17 January 2007

Minilee's war on GST

Back in early November, during our hiatus, Minilee announced the next GST hike. Given that the new financial year always begins in April, and that the government traditionally reveals some of its Budget plans in February, several thoughts went through my head, like:

"It's too premature to spring this on Singaporeans. Ideally you want to spring this as late as possible so people won't have time to internalise this policy, mull over it obsessively, and begin to think of all sorts of objections to it."

Tactically, this early announcement is a mistake, and we did witness several rebuttals, with the blogosphere exclaiming... "Why such high taxes if we don't even have social welfare schemes to fund?", and Today's forum contributors pointing out what a regressive tax the GST is, and how much MORE it'll hurt the lower classes that the GST increase was supposed to help.

We predicted the early announcement would lead to more questions, which would lead to more bad justifications and reasonings, and come 2007, Minilee would have to beat a hasty retreat from his plans. I mean, even Tommy Lee's IPS seminar last week had several academics pointing out - presumably through hard statistics - that Singapore's middle classes have had stagnant wages during the previous 5 years, and that its lower income groups had actually experienced declining real wages. Yet all these academics at a state-sponsored think tank couldn't stop Minilee from proclaiming his resolve to stay the course with the GST hike.

Now, this kind of thing is troubling since the emperor's advisors are supposed to find a way to tell their sovereign to change courses, however subtly they need to do it. Although the IPS seminar divulged almost nothing new that average Singaporeans already know, their public revelations were noteworthy because IPS isn't known for being rabidly critical...

Yet one could also insist that the IPS seminar did not result in Minilee overturning the GST hike, because that single issue was never explicitly linked, never explicitly rebutted through the findings the academics released last week... Were the speakers perhaps constrained by fear of what might happen if they made too direct a challenge to Minilee's GST policy? Were they too subtle? Or did they just put up a very token resistance, appearing radical by pointing out the obvious, but refusing to link it to the not so obvious?

What's really wrong about the GST
(with thanks to the various individuals who helped in the making of this minor manifesto last November - you know who you are)

1. The GST is a regressive tax. Increasing it to help the poor - what Minilee claimed is the purpose of the hike - is like amputating somone's foot in order to give him a bionic leg, without anaesthesia

Rather straightforward. Most people caught it within a week, leading to more clarifications by Minilee and more nebulous promises of a vastly increased Workfare

2. Increasing the GST and decreasing the corporate tax means the burden of social welfare is shifted from the rich and the corporations to the poor. A very clear signal, if you will, to businesses on their responsibilities as corporate citizens.

No one caught that either.

2a. The shift of the burden of social welfare to the poor is exacerbated by the stagnant wages of the middle class and the falling real wages of the poor. Again, a very clear signal that the state of Singapore is enacting its its very own tax cuts for the rich and the corporations.

No one caught that.

2b. A deeper political question is raised in all this: who should pay for government programs? The rich? Corporations that have benefitted from the "economic recovery" far more in terms of profit than Labour, whose private wages, salary income, and labour compensation has been at record lows in this particular recovery?

(Again, refer to this graphic)

When you are given a graph like that, and asked "Who is in the best position to pay for government programmes", who would you choose? When Minilee's answer to this question is a GST hike and corporate tax cut - what sort of signal does it send to employers?

No one caught that either.

3. Existing programmes like workfare don't really reach all the people it should, or help the people in ways they really need. They have been in some form of existence for the past 5 years, and still the wage gap increases. The whole "tax increases for more social programmes" sounds like an admission of government wastage, and should be painted as an admission of government wastage and inefficiency of its existing programmes. Why should the people pay even more money for more workfare, if workfare doesn't even function properly?

No one caught that. Maybe Minilee did, though. On 16 Nov (or 15 Nov), the headlines went: Pensions not the way to go
An old age pension system is not the way to go as it will impose a very heavy burden on the next generation, cautioned PM Lee. A better solution was or each person to save for his own future needs. Hence there is the CPF savings and the home ownership scheme, which gives one an asset whose value can be unlocked in one's later years.
Indeed, Minilee can be very charming if he wants to: He has this belief that despite Singaporeans living on $6.06 a day when they retire, the current CPF and home ownership systems are more than sufficient to see everyone through. Indeed, he's totally forgotten that the best solution is for each person to just sue the pants off their offspring, whose value can be unlocked for their own future needs. I mean, why bother with all those complicated pension schemes, welfare, and progressive taxes, when you can just ask the poor to rob their young, via the Maintenance of Parents Bill?

Are we trying hard enough to derail the GST hike? Are our academics at IPS doing hard enough to derail the GST hike?


Anonymous said...

Very nice summary!

Anonymous said...

He stated that his intention is to use the GST to help the poor.

He stated that the GST will allow the government to have more funding to run their programmes.

He also stated that the minister's pay which are benchmarked against the highest 6 earners in singapore are not meeting standards.

What are his motives?

Moreover, there is the billions of loss in the Shin corp case.

What is truly our financial reserve position?

All this talk will not shake his resolve.

He has bigger fish to fry and he has a higher motive....

it is plain that what he says and what is real is 2 different thing.

Bottom line...... he wants more money............