Wednesday, August 06, 2008

Cut the GST?


From TODAY, Voices
Wednesday August 6, 2008

Direct transfers the better way
This way will benefit lower and mid-income households, senior citizens and students

Letter from Chin Sau Ho
Director
Corporate Communications & Services
Ministry of Finance

CONRAD Raj (“The right time to step in?”, Aug 4) called for the Government to come up with measures to help Singaporeans cope with higher inflation, and suggested a cut in the GST rate.

His article omits mention of the Substantial benefits that the Government is providing to the majority of Singaporeans this year, including the middle-income groups and not just “the very poor amongst us”.

Budget 2008 provided Growth Dividends, Senior Citizens’ Bonuses, Post Secondary Education Account (PSEA) Topups for families with children, and Medisave top-ups for older Singaporeans.

Furthermore, the GST credits, Utilities-Save rebates and Service & Conservancy Charges (S&CC) rebates that were introduced in last year’s GST Offset Package continue to run this year and for the next few years.

Together with Workfare for lower income workers, which was also introduced when the GST was raised, the Government will be giving out more than $3 billion in benefits to Singaporeans this year alone.

Adding up the benefits within each household, the majority of Singaporean households are receiving benefits that would match or exceed the increases in the costs of living that they face as a result of this year’s higher inflation.

The lower income groups get more assistance, relative to their expenditures.

But the typical middle-income household staying in a four- or five-room HDB flat will also get benefits that at least match their extra expenditures caused by the higher inflation.

This is a better approach than cutting the GST, which will benefit the rich disproportionately, as they consume and pay more GST than lower- and middle-income Singaporeans.

The current Government approach of direct transfers is a more targeted and effective way to help Singaporeans cope with higher inflation.

This way, lower- and middle-income households, senior citizens and students receive more benefits, which they can use according to their needs.
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