GST is a bad tax. It is very costly to administer and require a lot of work to keep track of countless transactions, including identifying transactions that should be exempt, zero-rated or taxable and the inputs that are allowed to be recovered. This wasteful cost is added to the cost of doing business in Singapore and make us less competitive internationally against countries that do not have this burden.
GST can be replaced by a flat rate tax on wages and investment income. To replace GST at 7%, it should be possible to levy a flat rate of 4% - based on the assumption that most workers will spend 4/7 of their wages on the items that are covered by GST.
Employers can be made to contribute a payroll tax of 4% on the wages. They can recover this amount from workers earning above a certain threshold, so that the low income workers are exempted (i.e. the payroll tax is borne by the employer). This flat rate of 4% can also be levied on investment income. For income from property, this tax can be added to the tax based on annual value.
The government can collect an equivalent amount in taxation (to replace GST) and businesses can be relieved of the administrative cost of keeping a separate set of records and employing accountants to account for GST.
The accounting firms and tax officers will be unhappy to see GST disappear, as they make profits and earn good salaries with GST. But, we are already short of accounting staff to do the ordinary accounting work (other than GST) - so they can be redeployed for more useful purpose.
But can Singapore afford to waste scarce resources on doing wasteful work on GST, when there is a simpler and more efficient way to achieve the same goal?
Tan Kin Lian
GST can be replaced by a flat rate tax on wages and investment income. To replace GST at 7%, it should be possible to levy a flat rate of 4% - based on the assumption that most workers will spend 4/7 of their wages on the items that are covered by GST.
Employers can be made to contribute a payroll tax of 4% on the wages. They can recover this amount from workers earning above a certain threshold, so that the low income workers are exempted (i.e. the payroll tax is borne by the employer). This flat rate of 4% can also be levied on investment income. For income from property, this tax can be added to the tax based on annual value.
The government can collect an equivalent amount in taxation (to replace GST) and businesses can be relieved of the administrative cost of keeping a separate set of records and employing accountants to account for GST.
The accounting firms and tax officers will be unhappy to see GST disappear, as they make profits and earn good salaries with GST. But, we are already short of accounting staff to do the ordinary accounting work (other than GST) - so they can be redeployed for more useful purpose.
But can Singapore afford to waste scarce resources on doing wasteful work on GST, when there is a simpler and more efficient way to achieve the same goal?
Tan Kin Lian
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