Pay and pay, eh?

When I went to university in Chicago in 1993, one of the first things I had to get used to that drove me nuts at first was calculating taxes. State and city taxes in metro Chicago added 7.75% to every bill at the time; in the suburb where my university was, it was fractionally cheaper at 7.5%. Singapore wasn't charging GST then, so even though I knew the concept existed, had dutifully studied it for my 'A' Level Economics exam and paid it out on previous vacations, it took some getting used to, the habit of adding a little extra to everything I bought, whether it was groceries or a new outfit, a Jimmy John's sub or a meal at a restaurant. Plus 7.75%/7.5% aren't the most intuitive numbers to calculate on the fly, which meant that I'd usually add 10% and round down from there to be on the safe side.

It did add to the cost of things. You couldn't just pick up something and forget about taxes if you were living on a budget. Even groceries, as I said, cost approximately 10% more.

By the time I got home to Singapore, GST had firmly ensconced itself here at 3%, which seemed laughably trivial in comparison, particular when state and provincial taxes could add up to 15% or more in countries like Canada. Singapore retailers and service providers took the helpful step of including GST in the prices they displayed on their price tags and restaurant menus, so that customers wouldn't be flustered by having to punch out 3% on tiny calculators whenever they were thinking about buying something. Or so the logic went. Instead, it felt like, yeah, prices had just shifted upwards slightly, but hey, whoever thought we were ever paying taxes when we were just paying the sticker price?

So now the Prime Minister wants to increase the GST from the 5% it's been since 2004 --- after rising to an intermediate 4% in 2003 because that was supposed to make the 5% mark more politically tenable --- to 7%. Why?
Our aim is to help the lower income groups and the elderly, not to increase their burdens. When we implement the GST increase, it's not just the GST increase, it's the package which will fully offset the impact of the GST increase and begin to strengthen the social safety nets and tilt the balance in favour of the low income groups - we will not just raise the GST but we will have a comprehensive offset package.
--- Prime Minister Lee Hsien Loong, November 13, 2006,
as quoted in the Channel NewsAsia report, "GST to be raised to 7%: PM Lee"
(Oddly enough, the Prime Minister's speech hasn't been punctually uploaded to Sprinter yet, even though the government is usually scrupulous with this sort of thing.)

I don't really have any problems with an increase in GST as long as my income tax rates go down. And while there hasn't been any mention of that yet (they're holding back details of the GST increase till the next Parliamentary Budget debate in February 2007), I admit that the news itself of an impending increase doesn't quite get my knickers in a twist. I've long accepted paying a GST as an inevitable corollary of living in a big city, even though it's surreal to think that I'm going to be paying as much in taxes here as I did in Chicago 13 years ago, and even though I know there's nowhere that any GST will go but up.

What does annoy me --- and this may just be my 'A' Level Economics talking, because anything more advanced always made my eyes glaze over --- is that the Prime Minister is explaining away the increase as an effort to help the government raise money to help "the lower income groups and the elderly".

You know what would help the poor and the elderly? Not raising a tax that they cannot avoid paying.

The reason governments, I think, like GSTs is because they get to collect taxes from actual consumption --- the logic being that if you've got the moolah to buy something, whether it's the weekly groceries or a Prada bag --- you ought to pay the government a little something since you obviously earned or otherwise acquired the money somehow to make that purchase. So it helps them to get around (partially) the problem of people who make heaps of money but under-declare their official income through wily legal acrobatics or other accounting shenanigans. Nothing makes governments --- Republican, Democrat, conservative, liberal, socialist, fascist, totalitarian --- gnash their teeth so much as knowing that people are getting away with not forking out their "rightful" amount in taxes. Maybe totalitarian governments can take it out a little better on people by lopping off their heads, but that's already after they've ground their teeth to bits in frustration.

Having a GST also has the serendipitous side-effect of making everyone pay taxes (not just the rich) and "spreading the tax burden out" among all members of the population. That includes, by the way, the poor and the elderly.

Everyone in Singapore pays GST --- at some point, somewhere or other (unless you do all your shopping from an establishment that makes less than S$1 million per year). Whether you're earning an income or taking a handout from someone else, whether you're five or fifty, whether you're buying groceries you need to feed your family or a Prada bag you "need" for the year-end Xmas party --- we're all paying GST. No one asks (or cares) at the check-out counter if the customer is, in fact, poor or elderly.

So unless our government is about to issue little cards certifying that the bearer falls into the poor or elderly group and therefore gets GST waived on all their purchases, I don't see how raising the GST is going to help more than hurt the people it's supposed to, well, help.

