After reading some of the reactions to my previous post titled “Robbing Peter to pay Peter” detailing the math of how GST affects the poor, I think I need to express my opinion against those who are pro-GST.

For those who argue that GST is not regressive, I beg to differ. There’s a huge difference between the kinds of goods that the rich can spend on and the poor can spend on. The rich can easily compensate for an increase in GST by scaling back some of their purchases much more easily than the poor. The rich can buy a few less Mercedes, Rolexes, condominiums, or eat less of Lawry’s Prime Ribs. Do you expect the poor to pay one less month of electricity bill, skip visits to the doctor, or eat one less meal a day in order to compensate for the loss of spending income?

I’ve also pointed out in a comment to someone in the previous post that implementing GST is not the solution to help the poor. Remember Mr Tan Jee Suan? So what if we collect another few hundred millions extra of money if the money is not going to the right people? Is the problem not having enough money to help the poor? It’s an attractive proposal to raise funds to help the poor, but it will not solve the problem of helping the poor if our social safety nets have holes that allow people to slip through. I can’t help but remember NKF. Under Mr Durai, they were damn good in raising money. However, did more money help more people? No. It went to some of his cronies and the infamous gold tap.

The worst argument in my opinion is that low income and corporate tax equals to more foreign investments. By extension, using such an argument means that countries with high corporate and income tax will have little investments, and no rich people as well. Why would the rich want to stay in a place where corporate and income tax is high? Let’s take a look at the tax rates of some developed countries, taken from Worldwide-tax.com

tax rates 
As can be seen from the table, Hong Kong is probably the only country that has taxes that are more favourable than us. However, the economies of the other countries listed are doing well, even with tax rates that are so much higher than Singapore. Going by the logic of those who claim that low income and corporate tax rates means more investments and more rich people willing to come to Singapore, shouldn’t the people of all the other countries, with the exception of Hong Kong and Singapore, be chopping firewood for subsistence?   

Ultimately, the decision for rich people to invest in or move to another country is dependent on many factors, not just taxes. Many countries have taxes far higher than us, but yet rich people are still willing to stay there. Have we asked ourselves why is that so? Instead of always adopting a pragmatic (and stale) approach of cutting costs (and hurting your own citizens in the process) to attract investments, what else can we do? Why is it that even with such low taxes, investors worldwide are not flooding Singapore with capital?

I am not against the idea of generating more funds to help the poor. I am against the idea of increasing GST, or even having GST for that matter. America and Hong Kong have no GST, but their economies are not in a state of thrash. I think we should not always be looking at the economists to solve the problems of the economy. There’s only so much that money can do, and people do not always make decisions based on money. Tell George Soros to park all his wealth in Singapore and see what he would say.

I think the Singapore government should start consulting the sociologists, the political scientists and the psychologists in conjuction with the economists to make decisions for our future. Singapore is too small to compete solely on cost.