Singapore Media Watch

Wednesday, November 15, 2006

Your Views: Calling all Singaporeans for more suggestions on the proposed GST hike and more help for the needy

The Prime Minister announced in Parliament on 13 November that the Goods and Services Tax (GST) may be increased to 7 percent, up from 5 percent presently. Mr Lee said the hike is necessary to finance the enhanced social safety nets, which are needed to help the lower income group.

There are plans to increase the grant to the needy to buy their first home, as well as to give them more "workfare" bonuses as an incentive to stay employed, and it will come with a package which will more than offset its impact on the poor.

Since May, there has been increases in chronological order, electricity, taxi fares, electronic road pricing (ERP), food and beverage prices due to the higher rentals of upgraded food centres, university fees, development charge for non-landed residential sites, bus and MRT fares, HDB 1-room and 2-room rentals, etc.

GST is a regressive tax because it generally affects the lower-income more than the higher-income. As income tax rates have been reduced gradually since the introduction of GST, the higher-income has also in a sense benefited more on a relative basis.

Instead of just increasing GST, I would like to suggest that we explore the possibility of taxing the higher-income more, as well as other cost-cutting measures like reducing the number of scholarships for foreigners. We could also consider waiving GST for basic necessities like food, utilities, public transport, medical fees, etc, like some other countries.

Past experience indicates that most businesses may just pass on the GST increase to consumers, often times disproportionately more than the actual increase.
"A package which will more than offset its impact on the poor" may lead to those who are marginally above the poverty level to be in a way "squeezed more" in relative terms.

Our experience with the New Singapore Shares (NSS), Economic Restructuring Shares (ERS), etc, has shown us that there may be leakages in the system in that tens of thousands may not get the help that was designed to help them most, because they failed to register by the datelines imposed.

Increasing GST may also affect Singapore's competitiveness internationally, as our current costs are already much higher that our neighbouring countries.

I suggest that a comprehensive study and review be conducted to examine the extent to which GST and its increases, may have contributed to the widening income gap. In so doing, we may avoid the fine balance of increasing the probable cause of the problem which we are trying to address, which may further aggravate the problem.

This is reflected in the Department of Statistics' (DOS) General Household Survey 2005 (GHS) that about 40 per cent of households had declining incomes (inclusive of the bottom 10 per cent of households which had no income from work, presumably most of which are retiree households) after adjusting for inflation from 2000 to 2005, and the DOS Household Expenditure Survey 2003's (HES) data that about 40 per cent of households had a deficit in their monthly income-expenditure.

We could also try to explore other resources that Singapore has to help the poor, such as our US$132 (S$205) billion foreign reserves which has been ranked number one in the world on a per capita basis. According to the International Monetary Fund (IMF) World Economic Outlook Database September 2006, Singapore is ranked number one in the world for current account balance in percent of Gross Domestic Product (GDP) ratio. Singapore's ratio of 28.5 in 2006, is more than double the second ranked country, Switzerland's ratio of 13.3.

I believe the additional revenue from the two per cent GST increase is estimated to be less than $2 billion. This year, Temasek's paper losses in Shin Corp is already estimated to be over $1 billion and SingTel's SingTel Optus estimated expected write-down is about $8 billion. We could try to re-examine how our Government-linked Companies (GLCs) invest, particularly overseas, with a view to learning from the experience and the lessons, so that in future,we do not in just one year, have a paper loss that may be more than four times the annual increase in revenue from the GST increase.

The Government Investment Corporation (GIC) had returns of 8.2 per cent per annum for the last 25 years, and Temasek had returns of 18 per cent per annum for the last 32 years. With about $205 billion of foreign reserves, if just one per cent of the GIC and temasek's average annual returns is used to help the needy, there may be no need to increase GST, or a lower increase.

As to "plans to increase the grant to the needy to buy their first home", the lower-income may generally have a higher probability of encountering financial difficulty at some point in a typical 30-year mortgage, and thus risk losing their homes and CPF.

Some of the measures to help the needy, may unintentionally end up creating other problems for them.