Besides, if the government wanted merely to raise money to help the poor and elderly, there's lots of things they could do. Reduce the Cabinet minister's salaries, for one. For another, stop prancing about on the world stage like a kid trying to get the judges' attention with the IMF/World Bank meetings or the Singapore Biennale, and spread some of that money out among social welfare programmes. (Note to anyone who works on government committees trying to "enhance" the country's standing through all these song-and-dance efforts: When you're cool, you'll automatically be invited to sit at the cool kids' table. When you're not cool, no amount of whinging and wayanging will make it happen, plus it has the effect of making you look even more uncool while you're at it. That's just the way the world works. Suck. It. Up.)

The Prime Minister's GST announcement was shored up by an immediate avowal to develop a "package which will fully offset the impact of the GST increase and begin to strengthen the social safety nets and tilt the balance in favour of the low income groups --- we will not just raise the GST but we will have a comprehensive offset package" (see quote above).

You know, one wouldn't need a "comprehensive offset package" if one simply didn't raise the GST. And one could still help the poor and elderly by devoting all of one's time and energies to figuring out how to help and finance the help for them, instead of worrying about how to raise the GST and make it politically palatable at the same time.

Plus I gotta really love the part where the Prime Minister declares, "I'm not going to tax 15% on income tax". I hear that Singapore does have some of the lowest taxes in the world for a developed country. I've never actually crunched numbers to verify this, but my friends in the US, Canada and the UK pay a lot more taxes on their income than I do.

So I'm sure anyone in Singapore who makes heaps of money is glad of the Prime Minister's statement, taken for what it's worth. Never mind that the rich (or "higher income" group, as our government loves to euphemise) are precisely the ones who have the cash (and some measure of social responsibility) to help the poor and the elderly. Never mind that to them, a 2% increase in GST --- or in anything, really --- is fairly negligible and unfelt. Never mind that they could still pay taxes on the order of what is levied in the US, Canada or the UK, and still keep a pretty good party going all year round.

Oh no, we have to keep the "higher income" group happy, so we're not going to tax 15% on income tax. Fantastic priorities we've got here.

The thing is, even if GST's here to stay, and whether it's 5% or 7%, I'm thinking there has to be better ways to make sure it doesn't hurt people who are just spending money in order to get by in life --- people who are buying their groceries and school textbooks and shoes and public transport fares. In the UK, there's no tax on books --- I assume, because the philosophy is that it's good to read (even *sigh* reading some book of the crappy Chicken Soup ilk) and there shouldn't be barriers to reading and learning. In Massachusetts and Oregon in the US, there's no tax on clothes, which makes factory outlet shopping all that much sweeter.

Surely there has be to a way, in our teensy-weensy country where we know all the stores there are and the poor aren't exactly shopping at Palais Renaissance or the Raffles Hotel Shopping Arcade, to spread the GST out even more evenly so that people aren't taxed when they're buying stuff they need to, y'know, survive. Forego taxes on groceries? Make books and clothes un-taxable? I don't know, but if the government is smart enough to figure out a "comprehensive offset package", it must be smart enough to figure out how to differentiate conspicuous consumption from necessary consumption --- if they were interested in doing so in the first place.

You know what would help above all and regardless of any changes, though? If all the retailers and businesses in Singapore charging GST started indicating it separately from their prices in all their stickers and receipts. Because then we'd know exactly how many dollars we're forking out to the government, and not the retailer, with every purchase we made. Because then businesses couldn't use a GST increase to merrily hike their prices and round them up to the nearest 10 cents, 10 bucks or $1,000, in order to disguise a convenient price increase on top of the GST increase. It would require consumers to think a little differently when they look at a pricetag or menu, but that's a small price to pay for knowing exactly how much The Man is taking away from you, with every little transaction you make.

Raise the GST. Don't raise the GST. Just have the balls to say why and how you're doing it, and stop trying to wave your socialist cred around because, frankly, we all know you ain't got any.


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At 11/13/2006 10:27 pm , Anonymous Anonymous said...

i just wrote about this in my LJ, but you put in way much better than me


At 11/14/2006 12:47 am , Blogger Little Miss Drinkalot said...

Hmmm, credit for not sounding as pissed off as I think you are.

But, until we hear what sort of incentive packages the govt has in store for the needy, I don't think it's fair to bash them (yet) for their latest effort.

Assuming that the incentive package really does return MORE to the needy than what it takes away from them via GST, I actually see the logic in this increase.

I guess we shall just have to wait and see whether they can deliver.

At 11/14/2006 2:32 am , Anonymous Anonymous said...

Progress package or pre election bribe, whatever you call it, is a one time payment. GST hikes are recurring costs.

Unless the payout is a recurring sum, it will eventually be wiped out over time as the increased cost endlessly accumulate.

At 11/14/2006 4:43 am , Anonymous Anonymous said...

