Comments, opinions and an occasional ramble
Robbing Peter to pay Peter
After my initial reaction to the announcement of the increase in GST in my previous post, I realise that the latest move by the Singaporean government to increase the GST to 7% is not going to help the lower income groups as much as they would like to have us believe.
The reason given for increasing the GST is to generate money to help the lower income group. To finance the aid packages to help the lower income group, the government chooses to tax consumption instead of income. This is hugely unfair to the lower income group because they are worse off with the increase in GST compared to an increase in income tax.
An increase in income tax will not affect the lower income groups as much because of the various tax reliefs that can be claimed.
Let’s take for example a family of four, with the husband (an active NSman) earning $1,200 per month, the wife being a homemaker and two children who are in primary school.
The total annual income, based on a 12 month period, is $14,400. Let’s take a look at the taxable income for this family.
Earned income tax relief: $1,000
Wife relief: $2,000
Qualifying Child relief: $4,000 (each child is eligible for $2,000 relief)
Relief for NSman: $3,000 (active)
Relief for Wife of NSman: $750
Total relief: $10,750
Therefore, the income that is taxable for this family is only $3,650.
Since the GST will increase by 2%, for the sake of comparison, let’s assume that annual income tax has risen by 2% instead of GST. The tax increase for this family is $73.
Suppose that this family spends $1,000 per month on goods and services in order to survive. Increasing the GST by 2% will mean an additional increase of $20 per month. That means that the annual increase brought about by GST is $240. This is more than 3 times the amount that this family would have to pay if income tax had been increased by 2 percent instead.
Well, let me provide even more astounding figures. The first $20,000 of one’s income is not taxable. This means that this family doesn’t even need to pay income tax, no matter the increase in the percentage of income tax. The only way to make this family pay tax is to increase the tax on consumption, which is the GST.
Therefore, if GST goes up to 7% next year, this family would need to pay $70 a month in tax, and that would be $840 a year. If there was no GST, and the 7% had gone over to income tax, this family would not have to pay a single cent in taxes. The GST is a really ingenious idea to make the poor pay more tax.
PM Lee said in the report from Channel Newsasia that the increase in GST “will give us precious extra resources to implement social programmes like Workfare later on. Our aim is to help the lower income groups and the elderly, not to increase their burdens.â€
After doing the math, I find it contradictory that a tax that penalizes the poor is going to be implemented to help the poor. It’s not even a case of robbing Peter to pay Paul; it’s a case of robbing Peter to pay Peter.
Addendum: In response to the proponents of GST, I’ve added another entry further arguing against a GST hike. You many access it here.
| Print article | This entry was posted by Aaron Ng on 14/11/2006 at 3:59 pm, and is filed under Perspective. Follow any responses to this post through RSS 2.0. You can leave a response or trackback from your own site. |


about 3 years ago
WP opp leader Low always stress on accountability and transparency because it is common sense to do. Any intelligent and academic people can give BS and crap if end of day, they don’t have to answer for it with action.
Have you ever tell your boss that u cannot do your work because you lack resource ?? First time, u say is okay, but everytime, thing not done, the same reason is quoted, your boss will terminate u.
Sure, I give benefit of doubt to gov to help the needy and poor, to fight terrorist. But u can’t help thinking that when ppl start question gov’s policy, they often use the media to make a different headline citing terrorist’s threat and also raise other countries’s problem negatively as though Singapore has no such problem at all.
about 3 years ago
If gov keeps the words and say GST increase to 7% and truly keeps their words helping the needy and poor, then I say good, I be supporting Gov and vote for it.
But, with no such accountability and transparency, any Tom, Dick and Harry can blow up any minor and not unnecessary threat happenings (especially gov controlling the media) to coverup their incompetency and incapabilities, keep blaming on things and making these things as the reason for them not to able to fulfil their promise of GST hike.
Probably, it is this ability to get away and use such excuse with no consequence that ppl will love to join PAP. Well, we never know.
about 3 years ago
Well Daniel,
To be fair to the PAP, they stress accountability too. However, I think that internal checks and balances never work because of inherent flaws in human nature. Check this out:
http://aaron-ng.info/blog/internal-checks-and-balances-are-as-good-as-none.html
about 3 years ago
Stressing is one one thing, action is another.
I can say I am good guy but yet be deceptive. At the end of the day, it doesn’t matter if gov stress accountability. Show us in action that they did, not some kind of mouthing. They are paid for action, not talk and talk and talk, and then give carrots when next election come.
Who know that gov maybe playing mindgame. Mindgame is the most dangerous thing to do. Recently, LKY ask the ppl to learn internet so that ppl can know what internet and blog say is not credible at. I believe this is the example of mindgame I talk about. If internet/blog is unreliable and not true, why should gov implement law for cyberspace. The answer is clear. Internet/blogging expose them with facts, history, critical thinking, etc that will not easily find in newspaper. In printed media, it will not get mention at once or just report as though unimportant , and then lost forever unless someone go library to find out. But in cyberspace, those news, blog stay on and remain easy accessible.
about 3 years ago
The thing with cyberspace is that I find a lot more intelligent people like BL, Aaron, jonathan, Bart than I ever find in newspaper, magazine.
