Thursday, November 16, 2006

GST raise in SG - correcting misconceptions

Posted as a reply to a SigNeL email.

NO. its NOT 2% on each. GST is calculated on final consumption, with each intermediate level allowed to claim against GST paid.

IN simple language:

I am the middleman. I pay the farmer 7% for GST on a $100 order. ($7)

I stupidly sell the retailer at $100. on which I collect 7% GST for the government. ($7)
The actual tax that I collect is still $7.

This is the actual tax revenue received by the government. NOT $7+$7x$7(to the power of X).

instead of trying to confuse the world with the tax on tax on tax (which is something i think some opposition wannabes are trying to do), can we focus on the serious issue, which is that the GST is increasing by 40%?

(FROM 5% to 7% is an increase of 40%! basic math!)

Keywords are very important in obfuscating the impact:

Increasing GST by 2%
GST increase of 40%.

which is the preferred number used by the MsM?

Pithy the common man, for consumption taxes like these hurt the poor more than the rich.
As long as there aren't exemptions for basic necessities, then the poor will continue to carry more and more of the tax burden of the SG government. (oh, btw, poor also refers to those middle-class wannabes that prop up society. They will feel more pain from the GST increase than the pitiful income tax discounts that they will receive in the goodie package. as for those 70% who don't pay income tax, you can have 10000% discount on your income tax, and you still wouldn't be any better off.)

Either way, why is the government raising taxes when it isn't running a real deficit? Do our ministers and civil servants need a bigger raise (above inflation) that cannot be funded by the investment income? What happened to a smaller government sector?

Also, Has Temasek really squandered that much that they must now raid capital gains too to keep the fat cats well paid?

Issues that should matter, but are obfuscated and misdirected to keep the general public away from asking difficult questions.

Next thing they will tell us next year after the budget - to take care of so much money, we must pay our ministers more so that they will not be corruptible or tempted. (when the state does the corrupting, how can private individuals hope to compete in the corruption stakes?)

Truly, societies are made up of people who's primary goal is to screw the other person faster and harder than himself is screwed.

C'est la vie. Our fellow Singaporeans voted them in afterall.


On Wed, 15 Nov 2006 03:34:40 +0800, xxxx wrote:

Ho, ho, ho. The PAP has raised the Goods and Services
Tax from 5% to 7%.

Everyone who voted for them is getting his just

Aren't you glad you're gay and don't have any children
to support?

Now the cost of raising a child from infancy to
university graduation will skyrocket.

Actually, the 2% GST increase is misleadingly small on
the surface. Contrary to what the PAP claims, i.e.
there is no multiplier effect, I've noticed that the
more levels of service a product goes through, the
higher its end cost as a result of the GST increase.

Let's take the case of an imported fruit that retails
for $1 at the supermarket. With the 2% GST increase,
the freight forwarders will jack up their charges by
2%, the warehouse owners will do the same, the
transport company that delivers the fruit from the
warehouse to the supermarket will follow suit, and the
supermarket itself will also add its own markup.

Thus, these 4 levels of service will increase the
price of the $1 fruit by 2% x 4 or 8%, so that the
item now costs $1.08. In practice, the ultimate price
increase will be more than that because companies tend
to round up their charges to the nearest $5 or so. So,
the end result is an increase of more like 20%,
causing the fruit to now cost $1.20.

I feel sorry for the poor, the retired and the
unemployed. The government handouts will hardly be
enough to tide them over the increased cost of living.

Gays should be commended for not producing children to
add to the growing numbers who will require handouts.

I would also like to reiterate my point that the aging
of Singaporean society is being accelerated by
Government's policy of importing foreign "talent" by
the truckload.

Many of these emigres are from mainland China and have
been culturally indoctrinated to produce only one
child. Some even remain DINKS (double income, no kids)
after settling down in Singapore. Thus, the population
pyramid is being pumped with adults who have offspring
way below replacement level and this inverts the
pyramid faster than if the phenomenon were to happen
naturally, without immigration.

(removed for privacy purposes)

Wednesday, November 15, 2006

Tapping Capital gains

Now I'm sure I could do a lot better, but I'm not being paid, nor am I being graded, so here's a very simple explanation of what the SG government wants to do with its latest constitutional change. (posted over at mollymeek!) in response to a question on what it meant.

Capital gains - profit that results from the appreciation of a capital asset from its purchase price (source: Wikipedia)

Translated into simple buy and sell.

I buy a house at $200k in 1980.
Today in 2006, I sell the house for $2000k (say 10x value).

The capital gains will be 1980k.
(odd how the sums add up!)

Previously, because of the agreement with the people, all 2000k must be kept in the reserves. I cannot use them for anything other than reinvestment (buy more house hor.. and build up bigger nest egg for a rainy day).

By changing the constitution to allow them to "TAP' the capital gains:

I sell the house for 2000k. I return 200k to the reserves. 1980k, I can now go out and spend on all sorts of excessive consumption (such as million dollar ministerial salaries). The 200k will be reinvested, and any future gains will be spendable again, while the core 200k cannot be spent.

Now, capital gains takes into account 2 things - the increase in value, and INFLATION. By being allowed to spend all 1980k, there is no accounting for inflation (not by much, since accounting practices just lumps it all under capital gains). Which means, the core 200k loses value everytime it is turned over (sold/reinvested).

which means, the 200k you invested today, will only be worth 190k the next time you invest it (in today dollars) and so forth.

Smart of them to try to figure out more ways of spending that rainy day kitty.