The SDP Promise: GST, a burden on the poor

April 23, 2011
Singapore Democrats

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Its claim that subsidies more than offset the burden of the Goods and Services Tax (GST) has been shown to be false in previous analyses on this website.

Singapore Democrats

In our continuing series on The SDP Promise, this next series of articles outlines promises 6 to 10, national policy matters that we will advocate as a matter of priority in Parliament.

The PAP government has not been straight with the voters of Singapore. Its claim that subsidies more than offset the burden of the Goods and Services Tax (GST) has been shown to be false in previous analyses on this website.

 
If it were true, then the PAP is essentially saying this: We tax you, then we give you back the money we receive from the tax to help you pay the tax.

We submit that no government could argue this coherently. Even if just to fund the tax and subsidy system, the government would have to at least earn a little more so as to pay for the collection of the tax and the administration of the subsidy.

To suggest that it is providing a service free of charge not only makes poor business sense; it is inimical to the PAP’s philosophy of “no such thing as a free lunch”.

The PAP is depending on the indefensible.

It is a well-known fact that a consumption tax such as GST is the most unfair tax you can ever devise. Because rich and poor alike consume rice and sugar and electricity and school books, the poor feel it more because as a percentage of their income they have paid more.

No one argues that it is the duty of the citizen to contribute to government expenditure. But a system of fair taxation is one that measures your tax burden on the basis of what you take out of the system (ie. your income) rather than your outgoings.

A child who has had the benefit of a wealthier upbringing with tuition, her own room to study in, enrichment classes, and overseas travel may do better in life and therefore, as a community, when she joins the workforce, we ask her to pay more into the common coffer.

Consequently, a child who has had fewer opportunities which contributes to lower outcomes would be expected to contribute less. This is humane, it is just, and it is sensible.

An additional benefit of zero-rating GST for basic goods is, in removing the subsidy system, you immediately remove another layer of administration.

sdp_promise_flyer_2That layer is not then duplicated in the need to classify what constitutes a ‘basic’ good or service because like with the system for calculating inflation, we decide on a basket of basic goods which we classify as basic.

This list would be reviewed periodically, at a distance of 10 years (at the time of the 10-yearly Census). Ten years is a good timeframe because usage of goods (and therefore whether basic or not), does not change quickly: it takes time for something to become a basic as opposed to non-basic good or service (for example, dishwashers or laptops).

The SDP proposes that non-basic goods be rated slightly higher and luxury goods which should be set at 10%. A basic price of $500 is the guiding criterion for luxury tax status and a further refining criterion would be whether the item is deemed non-basic within the current 10-year classification period.

Non-basic goods are items where a cheaper one is available: A wallet costing $500 would be a luxury good while a computer costing $1000 would not since a computer is an important part of modern life and a standard part of the household.

Citizens on lower incomes find the current GST system to be acutely unfair and feel the burden of it daily. On our walkabouts, we come across numerous families who on a daily basis have to make the choice between one thing and another because of this added burden of taxation on their already depressed incomes.

The SDP, in Parliament, will press for this policy amendment on your behalf.

Read also:
The SDP promise: Our MPs’ pledge
The SDP will be accountable with the people’s money
The SDP promise: Let’s talk with the people, not at them
The SDP Promise: A people-managed community