GST.
My mum wrote an article and wanted me to edit it for her as usual. It is about GST.She is trying to make the point that the GST increase is not limited to the 2% written on paper. Which is true. And I come to realise how scary it is actually.
The 2% is 2% only if you buy stuff from the very primary producer who hunts wild boars using stones he picked up from Sungei Buloh. From then on, the increase is defintely more than 2%.
Let's consider a loaf of Sunshine bread from NTUC. The prices are arbitrary.
In order to produce and distribute the bread, Sunshine needs to:
1. Buy flour, oil, salt, sugar
2. Maintain its equipment
3. Pay rental for factory space
4. Pay its employees
5. Pay ultilities
6. Package its bread
7. Send the bread out to NTUC.
Let me keep it simple by considering only the flour chain.
Where does the flour come from? Alright, it is imported.
So, importer pays $100 for the flour (for 1 loaf of bread).
In order to make a profit (importer also has to pay rent, transport, ultilities, employees, equipment, income tax, CPF, and whatever nonsense there is), let's say he needs to sell the flour to Sunshine at a rate which is 20% more than what he pays.
So Sunshine pays $120 for the flour.
Then based on the same principle, NTUC pays $144 for the bread (probably more, because Sunshine is complicated, but let's keep it simple).
And the consumer pays $172.80 for the bread.
After the GST increase:
Importer pays $100 x 1.02 = $102 for the flour.
Sunshine pays $102 x 1.20 x 1.02 = $124.85 for the flour.
NTUC pays $124.85 x 1.20 x 1.02 = $152.82 for the bread.
So, I pay $152.82 x 1.20 x 1.02 = $187.05 for the bread.
As a result, the increase in GST, when it reaches me, is actually 8.25%.
What the heck. When you bring in the additional factors (like packaging, transport), each factor has its own set of layers (the producer - distributor - retailer - consumer sequence). Because the GST hike increases the cost of the layer above, the price he sets will be inevitably higher. In addition you are paying more GST. You may only be taxing the bread once, but the flour, the sugar, the milk, the petrol, the machine oil, the plastic bag, all have its own set of layers which are seperately taxable. And it all adds up.
Well, now I am screaming. A meal in a restaurant is already more expensive and when I looked at the 17% extra I just basically died. It's worse than Maryland. Maryland's GST is 5% and well, although the house rule says that you have to give at least 15% tips but we don't really care. And restaurants there don't charge extra for bread, napkins, peanuts, water, and goodness knows what.
(Don't convert and say Singapore is cheap: Singapore is only cheap for expats. And people who just came back from Europe and the US.)
Argh I am spending my own money, not my parents'. I feel it! That's why the noise. Remember the calculations for the offset packages? It doesn't take the layers into account. The calculations are based on the net 2% increase. The offset packages won't last. The GST absorption by the retailers won't last either. With another bus/MRT fare hike, sigh, I have to move funds back to Singapore from the US already. So that I can sustain another summer...
(Scary thing is, ST just said that the salaries for people like our janitors actually decreased to $650 from $800+ in the past few years... this place is heading into serious trouble if our social services do not improve. Don't give me the economics explanations because I will write another entry soon saying why I intrinsically don't like economic theorists. Now it's sleeping time :P)
Labels: Policy and Politics
