GST sums wrong again.

Last year, in Singapore, the GST - an indirect tax on spending - rose by 2%. The rationale was that Singapore faced a budget deficit without it. In the event, there was a budget surplus (which is usual around here) of 6.4 billion dollars. Many, at the time, questioned the need for a tax rise, therefore.

Now, we are told that a 1.5% rise in GST would cover the 1.2 billion dollar cost of making public transport free in Singapore. It seems to be a scare tactic to ensure that no-one will seek such a situation. Yet, as I have pointed out, most people would save money were this change made.

I wasn't satisfied, however, with that 1.5% number for a good reason: it seemed to come out of thin air. I wondered, therefore, how much money a 1.5 % rise in GST would actually raise. For an answer I looked at the Budget 2008 speech: http://www.mof.gov.sg/budget_2008/speech_p1/p1.html

On the Ministry of Finance (of Singapore) website we learn that last year's implementation of a 2% rise in GST in July (halfway through the year) raised 1.4 billion dollars. Now, that is strange, isn't it? In six months, a 2% rise in GST yielded 1.4 billion dollars. So, by that scale a 1.5% rise in GST would raise 2.1 billion dollars per year ((1.5/2) * 2.8 billion dollars). That means that the Government spokeperson was OVERESTIMATING the GST needed to cover the cost of public transport. In effect, he was proposing a tax RISE, hidden, by free transport to "offset" it.

So, if free transport is given in Singapore the government has said it will need to extract an extra 900 million dollars of tax, per year, than is justified by the cost of running the free transport system.

What is the true GST raise necessary to cover the cost of free public transport? Well, that would be (1.2/2.1) *1.5 = 0.86%. Thus the true GST rise needed to cover the cost is, ACCORDING TO THE GOVERNMENT'S OWN FIGURES about HALF the declared rate.

So, what can we read into this. It seems that the government has factored in a 75% profit margin into the equation. That is the monies raised would exceed true costs by 75%. That seems pretty generous to me.

By all means raise GST to provide free public transport to Singapore - but why not do so by the 0.86% actually necessary to cover costs - and not hide yet another true tax rise into the bargain?

Just a thought.

(If you would like to learn more of Ainan Celeste Cawley, a scientific child prodigy, aged eight years and seven months, or his gifted brothers, Fintan, five years exactly, and Tiarnan, twenty-eight months, please go to: http://scientific-child-prodigy.blogspot.com/2006/10/scientific-child-prodigy-guide.html I also write of gifted education, IQ, intelligence, the Irish, the Malays, Singapore, College, University, Chemistry, Science, genetics, left-handedness, precocity, child prodigy, child genius, baby genius, adult genius, savant, wunderkind, wonderkind, genio, гений ребенок prodigy, genie, μεγαλοφυία θαύμα παιδιών, bambino, kind.

We are the founders of Genghis Can, a copywriting, editing and proofreading agency, that handles all kinds of work, including technical and scientific material. If you need such services, or know someone who does, please go to: http://www.genghiscan.com/ Thanks.

This blog is copyright Valentine Cawley. Unauthorized duplication prohibited. Use Only with Permission. Thank you.)