At Five Stars and A Moon, we are well in touch with the ground. We know that there are groups advocating the abolishment of GST for necessities.
They ask: “Why is GST imposed on bare necessities, don’t the rich eat the same as the poor?”
Let us first define “bare necessities”.
Lets take rice for an example. There are many types of rice. Basmati rice, Vietnamese Rice, Thai Rice, Sushi rice (or Koshihikari Rice, a premium rice from Japan) and even Organic rice. Which one should be the necessity?
The Thai Rice (most) Singaporeans consume is actually a premium rice, not at all a “necessity”.
A mobile phone is a necessity. So is a mattress. So is water, electricity and gas. To be able to classify, update and manage dispute of articles for tax exemption would mean IRAS setting up another department and system – this also means: someone needs to pay.
Many, many companies will want their products exempted from tax to boost sales. Tax free shampoo and conditioner anyone?
Maybe the Restroom Association of Singapore (Yes, such an organization does exist) will then want toilet cleaners, brushes and toilet paper also exempted from tax. Don’t you think GST on these products discourage “Good toilet behavior”. There will be no end to all the petitions.
Does the rich eat the same as the poor?
Even if we might eat the same amount (arguably), but how about the cost?
Remember the GST Credits you received not too long ago? If you ran out and bought a shiny new iPhone, you’re probably not one of those that need help with taxes. This several hundred dollar cash handout by the Government is for Singaporeans to offset whatever they spend on GST, thus nullifying the tax altogether – specifically for expenditure on “basic necessities”.
In a nutshell, if we were to exempt GST from “necessities”:
1. Less overall GST collected due to people exploiting loopholes etc.
2. Rich pay much, much, much less GST while poor saves little
3. Higher cost for collecting GST including setting up GST assessment centres for new products as well as mediation and arbitration courts for GST and enforcement centres.