What's going on, really? One and a half year to discover a
mistake and unconventional adjustment for the mistake......
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Jan 3, 2006
Iras says there's error in GST figures for 2004
It admits collecting $208m less and makes adjustment to 2005
figure
By Narendra Aggarwal
Economics Correspondent
EVEN the taxman gets it wrong sometimes. The Government has
admitted making an 'error' in its goods and services tax (GST)
figures for 2004. It collected $208 million less than stated
originally.
The error came to light after a report was printed in The Straits
Times last week on data released by the Inland Revenue Authority of
Singapore (Iras) for the first 10 months of last year.
The Iras data showed that GST collection shrank 5.1 per cent
compared to the same period in 2004. This, despite takings from
income tax surging 10.2 per cent. Higher incomes should have led to
more consumer spending, which usually translates to more GST raked
in.
In an e-mail to The Straits Times, Iras said it had overstated
2004's figures: 'The correct amount should have been $730.43
million instead of $938.53 million. We have corrected the GST
collection figure for 2004 and informed the Department of
Statistics (DOS) accordingly.'
It did not say how the mistake occurred, or why it has taken 1 1/2
years to release the updated figure.
Going by the updated GST collection data, instead of a 5.1 per cent
drop last year, takings actually rose 11.2 per cent.
And so instead of the Government's overall tax revenue for last
year posting a modest increase of 2.4 per cent over that for 2004 -
leaving little room for giveaways in the upcoming Budget - it turns
out there was a healthy 5.1 per cent growth.
At the time, economists had said the modest 2.4 per cent increase
in the Government's overall tax revenue 'did not fit in' with the
economic recovery story.
Despite the new figures, economists have new cause for confusion -
the way Iras has moved to correct the error in its latest
data.
While the overstated $208 million has 'disappeared' from the May
2004 GST collection, the figure seems to have 'reappeared' in March
last year.
The result is a neat squaring off, with the 'error' having zero
impact on Iras' GST collections in its April 2004 to March 2005
financial year.
As Iras put it, an 'adjustment for the error of $208.1 million that
occurred in May 2004' has now been made by revising the previously
reported March 2005 GST collection figures upwards by an equivalent
amount.
However, Dr Choy Keen Meng of the Economics Department of the
National University of Singapore said that adding the same amount
to the March 2005 GST collections might amount to over-reporting
the revenue for the year.
He said if the same amount is now being adjusted under March 2005,
the question that arises is: 'Was the GST collected or not?'
Iras has told The Straits Times that the $200 million in GST was
not collected.
Dr Choy branded Iras' 'adjustment' as 'unconventional'. 'If there
was an error in reporting in May 2004, and it has been corrected
now, that should have been the end of the story.'
Another senior economist was puzzled not just by the error, but
also by how it went unnoticed for so long.
'I wonder how they made the mistake,' said Mr David Cohen at Action
Economics.
'That GST collections had gone down was not consistent with a
growing economy. But they deserve the benefit of doubt. They are
honest bureaucrats. If it were another country, one would wonder
what is going on.'
He thinks the 11 per cent growth in GST revenue last year would be
more consistent with local spending and record tourist
arrivals.
'There is a correlation between growth in tax revenue and economic
growth, so the new figure of a 5.1 per cent increase in the
Government's tax revenue is a good proxy for gross domestic product
growth,' he added.
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