Feedback: Budget 2009 - Tax-cuts not the way to go

I am concerned that another round of personal and corporate tax cuts may leave the government unable to play its essential roles in promoting the common good and preserving essential community services and support.

Although these tax cuts may seem attractive in helping to draw more foreign talents and investments especially in these times of economic slowdown, the cuts should be avoided as these taxes should be the main means of supporting social welfare. Further to this suggestion, the government should also not raise GST further and should pare down the use of GST for providing public assistance.

The Minister for Community Development, Youth and Sports, said in an exchange in parliament on March 9, 2007: “We can always do more (in providing public assistance) and we can always raise GST further.”

The raising of GST further, will put a huge tax burden on the poor. Some studies show that the lowest 20% of the population pay more than 15% in taxes, while the top 1% of the population, merely pay less than 5% in taxes. As the poor or the “new poor”, typically spend all their money on everyday necessities, the further increase of GST will be regressive.

Although people tend to shrug off GST as there is no tax-return or large lump-sum payment involved, further increases to the GST should be avoided as it is a myth that GST is fair because it taxes consumption.

Although perhaps 80% of Singaporean families now have refrigerators, stoves, color TVs, telephones, radios, VCRs or DVD players, microwave ovens, washing machines and cell phones, prosperity cannot be measured by how much food you have stored in your refrigerator or by how many DVDs you have stacked on the shelf. Prosperity is but a sense of financial security and peace of mind. And by that measure only a small percentage of the middle class (or the “sandwich class” as the Prime Minister acknowledged in his National Day rally 2008) enjoy it today, and certainly none of the poor.

Some studies suggest that 25 percent of “sandwich-class” families are at a high risk of slipping out of that class entirely and another 44 percent don’t have what they need to remain securely in it. There is a sense that social mobility is reversing as the cost of essentials outpace actual income.

The 2009 budget has to ensure that the lower-income have enough help to move up and that “sandwich class” gets back its economic footing, without which any talk about shared prosperity is feint.

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After note:

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I was at the dialogue session on budget 2009 today, chaired by Dr. Amy Khor and Mr Ng Wai Choong Deputy Secretary (Policy), Ministry of Finance. Wai Choong mentioned that the focus of the 2009 budget would be on helping businesses to sustain their competitiveness. I aired my concern that in the midst on focusing on the competitiveness of businesses, the needy and also the middle class cannot be forgotten. There must be enough assistance and incentives given for these groups of people especially in these times of economic crisis, which could be drawn out.

Some people from the business community were there to advocate that the government should make it easer for talented foreigners to come to Singapore to work as they demand a lower salary. One businessman actually said that he needs to pay a top rate chef from China only $1200 per month but no Singaproean top rate chef would work for that salary. Another business person said that China workers are willing to work for $2 per hour. I highlighted the fact that even if !% of China are deemed “more talented” than Singaporeans, it would mean displacing almost the entire population of Singapore. I asked, “Can these displaced Singaporeans seek jobs in China?”

But anyway, we all should play an active role in citizenry in providing the feedback for Budget 2009. Click on THIS LINK to go for the next dialogue session. You can also provide your feedback here: http://www.singaporebudget.gov.sg/.

Comments

ravi4u2 said…
Singapore only has a resident population of about 3.5 million people. China and India combined has a population of about 2 billion. There surely must be 1% of the population of these countries, or 20 million people who are more ‘talented’ and ’skilled’ and more ‘educated’ than Singaporeans. If Singapore starts accepting ‘foreign talent’ based on the ‘fact’ that they are more ’skillful’ and more ‘educated’, the entire resident population has got to be displaced and Singapore has got to find ways of expanding geographically. What then will happen to the Singaporeans.

Of course we are a nation of immigrants, but it would be wise to adopt the immigrant workers policies of Canada (the second most open country in the world for foreign talent migration after Australia), where an employer can only employ an immigrant if has satisfied the government’s Human Resource Social Development Canada (http://www.hrsdc.gc.ca/en/home.shtml) that they have tried to find employers from within the resident population, but have failed.

