Saturday, March 15, 2008

Give me my money

There have been calls in Parliament to reverse the increase in the GST rate from 7% back to the 5%. It would be good news for the people if this were done at all, but I suspect it wouldn't make much of a difference to the prices of goods and services. Prices have already gone up and they wouldn't come down even if the GST is rolled backed, especially where product prices are inclusive of GST. In these cases, businesses will save the two percentage cut in the CPF but those savings will likely NOT be passed this back to the consumer. So the net gain for the man in the street is absolutely zero, zilch. As the saying goes, 'its too little too late'. Prices have gone up not just because of GST, although that is one contributory factor. Other more 'sticky' factors continue to play a part in forcing prices northwards - e.g. the price of oil and raw materials that even the Finance Minister has no control over.

Yes, some people think of subsidizing these cost increases from government money, like what our neighbour to the north is doing. But even there, those subsidies are proving difficult to sustain in the long run and quite simply distorts the market terribly, to their detriment. If Singapore were to do the same, it would be nothing short of disaster.

Instead, I rather like the way the government has been giving cash back to the people lately. People get to spend the money, or not, on things they fancy. There is no distortion of the market. The government just encashed my Economic Restructuring Shares (ERS) by sending more than a thousand dollars into my bank account (mind you, not my CPF account, which makes all the difference). Additionally, it just gave out cash in the latest budget, though I didn't get the lion's share. The government has also just slashed my income tax bill for last year and told me I needn't file my income tax this year (well, I am one of the 300,000 or so salaryman given this 'privilege'). So really, I can't fault the government, except for the truism that the PAP government is very fond of giving away and taking back. There has always been this love-hate relationship for as long as they have been in power.

Now, the PM has expressed his fear that Singaporeans are beginning to view handouts as a matter of course - something that will happen every year come budget time. I empathise with him. Although there was a short-lived recession in 2004, for the most part of this decade, Singapore has seen wealth and prosperity. A generation is growing up never having tasted times of impoverishment. I blame the government. They are doing too good a job as far as the economy is concerned, surprising even themselves when they total up the tax receipts last year. Another way of looking at this surprising outcome is that all the government-sponsored PhD's still in government can't count very well. But its a happy problem, so nobody is being sacked for failing his/her maths. Lesson: never under-estimate.

But who can you blame when the government keeps on exceeding people's expectations? The government doesn't believe a lot in subsidies, more cash to the people is their way. Who doesn't want cold hard cash? And so long as the government feeds this 'fetish' for cash every year, Singaporeans will develop a dependency - something which may return to haunt it when times turn bad, as it will in any capitalist economy.

Damned if you do and damned if you don't.

Image source:  Author: Jane M. Sawyer

1 comment :

Onlooker said...

But at least rolling back the percentage increa$e to 5% or less esp on the government side EG the HDB flat payment, hawker stall rent, Bus Fare electric bill and internet access fee(unless like me using wireless@sg) will still help in little bit so a small step is still good for the people.
I'm sure they don't want to kill the workhorse(us) too.
Hurry for frozen rejected American/ Brazil GM food ;)
I especially like the growth hormones and Monsanto's ....
that promote shortevity ( opp longevity) that our leed say we will out lived XD like cockroaches