Ever since the announcement of the 2 percent Goods and Services Tax (GST) rate hike, there has been a lot of unpleasantness.
With reference to a few articles I have read during November last year, I understand that the aim of the hike is to help the low-income groups and grow the economy. However, after reading through this article, I do not think it will be successful.
First of all, it was mentioned before that government spending has to go up as infrastructure investments and medical facilities will cost a lot of money, so as a result, the GST hike is inevitable. However, why is the government going to provide a $4 billion GST offset package in order to cushion the low-income groups from the impending hike when it can be used to finance those investments and facilities? And in fact, the majority of the low-income groups will get offsets equivalent to what they would have spent in GST over five years. But what would happen after the five years? Therefore, I have to ask: how much will the 7% GST help?
Following that, I have read that all government fees will only be raised one year after the increase of GST. So when the fees are raised, will the government provide some more offset packages to help the low-income groups? If it is a yes, the GST hike will seem to have been a bad decision after all; it just creates a vicious cycle that will go on and on. But if it is a no, will the economy grow since the poor will become poorer, and the rich might become richer?
What I think that the government should do is to help the breadwinners of the low-income groups get a better job with a higher salary. This would, in fact, solve the underlying problem as in the long run, the government needs not to provide any financial assistance package for them. If the government continues to give more and more money, as stated above, it will just be a vicious cycle and it will not do both parties any good.
However, I must also say that I do not know what burdens does the government have. They may be in need of a huge sum of money to make Singapore more competitive, so in fact, I think that the GST hike may help the government in the long run, as what I have stated above are just some short-term from the point of view of the low-income groups. If the low-income groups are just a very small minority, the government would be able to “earn profit” from the other taxpayers and consumers, after giving out offset packages. Accumulating the amount received every year; the government would have an amount that can be used for investments and facilities, hence growing the economy.
Lastly, I just hope that the GST hike will not add burden to us, but help the government achieve their aims.
