not being a non-constituency Member, has become vacant for any reason other than a dissolution of Parliament, the vacancy shall be filled by election in the manner provided by or under any law relating to Parliamentary elections for the time being in force.

Anonymous said...

The fight against the ruling regime began!!!

Anonymous said...

Media Release: GST hike will crush poorer Singaporeans
14 Nov 06

Could there be anything worse than the Government raising the GST to 7 percent when Singaporeans are hurting economically, especially those in the lower income groups?

Yes, the spin that raising the GST would benefit those in the lower income groups.

Ignoring all the data showing that the poorest households continue to see their incomes fall, the Government makes bald assertions that its latest move to increase the GST would in fact benefit these people.

PM Lee Hsien Loong tells Parliament that it is good to increase the GST while the economy is good. This begs the question: Good for whom?

While the rich continue to get richer, many of whom are not Singaporeans, poor Singaporeans are left with nothing but desperation. The number of suicides, mental illnesses, crimes and divorces has mushroomed in recent years and is a result of the Governmentment’s heartless economic policies.

All this while PAP Ministers live the good life by paying themselves millions of dollars in salaries, oblivious to the hardship and toil of the average Singaporean.

Yet the elite of society remains unrepentant. It even derides the working class for not having the wherewithal to make a success of life. Worse, PAP MPs continue to chide Singaporeans for “complaining” and not taking enough responsibility.

In the meantime, Government entities like Temasek Holdings make reckless decisions that cost Singaporeans billions of dollars in questionable business ventures.

Is the GST hike, set to rake in almost $1.5 billion for the Government over two years, an attempt to recoup the losses made over the Temasek-Shin Corp and Singtel-Optus deals?

The horrendously careless acquisition of Shin Corp may incur losses of up to $3 billion while the much-criticised ownership of Optus stands to face a write-down of up to $8 billion.

In addition, has the Government been transferring our reserves to state-owned enterprises to prop these companies up since the Constitution was amended in 2004 to allow this?

Sadly, however, no answers will be forthcoming. Worse, the PAP is thumbing its nose at Singaporeans and saying: “So what if we increase the GST? What are you going to do about it?”

This is because the system manipulated by the PAP shields it from having to account to the people. It does not allow Singaporeans to speak and vote freely which means that we will continue to live under the thumb of the ruling elite.

Depending on their mood, ministers will from time to time encourage citizens to speak up. But make no mistake: this is not a change of heart. It is just a ploy to mollify the electorate and give them a chance to let off steam.

The Singapore Democrats feel the frustration and the anguish of the people. But without our rights to free speech and peaceful assembly, citizens are powerless to make the Government more responsive to our needs.

Without citizen power, the Government will not have to consult the people and it can do as it wishes, when it wishes.

The SDP will continue to raise issues concerning the welfare of our fellow citizens. This remains our priority. But in order to help the people to improve their quality of life and welfare, we need to work to take back our democratic rights without which we will continue to be at the mercy of the PAP.

Chee Soon Juan
Secretary-General
Singapore Democratic Party
14 Nov 06

Anonymous said...

The nation-builder press, April 20 2001.

"The overall amount of remuneration paid to cabinet ministers and ministers of state in the last financial year was $27.8 million."
- The nation-builder press, Apr 20 2001. $ingapore has 17 ministers + 10 ministers of state = 27.

"27 ministers continue to be paid $27.8 million a year. Every $ingaporean including the110,000 unemployed will share $17.6 million in NTUC's GST help package for one year only."
- The Mirror of Opinion, May 6 2002.

Anonymous said...

Well everyone who cast a vote for the PAP deserved this.
The rest of us just have to suffer until the rest wake up.SIGH.

Anonymous said...

hahahah so fast come up with another article to "cover up" ur & chia sacking? great move!!!

Anonymous said...

Mere criticisms out to score political points but whan asked to come up with alternative is to bankrupt S'pore.

Anonymous said...

If u got nothing to hide why u all scared of the media keep harping on James Gomez?

Anonymous said...

Once again GMS out to flaunt his econs knowledge. GMS admitted lowering of personal income tax, corporate tax etc to enhance our competitiveness but failed to come up alternative ways if we r not to increase GST to make up the loss. Once aagin this prove tht WP quick to criticise but when challenged to offer alternative answers, they hv none.

Anonymous said...

"Robbing the poor to help the rich"

No denial personal income tax/corporate tax will hv to be lowered to enhance out competitiveness but overall who pay more in GST? Not the rich but the poor? Who has higher consumption power? Who buy luxury cars? Will more GST be derived from sales of luxury cars or a packet of salt? Mr Goh I urged u to revisit ur textbooks before talking nonsense here. Ur only motive is to make urself pro poor hence more votes will come ur way next GE. How hv i exposed u? hahaha real intention revealed.