It would be good for Singapore to set-up such a council for Human Resource and Social Development, which would compromise interests of businesses over the rights of the resident population for gainful employment.
ravi4u2 said…
I provided another feedback, which is in line with SM Goh's call to "spend if you can afford it". Make credit-lines available for families who have a combined income of $2500 and who have been in employment for at least a year. The credit-line could be up to a maximum of the combined one month salary of the family (maximum). There should be minimal interest charged to this line-of-credit.
Daniel Ling said…
Hi, interesting topic. Can i clarify

1) wat tax cuts r u refering to such tat will be attractive to draw more foreign talents?

2) Wat was the answer to ur qn? “Can these displaced Singaporeans seek jobs in China?”

My view + discussion with frenz is tat GST is poor man tax and Income Tax is rich man tax. But in the view tat they likely would not increase Income Tax, thus maybe can consider Keeping or Increasing the GST but to be more stringent in giving out the GST Rebates. Wat i mean is tat the GST Rebates should only be for those who need it instead of for all. With this, those who need it then will really get more help. Since those rich doesn't really need it. Those average receive too little to help much. Where as the amt is too little to mean anything at all for the poor.
ravi4u2 said…
Hello Daniel, thanks for the comments on my blog. I was actually saying that there should not be further tax cuts to the personal and corporate taxes especially for the top earners/profit makers and that in fact the percentage of tax contribution should be increased for these group to finance the social assistances programmes for the needy. This may in fact put off foriegn talent.

Of course there was no answer to the question, "Can these displaced Singaporeans seek jobs in China?", although Dr. Amy Khor did shake her head in agreement.

And I agree with your view on GST.
Daniel Ling said…
Hi Ravi, could u kindly give more details on these tax cuts? "the personal and corporate taxes especially for the top earners/profit makers"

I would hope to find out more about this.

Thanks also for agreeing with my idea of keep GST but adjusting the Rebates. But i wonder if there's anyway to suggest this to the right authorities.
ravi4u2 said…
Daniel, see this link: http://www.asiaone.com/print/Business/News/My%2BMoney/Story/A1Story20080909-86643.html
Daniel Ling said…
Hi Ravi,

I think i'm a bit blind but i dun see any tax cut for the top earners in the article. Instead it talks about Tax Raise for the Top Earners and Tax cut for the rest?
ravi4u2 said…
Hi Daniel,

I said, "I am concerned that another round of personal and corporate tax cuts may leave the government unable to play its essential roles in promoting the common good and preserving essential community services and support."

Singapore's income tax rates have been cut in recent years, with the personal rate somewhat lagging the corporate rate. For YA 2007, the top rate for corporate and personal income tax was 20 per cent, though the corporate rate has since fallen to 18 per cent with effect from YA 2008.

The MFA official had said that the focus for this budget would be on ensuring that businesses remain competitive. My concern was in trying to help businesses remain competitive, personal and corporate taxes may be further cut, which will leave the government two options; one raising GST to pay for social welfare, or two cut spending for social welfare.
geraldgiam said…
I'm interested to find out your philosophy regarding who should finance social welfare? Should it be entirely borne by the govt (and hence taxpayers), or by private charities, the Church, corporate donors and philanthropers?
ravi4u2 said…
I believe that the family is the first avenue for social welfare, where the family fails or is incapable, then it becomes the responsibility of the community; and when the community is unable to remedy, then it becomes the responsibility of the government.

In the context of Singapore, the strength of extended families and communities have been eroded (e.g. HDB's Ethnic Integration Policy), because of various government policies through the decades. As such, the government (in its various levels), should be responsible for social welfare as the safety net of the extended family and the community have been systematically weakened through the decades.

As a follower of Christ, an individuals response I believe should be that of the 'Good Samaritan', where we provide assistance that is within our means without regard to race, language or religion.
kwayteowman said…
Ravi,

Although these tax cuts may seem attractive in helping to draw more foreign talents and investments ...

