GST bad for middle class


(FMT) – A Singapore politician says supporters of the tax in his country are misled by propaganda.

While Barisan Nasional leaders try to convince Malaysians that the Goods and Services Tax (GST) will not burden them, a Singapore politician says the picture has not been so rosy in his country, where the tax was introduced 20 years ago.

“GST has been harmful for the economy and for most working people in Singapore, especially the middle class,” said Tan Kin Lian in a blog article posted recently.

Tan, who describes himself as a social activist, contested in the 2011 Singapore presidential election and finished in fourth place. He runs an organisation that teaches the public about long-term financial security.

He said it would be better for Singapore to scrap the GST and impose higher income tax on the rich.

Singapore introduced the GST in 1994 at 3%. The rate has been increased gradually over the years. It is now 7%.

Tan said many of his compatriots had been misled into believing the GST was good for Singapore by the argument that the coinciding reduction in income tax rates would attract businesses to the country and create jobs for the local population.

“Most of these people are misled by the false propaganda that is fed to them over the years by the government and the proponents of GST,” he said.

He acknowledged that Singapore remained an attractive place for multi-national companies to set up their operational headquarters and manufacturing and research facilities, but he added: “Most of them are attracted by the tax holidays and the other incentives given by the Economic Development Board rather than the lower corporate tax rates.

“They enjoy exemption of tax on their overseas sourced income anyway. This is bad for their host countries, and does not benefit Singapore much, apart from creating a small number of jobs for the operational headquarters.

“Some of the top jobs are not given to Singaporeans, as they are allowed to recruit ‘foreign talents’ to manage these operations.

“I do not see much evidence of companies setting up in Singapore due to the lower corporate tax rates.

“Tax is only one cost of doing business. The other factors, such as rentals and the salaries and skills of local workers, are also important. These two components have increased significantly over the past two decades, more than outstripping the benefit of a lower tax rate.”

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