Anonymous said...

GMS need not worry abt how the extra gST would help the poor. This shld be his last concern. With a clean PAP in charge, not a single cent will be siphoned off but with WP in charge I'm not too sure.

Anonymous said...

GMS may i further asked whats ur motive in questioning defence spending? U want our securtiy to be compromised? R u working hand in hand with some other terrorists to being us down? Furthermore which country in this age of terrorism is not pouring huge sums into defence? Even a poor North korea wants to hv nulear arms what abt rich countries then?

Anonymous said...

No doubt u leave WP but ur real intention is to bankrupt us jus like ur former party chief. sap the will of the people o work, non self reliant, no dignity, whole day long relying on state handouts. This will of course "buy" u more votes but voters r not dumb because they knew they r the ones financing all ur welfare schemes should u be eelcted.

Anonymous said...

OMG!!! Every kid will be sponsored pre school education as if every kid need it. low T K with his MP allowance need tht? He cant afford to send his kids to kindergarten? Quek leng beng can afford tht? What a joke!! Finally who finance all these schemes? the people. Ur evil intention of adding on to the burden of the people is clearly seen thru here.

Anonymous said...

does HK need a defence force. Jiang zemin has said before "If required PLA would march in"

Anonymous said...

The whole purpose of writing this huge article fulfilled 4 aims as follows.

- So that people will forget abt GMS & chia resignation

- to show tht they r really for the poor hence pulling in more votes during next GE.

- attack their political opponents, PAP

- create a welfare state with the ultimate aim of bankrupting the state.

Anonymous said...

wolong123...your writing style is very annoying...argumentatum ad nauseum, that is, repeating untruths so many times in the hope they be regarded as truth

kai said...

Looks like we have another (or many others?) anonymous PAP nut on the loose here..

Anonymous said...

I see the PAPy dogs have employ brain washed morons to attack blogs that are negative to them or blogs that are set by opposition parties. You cann see this pattern esp. in the last 6 months after the election.

Anonymous said...

Spot on!! These balls carrying ass licking shitheads are appearing all over the place now.
Come on out now. There won't get sued or PAPy goon squad won't visit you in the middle of the nite.

Anonymous said...

Don't let these MIW tactics discourage you GMS. In politics you have to be thick skin and to win you must be more thich skin than LKY. This is the basic requirement for a politician. Stay the course GMS. You are not alone.

peach_blossom said...

The anonymous poster who says wolong123 keep repeating untruths/lies over time and hope that it will be taken as truth reminds me of opposition tactic by way of defamation during GE. They coincide their defamatory remarks during GE, keep repeating it over the course of 9 days and hv PAP not sued, that will be taken as the truth too.

peach_blossom said...

Its pretty sad that a respected man in opposition like GMS (now may I called him a party quitter) has failed to respond to many of his criticisms. To be very honest, like what PAP if you are defamed yet dare NOT sued then it must be TRUE (as in the case of James Gomez). Now similarly lots of accusations/criticism are hurled @ GMS yet he did not respond, I will take it as true also.

Anonymous said...

Stay the course GMS. Respond only when you want to and when the time is ripe, not when you're pushed. Name calling like "i thought you're this or that" mustn't get to you.

Anonymous said...

hey peachie, why the talk about sueing? Discussion of the issues would be much more beneficial and constructive to the nation.

Anonymous said...

I think it would be wiser tht GMS replied on his own rather than send his "hatchet man" here.

Anonymous said...

peach_blossom, you are an idiot. Obviously you've been reading too much of the MSM and lapping up everything they say.

But please, continue in your ignorance.

Anonymous said...

Balls carriers of MIW are going for your jugular here. They sense blood and are out to finish you off. Out of WP, out from forming your own think tank, out from anything and everything just like Tang liang Hong, Francis Seow, etc.

GMS sir, do you think you will fall against their onslaught. Can you fight on to build a democratic society base on freedom, justice and equality.

Anonymous said...

GMS only know how to talk cock sing song, can't even handle an anonymous forumer and kanna baited to flame him.

You are just an armchair critic, talk so much oso useless.

Sound familiar, fat ass?

Anonymous said...

Haiz...I see tons of name-calling...i guess this will persist for sometime to come.

Until the effects are over, dont mind their stinging words. Even though you are not a Politician anymore you are still a Blogger - You are free to exercise you right to write, just like the thousands of Anonymouses who are free to either give constructive replies or rant around.

Anonymous said...

http://mindbloggingstuff.blogspot.com/2006/11/its-payback-time.html