The Goods and Services Tax (GST) is a regressive tax. It takes a higher proportion of the income of the poor, compared to the rich. Most people felt that is is bad.
However, the proponents have put forward a few reasons why they felt that GST is good for Singapore. I like to state some of these reasons and point out why there are fallacious.
1. GST is a tax on spending. It is good to encourage people to save, instead of spend.
Fallacy: Most people, except the very rich, have to spend almost all of their wages to meet the daily necessities. They do not have any choice to avoid this spending. The tax hits them hard, by adding to their burden.
2. GST is an efficient tax, as it has a low cost of collection.
Fallacy: It may be low cost to the tax collectors, but it adds a high cost to the business to account for the input and output tax. Nearly all transactions have to be accounted for. The tax has to be computed for almost every transaction, adding significantly to the compliance cost.
3. By introducing GST, the government can reduce income tax and encourage rich people from around the world to migrate to Singapore.
Fallacy: The rich people do not have to pay income tax on their earnings outside of Singapore. We do not really know how much income tax that they contribute to Singapore, but I suspect that it is not that much. They did buy expensive property and in the process inflate the property prices and adding a burden to the local residents.
4. People can avoid income tax, but it is difficult to avoid GST.
Fallacy: Singapore has an efficient system of collecting tax and tax leakage is relatively small. We do not need GST to solve a non-existent problem.
5. The government needs to expands its tax base and collect sufficient tax to meet its obligations to the citizens.
Fallacy: The government already collects more than sufficient revenue from many other sources. It collects too much tax and have to make regular refunds. It is costly to collect the tax and make the refunds. Why not reduce or remove the tax in the first place?
Conclusion:
GST is unnecessary and harmful for Singapore. It has added to the cost of living and the cost of doing business. I hope to see, one day, that GST be abolished entirely.
However, the proponents have put forward a few reasons why they felt that GST is good for Singapore. I like to state some of these reasons and point out why there are fallacious.
1. GST is a tax on spending. It is good to encourage people to save, instead of spend.
Fallacy: Most people, except the very rich, have to spend almost all of their wages to meet the daily necessities. They do not have any choice to avoid this spending. The tax hits them hard, by adding to their burden.
2. GST is an efficient tax, as it has a low cost of collection.
Fallacy: It may be low cost to the tax collectors, but it adds a high cost to the business to account for the input and output tax. Nearly all transactions have to be accounted for. The tax has to be computed for almost every transaction, adding significantly to the compliance cost.
3. By introducing GST, the government can reduce income tax and encourage rich people from around the world to migrate to Singapore.
Fallacy: The rich people do not have to pay income tax on their earnings outside of Singapore. We do not really know how much income tax that they contribute to Singapore, but I suspect that it is not that much. They did buy expensive property and in the process inflate the property prices and adding a burden to the local residents.
4. People can avoid income tax, but it is difficult to avoid GST.
Fallacy: Singapore has an efficient system of collecting tax and tax leakage is relatively small. We do not need GST to solve a non-existent problem.
5. The government needs to expands its tax base and collect sufficient tax to meet its obligations to the citizens.
Fallacy: The government already collects more than sufficient revenue from many other sources. It collects too much tax and have to make regular refunds. It is costly to collect the tax and make the refunds. Why not reduce or remove the tax in the first place?
Conclusion:
GST is unnecessary and harmful for Singapore. It has added to the cost of living and the cost of doing business. I hope to see, one day, that GST be abolished entirely.
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