Is There A Need For The Singapore Government To Increase The Goods And Services Tax?
The Singapore government introduced the goods and services tax at the rate of 3 per cent in 1994. Since its introduction, the goods and services tax has been increased three times; from 3 per cent to 4 per cent in 2003, from 4 per cent to 5 per cent in 2004 and from 5 per cent to 7 per cent in 2007. Since 2007, the goods and services tax has remained at 7 per cent. At the current rate of 7 per cent, the goods and services tax contributes to about 15 per cent of the revenue of the Singapore government, behind the corporate income tax and the personal income tax. Students can learn more about the contributions of the different taxes to the revenue of the Singapore government from their economics tutor in their economics tuition class. Since around 2018, discussion about an increase in the goods and services tax in Singapore has been on the rise. There have been both proponents and opponents of the idea.
Proponents of an Increase in the Goods and Services Tax
Due to the prudent fiscal policy, the Singapore government runs an overall budget surplus, which means that the total government revenue is greater than the total government expenditure. Fiscal policy is taught by every economics tutor in economics tuition. However, if one looks at the primary budget balance, which is the operating government revenue minus the total government expenditure, it has been mostly negative in recent years. The operating government revenue is the total government revenue minus the net investment returns contribution. A good economics tutor can explain these concepts to their students in their economics tuition class. The reason for the primary budget deficits in recent years is the rising government expenditure on areas such as healthcare as a result of aging population. As the population of Singapore will continue to age, government expenditure on healthcare will continue to rise. As a result, the primary budget deficit will increase may will eventually result in an overall budget deficit. This is particularly true in view of the fact that the Singapore government is unable to increase the corporate income tax and the personal income tax in order to continue to make Singapore attractive to foreign direct investments and foreign talents, at least not significantly. Students can consult with their economics tutor about the adverse effects of a persistent budget deficit in economics tuition. Therefore, there is a need for the Singapore government to increase the goods and services tax.
Opponents of an Increase in the Goods and Services Tax
Although it is true that the Singapore should not increase the corporate income tax, it can increase the personal income tax on ultra-high income individuals. This can be done by creating higher personal income tax brackets and therefore higher marginal rates of tax for ultra-high income individuals. students can find out more details about the progressive personal income tax in Singapore from their economics tutor in economics tuition. For example, the Singapore government can create a higher personal income tax bracket for annual taxable personal income over one million dollars with a marginal rate of tax of 30 per cent or higher. Although it is true that high income individuals in Singapore earn high incomes, their annual taxable personal incomes typically do not exceed one million dollars. Therefore, such a move will not make Singapore less attractive to foreign talents, at least not significantly. This is particularly true in view of the fact that the top marginal rates of tax in many other countries are way higher than 30 per cent. For example. the top marginal rate of tax in the UK is 45 per cent. Students can find out about the top marginal rates of tax in different countries from their economics tutor in their economics tuition class. Therefore, there is a no need for the Singapore government to increase the goods and services tax.
Edmund Quek
Economics Tuition Singapore @ Economics Cafe
Principal Economics Tutor: Mr. Edmund Quek