Much has already been written about our inverse Robin Hood GST but to what extent the PAP has enriched the wealthy has been underestimated.
The fact is our GST has effectively transferred billion$ from ordinary Singaporeans to the wealthy and filthy rich and contributed to an increasing income disparity.
Singfirst’s proposal to scrap the GST and replace lost revenue with increased taxes on the wealthy, reinstating estate duty, etc will benefit low- and middle-income Singaporeans. But expect lots of resistance from many irresponsible wealthy citizens and the PAP to reject it by painting a doomsday scenario.
GST was introduced on April Fools’ Day in 1994 and has increased from 3% to currently 7% while the “maximum personal income tax rate of 33% was progressively lowered to 20%”. Below are the income tax rates for YA1987 to 1993, YA 1994 and from YA 2012 onwards. (for reference)
(Bear in mind there’s a limit to CPF contribution for ordinary wage, which fell from $6,000 to $4,500 and is currently at $5,000 ie no CPF contribution for dollar earned above $5,000. There’s also an Additional Wage Ceiling (AWC) of $85,000 for CPF contribution ie CPF contribution for bonus + ordinary wage < $85,000. In the 1990’s, the AWC was slightly higher at $100,000. Using this figure ($100,000) and a personal tax relief of $15,000, the income tax payable pre-GST by 3 income groups is calculated and shown in the table below.)
Pre GST income tax payable
After tax rates were slashed post-GST:
– A has tax savings of $360
– B – $47,450
– C – $190,450
(see table below)
Tax savings in 2014
|TAX PRE GST||$360||$120,450||$483,450|
|2014 TAX RATE||0%||20%||20%|
Thanks to our 153th press freedom ranking, most ordinary Singaporeans have not even realised the PAP has been enriching the wealthy at our expense.
Obviously, the above is only the gross savings because consumption will now be taxed. Realistically, A would not have any savings due to our high cost of living as his entire disposable income is likely to be spent on necessities. Only high income earners like B and C will be able to save part of their disposable income which is conservatively estimated at 30%. (see table below)
As can be seen, a reduction in tax rates with a corresponding increase in GST has left ordinary citizens poorer. It has resulted in tax savings for the wealthy which are 2 times more than the GST levied on the disposable income. (table below)
|GST 7% DIS INCOME||$1,680||$14,980||$58,163|
GST has benefited B and C by at least $32,000 and $132,000 respectively while A is out of the pocket by ($1,320).
Because the PAP had created a permanent issue with the introduction of GST, it recently came up with a permanent solution – GST Voucher scheme. The scheme has 3 components – cash , Medisave and U-Save. The maximum payouts are $250, $450 (85 years old and above!) and $260 (1-and 2-room HDB) respectively represented by the equation:
$960 (maximum per person) GST voucher scheme = Cash ($250) + Medisave ($450) + U-Save ($260)
As usual, all the ‘maximum’ figures look good on paper but on average, A will receive only about $400 in GST vouchers. Medisave payout applies only to citizens aged 65 and above. Even when GST offsets are included, the PAP has actually profited from ordinary citizens by almost $1,000 ($1,320 – $400).
In 2007, the government announced a GST Offset Package which would cost about $4 billion over 5 years/$800 million annually. In 2013, this amount went up to $1.2 billion only because it included a special payment. It is still less than $1 billion today.
To put this in perspective, the PAP collected $1.5 billion in GST in 1995. 20 years later, this amount had ballooned to about $10 billion. Meanwhile, GST offset package has remained below $1 billion without special payments. How are ordinary Singaporeans being helped? Or is the PAP helping itself to our money?
Ex PAP MP Tan Soo Khoon was spot on when he described the GST as a goldmine for the PAP in 2002 before it was increased to 5% in 2003.
With inflation, GST offset package should have already been increased to, say, at least $4 billion. How is the PAP helping low/middle income with the same quantum of assistance 2 decades ago? Is GST revenue neutral as PAP has claimed or just another half truth which citizens die-die must accept?
As with other government assistance schemes, almost 50% is channeled into CPF (Medisave). How does this help when necessities are paid for in cash? Why is the PAP so desperate and keeps channeling billion$ into GIC?
In 2013, PAP assisted Singaporeans by channeling almost $2 billion into CPF.
The tax burden in every society has to fall on the wealthy but PAP has implemented an inverse Robin Hood. The PAP does not have any supporting statistics to confirm it has not shifted the tax burden to ordinary Singaporeans.
According to Gintai, Law Minister Shanmugam said “the top 20% income earners, companies, and non-Singaporeans pay 84% of the total taxes in Singapore (2011) to finance our $52 billion (?) government budget expenditure.” ie:
Why did the Law Minister not offer concrete numbers instead of throwing smoke?
Not only that but the smoke should be challenged. Total tax revenue comprises:
– other taxes – $3.2 billion
– stamp duty – $2.1 billion
– betting taxes – $2.4 billion
– motor vehicle taxes – $1.7 billion
The figures simply don’t add up. Since Gintai’s figures were not corrected, the conclusion is Minister Shanmugam did not have the facts. : ( Should citizens believe in smoke?
Ordinary Singaporeans must be aware that PAP will continue to profit from our ignorance if we allow them to. The next stage of GST increase has already been set 2 years ago in “GST hike ‘more likely’ if Govt needs to raise revenue for new initiatives” when PM Lee said “all good things must be paid for either by raising taxes or cutting other spending…”. So did PAP cut social spending because it did not raise taxes for ‘good things’ like past ministerial salary increases?
The PAP is not interested to shift back the tax burden to the wealthy. If it did, ordinary Singaporeans would not have been forced to enrich the wealthy since 1994. What’s worse, another increase is already on the horizon.
Lower-and middle-income Singaporeans are worse off after the introduction of the GST. GST offsets are only a fraction of GST revenue.
The net benefit to a high income earner runs into tens of thousands of dollars every year. Those earning in excess of $1.3 million, including PAP ministers and many part-time PAP MPs, benefit by at least $100,000. The tax burden has been shifted to ordinary citizens right under our nose by the PAP.
More than a decade ago, GST was already a goldmine for the PAP. Expect ‘gold mining’ activities to pick up to perhaps 10% if the PAP still dominates parliament after the election.