Originally posted by Qitai:
The purpose of my comparison is not to justify the GST. But rather,
to see what is possible. Given that the other countries needs to
tax alot more than Singapore, this means that this government has
been prudent with it's spending compared to other countries.
As for your arguement on GST Versus Income tax, I completely agree
with your points raised (except with the note that only business
above $1M annual turnover needs to pay GST - i.e. your
neighbourhood shops do not need to pay GST). It is indeed one of
the effects of GST. However, I believe the rational of GST is to
tax based on spending rather than earning. As to whether that logic
will bring in economy benefits, I do not know. So yes, without
knowing the actual benefit of a GST based taxation structure, I do
not know if it will actually benefit Singapore as a whole. This is
one subject I would be interested to study more. Until then, I can
neither agrue for or against GST. One thing I do know now is that I
am one of those who has actually benefit from GST due to my
extremely low expenditure. So, maybe I am already
biased.
The objective of implementing the GST in Singapore is to ensure
that tax is paid by every Singapore Citizen.
In the Income Tax system, the tax net is dependent on the 'honest'
reporting of one's income, which can result in leakages in the
system, and taxes not paid accordingly.
With GST, tax will be paid by every Singaporean based on his
consumption - whether it is an individual Person or a Company, each
transaction will result in GST being collected.
Even when a Business has turnover below $1 Million, the Business
will still be PAYING the GST on the goods and services PURCHASED by
the Business.
However, this SMALL Business (below $1 Million turnover) will not
be required to COLLECT GST, by charging their customers for the
goods or services sold to them - (the Small Businesses can OPT to
collect GST, and pass on the cost of GST paid to their
Customers).
The GST is a multiplier of revenue for the Government, as when an
Item is IMPORTED into Singapore, the first GST will be paid by the
IMPORTER.
When the same Item is sold to a Middleman, the transaction will
result in another GST being paid on Cost PLUS Profit.
When the Middleman resell the Item to another Buyer, GST will again
be imposed on this Item - at a new higher value.
For each subsequent transaction on the same Item, GST will be
imposed and collected.
Everyone living in Singapore will have to pay GST on every item
consumed.
As to which system is better for the Citizen, one has to look at
the net effect of reducing Income Tax to implement GST, which may
not necessarily reduce Revenue to the Government - due to the
multiplier effect the GST is repeated on each and every transaction
of the same goods.
The net loss reported by the Singapore Government is due to the
subsidies that they claimed have been paid to Singaporeans, to help
them to adjust to the GST being implemented.
Now that the GST has been introduced and operating for the last
five years, and the subsidy is no longer available, Government
Revenue should be increasing in geometrical bounds.
At the end of the first year when GST was implemented, and despite
the subsidy being paid-out, the Government had reported an
embarrassingly higher revenue, which resulted in the Singapore
Shares being paid out- as a refund of tax collected.
With the knowledge of the profitable effects of each percentage
increase to GST, and with a bumper collection in the First Year of
GST, there is no reason for the GST to have been increased from 3
Percent to the current 5 Percent.