Does anyone not think about the round-tripping that goes on with PM Lee's "logic".

Why incur administrative costs and bureaucracy to give offset packages if the Gahmen does not impose the increase in GST in the first place?

I am not sure what other offset packages will PM Lee offer to make it less tough for the poor and elderly? Another progress package type of handout?

Hello Kitty

At 11/14/2006 8:26 am , Anonymous Anonymous said...

GST is actually a much more equitable tax than an income tax.

most of the rich in singapore have accumulated wealth - they're not drawing a salary. so most of their earnings comes from interest, capital gains etc., and capital gains tax in singapore is 0%.

in principle without GST the very rich could avoid paying taxes altogether(!).

tax rates in singapore are remarkably low - top rate 20%, only bettered by hk's 16%. for comparison, china's top rate is 45%.

despite all there is to bitch about, be thankful that we have a somewhat streamlined bureaucracy!

At 11/14/2006 9:22 am , Anonymous Anonymous said...

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At 11/14/2006 11:35 am , Blogger Terz said...


Ah, the messages that get filteredby my gmail.

At 11/14/2006 3:57 pm , Anonymous Anonymous said...

I think your correlation between the GST and the income tax freeze is the most convincing argument against the government's claim that the hike is for the benefit of the poor. Totally disingenuous!

However, I did notice, even in Canada when we were suddenly beset with that lovely 8% GST and 7% provincial tax, that a lot of that money was supposed to offset the deficit that from gov't borrowing and the impending increased burden of pensions on federal funds.

It's an economic fact that a significant amount of growth in the sixties and seventies, in most western countries, was based on the exploitation of credit.

As for the very rich, I think there's luxury tax on certain items in Canada... or maybe I'm hallucinating. Often times gov'ts are terrified of taxing the very rich because the very rich often flee to tax-free havens. Hello Monaco!

Either than that... thank you for writing this kind of piece. I wish you had a regular editorial column in a famous and well-respected journal... somewhere.

At 11/14/2006 10:18 pm , Blogger Tym said...

lumos > Don't shy lah! What's your link? It's important to make your voice heard.

LMD > Yes, I am more cynical than you ;)

Anonymous #4 > GST is equitable, yes, but is that the best way to help the poor, as this GST hike is supposed to? I think not. Plus I think there are more important things than a "streamlined bureaucracy" that we should work towards!

nardac > Thank you :)

At 11/14/2006 11:57 pm , Anonymous Anonymous said...

In a private company, when funding is required for Project X, you budget it by either cutting down on expenses for the other projects, or even better, increase profits.

In Singapore, there are no profits, it's so easy to raise the GST to cover those funds. The budget balancing does not look like: cut in defense spending, increase welfare. Or cut in (failing) overseas investments, and increase social welfare. It's like... hrm... need more money, increase GST.

Going with your Prada bag example, the government makes more than the 7% you paid for the Prada bag. The wholesaler who imported the Prada bag paid 7% for it. Then the retailer paid 7% for it. Then you paid 7% for it. Unless, of course, as you mentioned, the wholesaler and retailer all made less than $1,000,000 a year.

The rounding up is surely going to hurt lots of Singaporeans. I can't imagine that if you're paying $1 for a cup of coffee, the Ah-Sok will ask you for $1.04, but more likely charge you $1.05, or $1.10. If they are told that they cannot increase the price, fine, they will serve it to you in a smaller container. Still $1 wat.

Looking at the bigger picture, a 2% increase in GST is going to cost more for the manufacturing industry in Singapore. If a company made $100 million a year in goods, their cost to do business has just gone up by 2%, and they will be paying $102 million instead. I'm sure this will be another catalyst for companies to move out of Singapore to somewhere else more favorable.

Does this mean that if "the lower income group" is going to benefit from hundreds of millions of dollars from the GST increase, there is less of a need to donate to the poor now?

At 11/15/2006 1:15 pm , Anonymous Anonymous said...

I live in Southern CA. We don't pay sales tax on grocery/food staples & I believe its the same in all the 50 states. There is sales tax on the non-essentials though. There are governmental programs like food stamps, WIC (women with infants and children) stamps & community resources to help the poor. There are also govt. programs of free breakfasts and lunches in school for the poor kids.

We have free public education from K-12th grade even for illegal immigrants. No school fees to pay. All textbooks are provided free to the students. Students would have to buy their own stationery. All from taxes that we paid in, which I don't mind paying my share.

Also, if any city wants to raise the sales tax it has to be first put on a ballot as a measure for voting by the residents. They cannot just ram it down our throat without public hearings & finally putting it to a vote.

At 11/15/2006 7:46 pm , Blogger Terz said...

Ah referendums... nope. That concept is alien here.

Just look at the IRs.


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