Hard to comprehend Govt's plan

I was listening to PM Lee's parliamentary speech on TV last night. After listening to what the government has plans to do, I find it hard to understand what it is they are trying to achieve!

Let's look at what the government is concerned about currently:

1) Widening income gap

2) Helping the lower income groups

3) Maintaining foreign investor interest in Singapore (ie lower tax rates)

Now let's look at what PM Lee has suggested and analyze the implications :

1) Welfare is a dirty word. I can understand that giving freebies to people may encourage people to continue where they are without putting in any extra effort. That is indeed not ideal for our economy. But sometimes, people need some help to get started in the first place. It's all about a balance. Some welfare can't be all that dirty frankly.

2) Say no to minimum wage. Apparently foreign investors will leave in droves if we had a minimum wage. Nobody bothers to talk about how much the minimum wage would be exactly. I mean if I set the minimum wage at $100 per month per worker I doubt it would do anything to scare investors away! However it makes no sense to have a minimum wage that you cannot survive on! I suspect the real issue about not having a minimum wage is because the government is fully aware that there are people who earn so little in this "free market" that they simply cannot survive on one job alone. In some ways you can infer that the government has stamped its approval on foreign companies coming here to exploit cheap labour. It's a political move not to have a minimum wage. Not an economic one. The government could set the minimum wage at a low level that would please investors and keep them here, but then it would anger the people and hurt the PAP politically. The government has thus chosen to sidestep the tricky question of what constitutes the minimum amount a person should earn to survive in Singapore.

3)Increase the GST from 5% to 7%. When I heard PM Lee's speech last night, he announced this in the context that Singapore was competing (economically for investments) globally and had to adapt to global trends. He had mentioned that corporate tax rates would have to drop a few points to make Singapore competitive and attractive to investors again. Every 1% drop in corporate tax rates would cost the nation SGD$700 million annually (if I recall correctly). Hence we had to increase GST to make up for this fall. I'm not really sure whether these investors coming to Singapore hiring workers and paying them salaries with no minimum wage restrictions is going to really help lower income workers or not.

Now what is more interesting is that in Today's paper this was written :

"What are we going to do then, when the people are stuck with a higher cost of living?" he (Mr Low Thia Kiang) said. In response, Mr Lee rebutted the WP for its lack of a clear concept and its constant refrain for a welfare system, and told Mr Low to "wait for the Budget". Details for the "offset package" would be revealed at next year's Budget speech in February, he said, adding that it was "not the time for a long, supplementary debate".

"The higher income should end up paying more. That is part of being one society. I think that is fair and Singaporeans will support it," Mr Lee said.

I don't understand this part totally.

An increase in GST is an increase in the cost of living across the board for all in Singapore. The 2% increase applies to both the rich and the poor. It's not as if the 2% increase is for certain luxury items only , while necessities like water and electricity will be GST-exempt (unless this will be mentioned in the budget). So what happens here? Cost of living goes up for the poor. The poor suffer. What do they get in return? More chance of finding a job that will not pay a minimum level wage that can help them survive in Singapore? How does this help the poor?

As for the above comment by PM Lee that the higher income should end up paying more, it goes against his reason for increasing the GST in the first place! Everyone knows that the low tax rates benefit the business and the rich. It's pro-business. PM Lee did say last night "Have to lower corporate tax rates to be competitive" (ie attract rich people to do business here) "So no choice but to increase GST".

But then he tells Low TK that the rich will pay more? Huh? Did I lose something in translation? Doesn't a lowering of tax rates mean the rich paying less? Which is the point to attract them here right? And now he says they will pay more?

I really don't get it.

To end off, PM Lee said "We have done this before" referring to the past increase of GST from 3% to 5%, and the assistant package they came up with to help the lower income groups. And he implied that they did it well and it caused little problems to the lower income group during that increase.

From what I know, and from what the MPs are debating about, isn't it a fact that the lower income group are SUFFERING badly right now? Since the last GST increase, the lower income groups have lagged further behind! This despite the package they boast about. Hasn't the income gap widened? It is somewhat strange that the government would refer us back to the past increase in GST and their programs as a show of "evidence" that the new increase will be good for the lower income groups.

Having said that. The Singapore government will do what they want, when they want and how they want. As a Singapore citizen, all I can do is read, watch, work as hard as I am expected to, and hope for the best.