ss project - goods and services tax

the policy i am touching on is about singapore's goods and services tax (GST). GST is the tax on domestic consumption and is paid whenever customers buy goods or services from GST registered businesses.GST was first introduced in Singapore on 1 April 1994. The GST rate was increased from 3% to 4% in 2003 and from 4% to 5% in 2004.

on november13 2006, Prime minister Lee Hsien Loong announced that the goods and services tax will be increased from 5% to 7% and the details and timing for the implementation of the hike are to be unveiled during the budget speech on feb15 2007. Prime Minister Lee Hsien Loong cited three reasons for the increase :

1) Because he needs to finance the “enhanced social safety nets needed to help the lower income group”, which means that “government spending will have to go up”. He emphasizes that “the offset package would more than counter the rise in GST“.

2) Because Singapore’s economy is doing so well, so it is “natural” that we follow other countries and increase our GST accordingly.

3) Because we intend to cut our corporate tax.

Also, he has described the Budget statement on February 15 as forward looking. It will be one that will allow businesses and the people to emerge stronger.

well, after hearing this news last year, i feel that this policy will definitly arose a lot of attention from the population, some praising it, some disliking it.this policy is based on the principle of being forward-looking. as there are people with very low income in the population, the government has to do something about it and by increasing the GST, the government will be able to get money to help the poor. however, to me, i feel that there isn't a need for this policy at all.
firstly, the government said that the extra money was needed to help those in the lower income group. with the economy doing so well now as stated in the second reason, there should be more profit for Singapore and why cant the government use those money to help the poor instead? Also, if the government start this policy of helping the poor, somehow, some of the people in the lower income group will starting misusing this and not work hard for themselves.
Adding on, the rich will most probably be able to afford this raise but as for the middle class, who are too rich to fall in th lower income group, may have difficulty adapting to and affording this change. i am very sure that the bulk of singapore's population belongs to the middle class and thus, a larger part of the people may face difficulty affording the increase and it might eventually result in some people staying home most of the times and business may suffer.Therefore, this policy can create problems for the middle class.

for the second reason, although the economy may be doing well, i feel that whether or not the GST should increase to 7% should not be “natural”and should be considered again. although there are countries that increase their GST when their economy is doing well, there isn't a need for singapore to follow suit. singapore government should look closely into whether the people are able to afford the change and willing to cooperate with the change before imposing it.

in conclusion, i feel that an increase in GST is totally not necessary although it has a purpose of helping the poor and helping the economy of singapore. however, it s the population who is contributing to this tax and if some of them cannot afford the increase, the end profit may just end up worst than the current 5%. therefore, the government should really look into this policy again and consider carefully if this is going to benefit the nation in future or will this end up worst than the current situation.