Leong Sze Hian

3 Comments:

  • Coffee Shop Talk - Double Standards From The Government? Subscribe
    From: makapa 09:50
    To: ALL 1 of 2

    124044.1

    http://edmund-ng.blogspot.com/
    Double Standards From The Government?
    We have seen the continuous efforts from the government telling Singaporeans the need to get their skills upgraded in this ever competitive landscape. On one hand, we have been told that when we upgrade our skill-sets, opportunities will be plentiful. On the other hand, the government opens the flood gate in issuing work permits and PR status, thus creating competition for Singaporeans. I think the agencies in question need to sit down to look into this seriously. What are the priorities?
    What is more important? Getting more ‘would be Singaporeans’ to join us to boost our GDP or helping real ‘authentic’ Singaporeans find jobs? It seems that the government is interested in getting quick fixes. I have seen reports saying we need to have foreign talents so that MNCs would be more interested in setting up operations and investing in Singapore. Let’s not forget that the Government’s responsibility is to take care of its people first. What’s the point of having investments in the pipeline when there are real Singaporeans suffering and can’t wait to end their lives. We have heard of the $500,000 MRT ride.
    We have also not seen the actual breakdown of jobs that was really offered to Singaporeans as MOM has a way of including PRs as Singaporeans. Perhaps more could be researched onto how long a PR actually stays in Singapore before they leave the country and how many of these PRs actually commit themselves and become a Singaporean.

    I want to make a clear distinction between foreign talents and foreign workers. Not all foreign workers are really talented and thanks for the excellent branding our government gives them. We have just inadvertently told the world that we’re not good enough. Try telling that to the South Koreans, a country that treasures their local talents and have made huge leaps of progress without jeopardizing welfare and jobs by opening up the flood gates via a foreign talent policy.

    Living standards are rising by the day but it seems that salaries have not increased much to match inflation. What’s the reason for that? The influx of foreign talents is the root cause of it. We should welcome the foreign talents but not ‘over embracing’ them. Can you tell me which employer would not like to have lower paying salaried workers? By having an over supply of low-wage workers, it is just Economics 101. The salaries will either maintain or go down. This situation worsens when we have more supply. Take a look at Old Chang Kee and you will see workers of different nationalities. When there are too much foreign entry level workers and not enough jobs, we create other social problems. Crime rates go up but at whose expense? Just take a look at Little India and you will realize that it can get really rowdy at times.

    How about the mid-tier jobs? You have slogged through 16 years of studying only to realize that there are literally thousands of foreign workers vying for the same job. With that ratio, it is hardly surprising that all the good jobs would have already been taken up. In India alone, there are 400,000 computer science graduates every year. How about China, Malaysia, Indonesia and Vietnam? By making Singapore a haven, the situation is only going to get worse. We need to ask ourselves when the authorities will say enough is enough and put a stop to that. Until we hit a population of 7 or 8 Million people? What are the jobs left then? Jobs like Retail, Customer Service, Receptionist, Insurance / Property Agents? You don’t study 16 years to do that.

    Let’s not forget our roots and create a Singaporean for Singapore society.



    Options Reply




    From: makapa 10:24
    To: makapa 2 of 2

    124044.2 in reply to 124044.1

    From: Noor Aiza Mohamed Joz [mailto:noor@sph.com.sg] On Behalf Of STForum
    Sent: Wednesday, November 15, 2006 2:10 PM
    To: edmund@infiniquetech.com
    Subject: Re: Double Standards From The Government?



    Thank you for writing to us. We do appreciate your making the effort.

    We receive 70 letters on average each day. Limited space means we can publish only about a dozen every weekday.
    This means having to make often-difficult editorial judgments on which letters to publish.

    We regret we are unable to publish your letter, and hope you will appreciate the constraints on space we face every day.
    We hope you will continue taking an interest in the Forum Page.


    Yours sincerely


    Ms Noor Aiza
    for Forum Editor
    The Straits Times


    Options Reply

    By Anonymous Anonymous, at 11:58 PM  

  • the biggest dissatisfaction comes not from the evil but the hypocrisy.

    By Anonymous Anonymous, at 12:59 AM  

  • By Anonymous Anonymous, at 4:25 AM  

Post a Comment

Links to this post:

Create a Link

<< Home