Budget 2007 Essay Competition

I refer to extracts from the Budget 2007 Essay Competition, published in the Straits Times on 12th Mar 2007.

Category 1 (TERTIARY), First prize by Mr Cheong Poh Kwan

Mr Cheong wrote of “a need to plant the seed of entrepreneurship in the citizens, so that they will be able to breed strong corporations that can spontaneously respond to changing market trends, instead of blindly flocking to where the government investment vehicles are moving towards.”

Mr Cheong is right in saying that we should not blindly follow the government into money losing investments. Likewise, we should also be careful not to reinforce the government’s fervent drive towards entrepreneurship. While it may be obvious with hindsight, the follies of the earlier government investments, it remains to be seen if our present zeal with entrepreneurship might not turn out equally disappointing. What is important is that we learn the right lessons from present day entrepreneurs.

Bill Gates didn’t write MS DOS out of conviction that it would one day lead to the most successful corporations ever. Steve Jobs didn’t build the Macintosh with the aim of becoming a multi-millionaire. While they are both outstanding entrepreneurs in their own right, they were never motivated by entrepreneurship to begin with. All they did was simply pursue their respective passions to the fullest, and I think that ought to be the lesson to learn from them. If we only see their entrepreneurial outcomes without seeing the sources of their inspirations, we risk imbiding the wrong values in our children and setting them off on the wrong foot. When they’re motivated by money as opposed to passion, they may in all likelihood, not find fulfillment at the end of the day. For the millions and billions that Bill Gates and Steve Jobs amassed are but by-products of their respective pursuits of their dreams and imaginations.

Category 2 (JC, Polytechnics and secondary schools), Second prize by Mr Chew Zhi Wen

Mr Chew wrote “progressive personal income tax affects work incentive, discouraging people from moving into the higher-income brackets”

There is no reason why Mr Jackson Tai, who earns millions from DBS every year should prefer to trade his position with me just because I pay so much less tax. The idea that a person should feel disincentivised from rising through the ranks simply because he doesn’t wish to pay more tax might not manifest itself in real life.

Mr Chew also wrote “Together with an ageing population, the income tax burden will weigh increasingly on the shrinking workforce”

On the contrary, indirect taxes might weigh more heavily on our shrinking workforce than direct taxes would. If I have four parents to feed, lowering my income tax will not help me as much as emburdening me with four times as much GST.

The notion that indirect as opposed to direct taxes better motivate people to work only makes sense if people keep their hard earned money under their pillows and never spend it. What really matters to him at the end of the day, whether he is taxed directly or indirectly, is how much he can afford to buy which is in turn affected by both GST and income tax. An average worker might even find himself worse off for the taxable income may be only 20% of his total income whereas the GST eats sooner of later into his other 80% depending on when he chooses to spend it.

Ironically indirect taxes may indirectly ‘motivate’ the worker to work harder. The GST is like inflation, compelling the average worker to work harder because prices around him have gone up

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