Goods and services tax (GST)

The Goods & Services Tax is a bad tax in the following ways:

- it is a regressive tax and hits the people at lower income most
- it is a wasteful tax as it incurs a heavy administrative cost to the tax collector and the payer

A better solution is to abolish GST and have higher income tax. If a country needs to lower income tax to attract higher income earners (a strategy for which I personally disagree) and needs to find an alternative source of revenue,  here is a better approach to GST:

- levy a flat rate tax of 4% on payroll and investment income (which produce the same revenue than 7% GST)
- the payroll tax is a cost to the employer but can be recovered from employees earning above a threshold salary

There is a mistaken concept that GST is fair as it is imposed on consumption and encourages savings. A better way to encourage savings it to pay a higher rate of interest (which can be achieved through monetary policy) or to exempt interest from tax. Many retirees earns a low rate of interest on their savings and yet have to pay higher prices through GST.

GST has become so complicated, costly and open to abuse that it is time to abolish it and replace it with a more efficient tax.

Tan Kin Lian