No more dr Oz bloke, just me

aka Dr Charlotte Charlatan

Monday, November 13, 2006

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.


At 11:03 PM, Blogger nofearSingapore said...

Hi dr oz bloke,
Yes the poor will feel the impact of this increase more as they won't benefit from any decrease of corporate/income tax but yet they need to eat!
I say that essential items such as staple food, ricebreadmilkpowdermedicaleducation should be exempt from GST as is the case of many countries. I am sure that the govt is not so desperate that every single opportunity for GST taxation is needed to balance the govt's books. If it is , then you have one more worried man today ( ie ME)


At 8:37 AM, Blogger aliendoc said...

Agree with Dr H. that certain essential neccesities of living like food & medication should be exempted. In the US certain states even exempt clothes. Maybe should also have a gradated system of taxing utilities - lower usage = lower tax.

At 5:42 PM, Anonymous Anonymous said...

Please, the IRAS is already the cheapest public service in the world - so says the PM. Why the hell would we want to overwork them with a graduated scale of GST?

At 4:49 AM, Anonymous 40+ Singaporean said...

If welfare improves the wellbeing of deserving cases, it cannot be a dirty word, particularly when the country/government providing welfare has accumulated reserves to the level that Singapore has.

Minimum wage, as the term suggest, should be to set the minimum level of wage that at least provides the employee in that particular job a reasonable level of income. This is again something that need not be bad. It is only bad if the implementation is bad. If minimum wage is set right, that will at least ensure that the least paying jobs that the low income group are performing give them a reasonable means of surviving in our country where the costing of living is going up each year, not to mention the GST.

If we have no minimum wage and there is no welfare, then there will always be people like Mr Tan who has to take the drastic step of killing themselves on our public transport system because they have little avenue of help to turn to.

If now is not the time for debate on the GST increase, and we leave it till the budget time, the question is whether it will then be debated. I very much doubt so. What's the point of bringing up this impending increase, if no debate is allow or entertain? Does parliamentary debate have any meaning at all in Singapore Parliament?

The government always use the tag that says they are prepared to implement unpopular policies, if they are the right ones for the country. Isn't this the attitude of 'The government knows better. You have to take the bitter medicine. It is good for you.' Why don't we allow the debate, presents the arguments both for and against and then conclude after all views are heard? This is not the Singapore government's way. If that is so, then the government should not lament the fact that citizens complain instead of offering solutions or doing something about it. The government cannot have the cake and eat it at the same time.

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