The most intelligent ppl are in internet, and it is great insult to say that cyberspace has no credibility. It is non-censor and true to one’s opinion. That’s alone is most resourceful of all information.
about 3 years ago
Well Daniel,
When people argue for something, they naturally want to argue to their advantage. I see it as something perfectly normal for MM Lee to say that the internet is not credible because it serves some of the PAP’s interest to say that. He is not lying. There are indeed plenty of crackpots around. At the same time, there are plenty of good things around too.
In my opinion, the newspaper editors and journalists are not dumb. They are intelligent people, but they self censor because they don’t want to break their rice bowl. If you work in SPH, you will know how well those guys are paid. It’s the ‘golden handcuff’ syndrome. Bloggers don’t get paid to write (except for some like Xiaxue, who writes totally inane things anyway). They write that they truly think and feel.
There are several aggregators online that collect good stuff from the blogosphere. These websites are quite good in my opinion. I think Singaporeans should supplement what they read in the mainstream news with articles from these aggregators. There is certainly a need for one to be aware of greater diversity of opinions in order to become more intelligent.
I thank you for your compliment but I think that I’m just passionate about what I write. I’m glad that you have found my writings to be thought provoking. Progress is always a collective effort and if everyone makes an effort to contribute and discuss, all the better for everyone.
about 3 years ago
I agree perfectly with this: “In my opinion, the newspaper editors and journalists are not dumb. They are intelligent people, but they self censor because they don’t want to break their rice bowl.”
Look at how Mr Brown got fired just by sounding a little sarcastic, but speaking the truth in general.
One day, when the Government oppresses the people too much, then only will people break the censorship rules, because they have nothing to lose already.
However, we have to wait long long for this day, because Singapore is no where near this “critical point”.
about 3 years ago
Well done Aaron! That’s a wonderful post indeed imho. When I first heard of the news I was rather skeptical about the reasons given for the proposed GST hike, and I still is though I didn’t really given much thought about it..
.. Till I somehow managed to stumble upon your site. Your calculations of the sumes involved in a hypothetical scenario was rather eye-opening to say the least. That people down the income ladder are actually more worse off at the end of everything.
This whole thing is a rather big irony, really. Something has to be done about this issue, I hope. Let’s hear what they have to say about this in the coming months.
about 3 years ago
Well Jimmy, I would caution you against making a conclusion based on my arguments. There are competing arguments, and mine is only one of them. I made the choice to argue from the standpoint of the poor man in the street because I believe that the poor have a right to be treatly with dignity as well as anyone else, and not that they can be made to bear the brunt of everything because of the fact that they are poor.
Do check out the counter arguments. Here’s a good one: http://perspectiveunlimited.blogspot.com
about 3 years ago
And what saddens me is the fact that come next GE, Singaporeans will fall for all that sweet talk and handouts again. Damn. We have a memory rivalling that of a goldfish.
about 3 years ago
People should be wise to make decision. Choice is yours and ours. The gov can give carrots, marketing ploy, or whatever. But be prudent to realize that we shouldn’t blame gov. Gov can give fear, doubt and uncertainty but then choice is yours. Even if u can’t do anything with gov, make other choices in your life. I think lately the increasing “good news” that media say has caused an uncomfortable feeling in me that something bad is going to happen soon. Though I don’t know what it is, it is just some bad omen or feeling.
Follow your heart if u want not your emotion and fear.
about 3 years ago
I believe that there is hope for the opposition.
Look like ppl like Chee Soon Juan. Even though he is quite screwed-up, and lost, close to 30% of the people voted for him.
I believe that the 30% are the younger generation, and hence as the younger generation grow up, there will be more people to vote the opposition.
about 3 years ago
Well Daniel, human beings are simple, human beings. To err is human. We have certain instincts that drive us, such as fear and insecurity, which can be easily manipulated if one knows how to. I think Singaporeans have been brought up in comfort and now are risk averse. They rather stick to a tried and tested party despite their flaws. I’m not sure when Singaporeans will be willing to take some risks.
about 3 years ago
We are risk adverse because of fear originated from the environment, the fear of doing wrong, the fear of failure that make us think we are failure forever, the lack of confidence in ourselves etc.
The governing system developed has nurtured these subconsiously which I believe so. Or in other words, we are been condition and programmed from early age. It will be hard for next generation to change their behaviour. Most likely, the next gen will have the same mindset as us.
about 3 years ago
In response to your entry, here’s someone who commented, from the economics point of view.
http://perspectiveunlimited.blogspot.com/2006/11/economics-of-gst-robbing-peter-to-pay.html
about 3 years ago
Hi Carine,
I saw that entry some tim back. I do not disagree with his logic from an economics standpoint. However, to me, economics is not the basis of all decisions. If we were to make all decisions based on economics, the world will be a very cold and cruel place to live in. Economics is all about efficiency and maximising the use of resources. It does not take into account how some people might suffer as a result of implementing something that is considered wise economically. My take on the matter is that not every decision should be made from an economics standpoint because the invisible hand that guides the economy is a cruel hand as well.
about 3 years ago
Any comments on the pointers posted by the following blog, I agreed with some of the pointer, especially using the self help group to provided the safety net.
http://jobscopevsreliance.blogspot.com
about 3 years ago
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