A Note on GST

Recently, rising inflation is probably one of the most talked-about topic in Singapore and also elsewhere in the world. Witnessed the domino-like toppling of entrenched authoritarian regimes in Tunisia, Egypt .....Against the backdrop is consistently one of bulging under-employed or unemployed youth population, sky-rocketing commodities prices, growing intolerance to corruption amongst the existing ruling elites and their circle of cronies etc.

Over here in miniature Singapore, the situation is considerably milder, but we must not underestimate the hardships felt by a growing segment of the population whose incomes level have remain stagnant over the last 5 years fighting a day-to-day existential existence against the rising cost of living brought about increasing cost of basic necessities. The huge influx of immigrants over the last five years may have added a few percentage points to our GDP growth, but for a large segment of the populace, what they are getting in return for bearing with the huge the influx are wages suppression, competition for prized jobs and public infrastructure.

Hence, there is a growing chorus of calls for the abolition of the GST, at least for the basic necessities that provide for a decent living. After all, why do we want to tax the young, the poor, the unemployed and the retirees? It is therefore heartening to witness the opposition parties taking up this call, but the reaction of the ruling elites is almost as predictable as the sun rising from the east ie like a proud cockerel perched on a high rock with its beak pointing into the air. There isn't the slightest attempt to cock its ears and listen to what the other side is trying to say.

Christopher De Souza, lawyer by profession with scant understanding of economics 101, I would assumed, attempted to demolished LTK's argument for GST reduction of 2% from the existing 7% to 5% by claiming that "High income earners, we know, consume more and therefore pay higher GST." While I thoroughly agree that the high-income individual pay a higher absolute amount for GST compare to a low-income individual, there remain a strong case to look at the abolition of GST for basic necessities to alleviate the cost pressures felt by a substantial portion of the under-privileged. Remember, 7% off the basic necessities would mean their cost of living will go down by an average of 4%  to 6% for most people.

So far, I could only see two possible objections for such a proposal. Firstly, there is a significant proportion of foreign workers in Singapore, so GST is a way to ensure that they help to contribute to the nation budget since they are also the implicit beneficiary of our national infrastructure. To zero off GST even for the basic necessities would then remove the contribution from such a group that do rightly have to contribute to their host country. Secondly, there could seriously be an issue in terms of implementing a system of GST excluding the basic necessities.

In both cases, there is merit to examine more closely on the suggestion than to brush aside such proposal with the stern look of a father looking at an over-indulgent child