GST article!!!

Pub Date: 20/02/2007   Pub: ST              Page: 3
Day: Tuesday
Headline: All about the GST
By: ANDREW DUFFY

BIGATHOME
The five Ws and an H of the hike in Goods and Services Tax (GST). BY ANDREW
DUFFY

WHAT IS GST?
It is the tax we all pay on whatever we buy. Businesses pay it, and customers
pay it. Currently it adds 5 per cent to the cost of everything. In the Budget
last week, the Prime Minister announced that it would go up to 7 per cent.

WHO WILL BE AFFECTED BY THE HIKE IN GST?
Everyone, but poorer people are more affected. This is for several reasons.
For example, poor people tend to earn less and thus have less savings because
most of what they earn goes to expenses. Therefore  as a percentage, more of
their income goes on GST.
That is why the Government wants to help them by giving out Workfare.
Workfare is  a cash bonus to poorer people, who are also working, to boost
their income to make up for the rise in prices caused by the GST hike.
WHY DO WE PAY GST?
A rise in GST will put $1.5 billion into the government coffers annually. That
means it can reduce the corporate tax rate – the amount businesses pay. And
that will attract more big businesses to set up or stay here, and boost the
economy as a whole – so more people should get richer. So it is needed for
Singapore to be globally competitive. Most countries are cutting corporate tax
rates, and raising “indirect” taxes like GST.

WHERE ELSE DO PEOPLE PAY GST?
It is more a question of where they do not. In Asia, for example, only Hong
Kong, Malaysia and tax-free Brunei have no GST. And in other countries it is
much higher. For example, in the United Kingdom it is 17.5 per cent. Plus it is
more complex there; for example, hot takeaway foods are taxed at 17.5 per cent,
but cold foods are not. Bread is considered cold, even if it is warm. That
makes things so complicated. Singapore has decided to have a more
straightforward GST on everything.

WHEN DID GST START IN SINGAPORE?
GST started in France in the 1940s. In Asia, it was introduced by South Korea
in 1976, followed by Taiwan and Indonesia in 1985. Singapore GST started in
April 1994, at 3 per cent. The rate was raised to 4 per cent in 2003 and 5 per
cent a year later. And this new hike would not be the last, as Singapore has to
adapt to stay competitive.

HOW WILL GST REVENUE BE SPENT?
It will allow Singapore to help its lower-income earners, plan for its ageing
population and invest in infrastructure like new roads and bridges. It will
also boost health care and education; the plan is that through education,
children from low-income homes will go on to higher-paying jobs.