The KTM is surprised that Wai Choong did not address your questions appropriately to allay your concerns and Amy Khor seems to know nothing. Perhaps the KTM can give you his two cents.

First, it doesn't take a genius to realize that foreign investments are not likely to be forthcoming given the present climate. It would be naive to expect to generate growth with tax cuts. Conclusion: tax cuts is not going after foreign investments.

Second, you have to understand that the one thing that probably keeps the PM awake at night given the current crisis is : JOBS. The whole point of the tax cuts is to help local businesses reduce costs -- and hopefully they will have less of an excuse to retrench.

There are effectively two routes to social stability: (i) social welfare; and (ii) jobs, and again it shouldn't take a genius to figure out which route Singapore has picked. :-P

Re: foreign workers, they have nothing to do with the the Budget. The quota is controlled by MOM and sure as hell, MOM will be surreptitiously tightening. :-P But it's good for you to see firsthand the pressure that the Govt is getting from the small businesses. :-)

Re: personal income tax - that's something that we will take the cue from Hong Kong. We will match them 'cos no choice - or we will get outflow. I don't think the Govt will be drawn into a destructive competitive lowering of the tax rate and we'd likely just be playing catch up (or rather catch down).

I hope this helps you understand the situation. :-P

Some studies show that the lowest 20% of the population pay more than 15% in taxes, while the top 1% of the population, merely pay less than 5% in taxes.

You are talking about the US? Please cite your studies to substantiate your numbers.

Some studies suggest that 25 percent of “sandwich-class” families are at a high risk of slipping out of that class entirely and another 44 percent don’t have what they need to remain securely in it.

Again, what are your sources for these numbers?

Prosperity is but a sense of financial security and peace of mind. And by that measure only a small percentage of the middle class ... enjoy it today, and certainly none of the poor.

You know, you are right. My question: how people in this world today enjoy this "sense of financial security and peace of mind" you think? So you think it is a RIGHT for Singaporeans to enjoy this? :-P

Daniel is wrong about the rebates. The KTM has inadvertently received A LOT of GST rebates and dunno what Singapore shares for deciding to squat in a small HDB flat instead of buying a condo.

The rebates are a more economically efficient way to help the poor more directly. People can do the math. There is no way the poor will buy enough stuff given their incomes to pay GST equal to the rebates that they got.

Dun anyhow agree leh. Find out the facts first!

the government (in its various levels), should be responsible for social welfare as the safety net of the extended family and the community have been systematically weakened through the decades.

While you can prove that the safety net of the extended family has eroded, the KTM would like to see how you can prove that it's the Govt's fault. Lemme ask you (actually I already know the answer to this rhetorical question): tell us about the US. Has the safety net of the extended family also not eroded?

You have to be fair in apportioning blame. You forget that HDB actually gives people a extra $10K housing grant to stay close to their parents. :-P
ravi4u2 said…
KTM,

I will take some time to answer some of your queries, as I am caught up with some matters now. But you had said:

You have to be fair in apportioning blame. You forget that HDB actually gives people a extra $10K housing grant to stay close to their parents. :-P

Please see: http://theonlinecitizen.com/2008/12/hdb-providing-homes-or-a-monopolistic-business-model/

The writer answered that question for me...
kwayteowman said…
Ravi,

You are welcome to take time to think before answering the KTM's questions, the KTM has plenty of time and can wait. :-)

Just please answer your questions yourself, instead of saying so-and-so has answered for you. The KTM is not free to go and read through a whole load of crap to get at his answers.

In any case, much of what the writer wrote is crap. People have the choice NOT to buy the BTO flats. If they want to spend x% of their disposal income on housing, that's their choice.

In any case, these are not your poor and uneducated people, so I'm not sure what you're worried about.

For the record, the KTM thinks that HDB shouldn't have gone into the EC market and should just have focussed on the lower-end public housing. By going into the competition with the private developers, HDB is asking for trouble.