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Budget 2011 promised Singaporeans that they would receive $600-$800 in cash as ‘Growth Dividends’. This works out to approximately $66 a month for 12 months. While this is useful cash for the average Singaporean, voters must not be enticed to vote for the PAP because of it. Here’s why:
While the Government hands out the money, it doesn’t tell the people that it collects much more in return through the GST. A breakdown of the one’s expenditure would reveal the truth.
Based on a family of four persons (two adults and two children), one can see that the average monthly household expenditure is about $2,720. This is a very conservative estimate which does not factor in any leisure activities, vacations or medical emergencies.
The household would pay a 7% GST on these items which amounts to $190 every month. Compare this to $116 it hands out (for two adults in the household) for the Growth dividend this year.
Average monthly expenditure for a household of four
|Water, electricity and gas||$200|
|Transport ($2.50/person/working day)||$200|
|Medical bills (ave per month)||$50|
|Handphone and Internet||$150|
|School fees and supplies||$150|
And remember, the Growth package is given out on a one-time basis whereas the GST is collected every year and there is every possibility that it will be increased again after the next general elections.
Now look at the SDP’s Shadow Budget 2011 plan where we propose a three-tiered GST system. Under such a plan basic necessities such as foodstuff, medicines, school books and supplies, and public housing are zero-rated, non-basic items are charged 3%, and luxury items (worth $500 or more per item) at 10%.
It can be seen that from the above table only utilities, cellphone and Internet fees, and household supplies would be taxed at 3%. This amounts to $12 in GST that the family pays in a month.
What this means is that for a lower-income family who spends minimally on luxury items but half of its expenditure on meals and foodstuffs, the GST levy is small. A rich family who indulges in branded items and goes for expensive holidays would pay more in GST.
The extra revenue collected from the increased GST for luxury items compensates for whatever losses incurred from the 0% tax on basic necessities. Such a formula is more equitable.
The final analysis is that while the PAP Government gives out $1,200-$1,600 to each household this year as Growth Dividends, it more than takes back with the GST collection of $2,160. And this does not take into account other monies that the Government collects through other means like the COE, ERP, HDB, etc.
That’s the arithmetic Singaporeans must remember when they go to the polls this election.