GST-Plus

The finance minister Mr Tharman admitted yesterday in Parliament that the GST in itself is not a progressive tax, but if you add in the the Growth Dividends, Edusave Top-Up, S&CC rebates, U-Save rebates and Medisave Top-Up - voila, you all get an almost perfect taxation system that takes care of the poor, the middle-class and keep the nation on an even keel to a steadier growth path. This strange concotion of GST together with its myriad of handouts and top-up will magically transformed into a progressive tax system. It is also claimed passionately by the majority of the PAP MPs that is the rich that it is subsidizing the poor and the middle class (bottom 60% household) through the GST-plus taxation system.

The simple question - is that true?

I did a simple, crude research using data from the Dept of Statistics with some assumptions and came up with the following table below:-

Household Income	2010 Monthly Income (Dollars)	Transfer Amount (Budget 2011)	Est Expenditure	Est GST	Transfer Amt minus Est GST
1st – 10th	1400	4181	1000	840	3341
11th – 20th	2681	2981	1760	1478	1503
21st – 30th	3757	2956	2881	2420	536
31st – 40th	4886	2660	3256	2735	-75
41st – 50th	5888	2660	3571	3000	-340
51st – 60th	7016	2603	4051	3403	-800
61st – 70th	8358	2603	4532	3807	-1204
71st – 80th	10095	2555	5305	4456	-1901
81st – 90th	12818	1640	6078	5106	-3466
91st – 100th	23684	740	12078	10146	-9406

In summary, GST-plus is positive for the bottom 20% of the household income group, but for most of the population, the burden of GST is greater than the provided GST-plus benefits. If we assume citizens in the broad band of the spectrum from the zero to the 90th percentile do not pay any income tax, GST-plus is regressive for the bulk of the Singaporean population.

I will do an analysis in the future to look at the income tax savings for each percentile group to get a better overall picture. However, I would conjecture at this point that the income tax saving resulting from the implementation of the GST will probably benefit the top 1% of the household income group more than anybody else.

Anyway, the overall picture that emerges from this simple analysis (which stand to be challenged and corrected) do not seems to be close to what the finance minister and his party MPs are claiming in the recent Budget debate.