Archive for the ‘Budget 2007’ Category

Illogical not to raise tax during good times

March 24, 2007

When the economy is bad, we are asked to accept wage freeze and cuts in employer’s CPF contributions. But when the economy gets better, we’re asked to accept more taxes in the form of increased GST. Bad times we get pay cut, good times we get taxed more, why are we always at the losing end of the bargain?

Not fattening one’s own pockets

March 24, 2007

Remember what Miss Lee Bee Wah said during Budget 2007 debate about what Singapore politics is not about? Ms Lee was adamant that Singapore’s politics, unlike those of Malaysia, is not about fattening one’s own pockets.

What is the doubling of minister’s pay to $2 million now, Ms Lee?

Budget 2007 Essay Competition

March 23, 2007

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

Budget 2007

March 23, 2007

The following are my comments on the series of budget debates reported in the Straits Times over the last two weeks:

28 Feb 2007

“Low Thia Khiang praises Workfare, slams GST hike” by Lynn Lee

It was reported that Mr Hri Kumar finds the idea of not raising GST during good times illogical as it implied that taxes should be raised when the economy was plummeting. He is mistaken. To use the analogy of a robber, the fact that times are better doesn’t give the robber more reason to rob the people. The fact that times are better and that the robber is better off means he should let the people off instead.

1 Mar 2007

“Sylvia Lim ignoring offsets in generous budget: PAP MPs” by Ken Kwek

Miss Lee Bee Wah was reported to have been congratulated by old friends in Malaysia for “going to get rich very soon”. Ms Lee attributed their comments to their mistaken belief that Singapore politics, like those of Malaysian politics, is all about fattening one’s own pockets. But I’m sure her Malaysian friends aren’t as ill informed as Miss Lee deems them to be. Their comments may be sincere acknowledgement of the fact that Miss Lee would be pocketing $10,000 monthly for the next 5 years, which is a cool “peanut” sum of $600,000.

Miss Lee also said it was better to raise the tax now while the economy was doing well rather than when things took a turn for the worse and rationalised it with the Hokkien phrase “looking for a toilet only when one needs to pass motion”. I think a better illustration of the actual situation now is “not using one’s own marbled toilet with golden taps but going instead to the commoners’ homes to use their toilets.”

2 Mar 2007

“More funds needed to pay for the future” by Sue-Ann Chia

Tharman argued that revenue from the integrated resorts would be miniscule compared to the budget that its ministry requires. This is in stark contrast to the perception the government gave when it was justifying the opening up of gambling in Singapore. The rhetoric then as I recall was that the casino was integral to our very survival as a nation.

Mr Tharman also said that the top 20% pays four times as much tax as the bottom 40% even as its share of household income is merely double those of the latter group. This seems to suggest that the rich is twice as generous as the poor but what it really shows is just how un-egalitarian our society has become.

He also mentioned that middle incomers here paid less tax than their counterparts in cities like Dublin, Sydney and Tokyo and comparable to those of Hong Kong. However, the wages in these cities are much higher than those in Singapore that more than compensates for their higher taxes so that on the whole, their citizens have more disposable income than ours.

3 Mar 2007

“Attracting new citizens: Integration is key, plus a dose of love” by Ong Soh Chin

Ms Indranee Rajah said that “being Singaporean is not a matter of ancestry, but of conviction and choice”. This is too simplistic a definition to being a Singaporean. When a person makes a purposeful choice to take up Singapore citizenship out of conviction that his material gains here will be much better than back home, does that make him a true Singaporean or a mercenary? Doesn’t sound like there’s much love except for money, does it?

“Spotlight cast on Temasek” by Leong Chan Teik

Ms Lim Hwee Hua says that “It’s important to note that Temasek was set up as an independent investment vehicle so as not to confuse the issue of what’s strategic and national with what’s commercial.” There is nothing confusing about the role of Temasek. It’s role is to grow the nation’s reserves and not squander them on ill considered investments so it ultimately answers to the nation.

“Citizenship Day to mark shared national identity?” by Peh Shing Huei

Mr Wong Kan Seng said that it is because our immigrant forefathers weren’t dissuaded from sinking roots here that is why we are here today and so therefore we should not dissuade new immigrants from sinking roots too. This is too simplistic a view. When our forefathers came, Singapore was still a colony, not a nation yet. Now that we are a nation, should we continue to be wanton towards immigration?

Mr Wong also cited the fact that there were more jobs in US states where immigration levels are high as proof that locals do indeed benefit from immigration. Mr Wong may have gotten his cause and effect the other way round. It doesn’t make sense to say that because many immigrants are coming into my country, therefore many jobs are created to cater for them. It is because there are many jobs available here that is why many immigrants come.

It is because places like silicon valley are prosperous and present much opportunities that they attract many new immigrants. Rather than say that immigration brought a net benefit of US$10 billion to US economy, it would be more apt to say that US$10 billion worth of job opportunities were available but were taken up by foreigners.

Our ability to absorb new immigrants depends on the opportunities we can create here. If we currently have a glut of professionals retrenched or re-employed to less desirable positions, surely it shows how acute our lack of opportunities here is? In that case, how can we still be wanton towards immigration?

Elsewhere, Mr Wong has also been emphasizing that the 6.5 million population figure is a forecast, not a target. How can this figure merely be a forecast if the actual number is determined by who the government actually grants citizenship, permanent residency or work permit to?

10 Mar 2007

“Downtown MRT line in final stage of planning” by Christopher Tan

Mr Raymond Lim said that the morning peak MRT occupancy at Toa Payoh or Kallang is only 80% of train’s capacity. He should try the evening peak at Raffles Place or City Hall.

Mr Lim also said that Tokyo, with a population of 12.5 million has a peak hour train ridership of 8 commuters per sq m against our 4 commuters per sq m. This suggests that Singaporeans are overly pampered as they have twice as much space around them as their doubly squashed counterparts in Tokyo. But Mr Lim failed to point out that Tokyo’s population is three times ours so their trains should be three times as crowded. But their trains are only twice as crowded, so their system is actually more efficient than ours. In proportion to the population, we should have 2.8 commuters per sq m instead of the current 4.

More importantly, the fact that Mr Lim has chosen, of all cities, to compare us with one of the most congested just goes to show what he thinks we ordinary citizens deserve. He gives the impression that we deserve the most congested trains there is in this world. Shouldn’t it be more apt to compare us with cities of similar size and development, like Taipei and Hong Kong?

He also attributed the low pay of taxi drivers in Hong Kong to oversupply and used that as reason for not increasing the cab pool here. However, I don’t see how much more highly paid our taxi drivers are even with our shortage. So we are being short changed on either ends, no abundance of cab pool and no decent cabby salaries and I wonder if our ever greedy cab companies have anything to do with our predicament.

“Exchange pits head against heart” by Chua Mui Hoong

Mr Balakrishnan was quoted as saying “Singapore … as a free-market capitalist country … has done better than socialist countries looking after the poor”. What is so proud about doing better than Russia? Why not compare with social democracies like Germany, Finland or Sweden? Even the mother of all capitalist societies – USA has done better than us in social welfare.