Treat companies well, but workers better

The Nanyang Chronicle, 8th January 2007

Over Christmas dinner, my mother lamented the time when just one working parent could support the family. My cousin, who had just started work, agreed, and added that couples today had to combine their incomes to raise a family.

That, I feel, summarises the state of the Singapore worker today — working longer hours just to raise a family and live in relative comfort.

The government’s plan to incrase the Goods & Services Tax (GST) only adds to the woe of the workers. Everyone will have to pay more for essentials.

Furthermore, GST is a regressive tax, which means that the lower-income will be hit the hardest, since a bigger proportion of their income will go to GST.

Despite the government’s claims that there will be scheme such as Workfare to offset the GST burdern for the lower-income, I question Workfare’s effectiveness, and for how long it can be sustained. The whole scheme of things seems to be geared towards everyone having to chase prices that will never stop rising.

Second Finance Minister Tharman Shanmugaratnam argued that the increase in GST is part of a larger effort to increase revenue “so that all Singaporeans enjoy better growth, lift all boats, so… everyone is better off.”

But are all the “boats” ready to be liefted, and is everyone comfortable in their boat? Some workers may only be rowing sampans, and the slightest wave will cause them to overturn. In fact, those most likely to benefit would be those who already have big boats.

Perhaps, the extra revenue would indeed benefit all, but do we really need the estimated $1.5 billion generated from the rise in GST so badly?

With the upcoming plan to amend the Constitution to redefine Net Investment Income (NII) to include realised capital gains, NII has been estimated to grow up to $5 billion from fiscal year 2005’s $2.67 billion.

Based on this estimated figure, the government has $2.5 billion to finance its programmes, since the constituttion allows the government to spend up to half of NII.

What are the exact plans for the extra revenue to be raised by the GST hike?

No one knows at the moment, but details are likely to be released when the Budget is announced in March. Perhaps the current uncertainty adds to the feeling of scepticism about the hike.

Even if the revenue was needed, one alternative might be to raise corporate tax. Instead, the government has plans to reduce corporate tax further.

Couple with the rise in GST, it seems the corporations will hold workers hostage, since workers will be made to pay more in their daily lives. This indirectly pays for the loss of tax revenue from lowering the corporate taxes so as to attract these corporations to set shop here and drive growth in our economy.

The on-going Central Provident Funds (CPF) debate also suggests such thinking.

When times were bad, workers took a cut in CPF contributions, but now that the economy is doing well, many corporations are hesitant to return to the former levels of contribution. Workers seem to be getting a raw deal again.

Some might argue that raising corporate taxes would mean that corporations pass on these costs to employees and customers with lower pay and higher prices respectively. I would argue that with higher corporate taxes, more money goes to the government who can in turn use it to our best interests, like funding for the social programs it promises with the rise in GST.

Most importantly, workers should be treated better just because they are human beings.

Are we born merely to work and make ends meet? No.

My grandmother once spoke of working hard in life in order to retire and enjoy her golden years. Today, senior citizens serve me at fast-food restaurants.

I remember a time when my parents came home to eat dinner as a family. Today, we eat outside the home, often alone. My friends used to talk about their ambitions in life. Today, we worry about not being able to find jobs after leaving school.

The government should take a leaf out of its latest policy to reduce subsidies for permanent residents and foreigners in healthcare and education services so as to “treat foreigners well, but Singaporeans better.”

The tax burden could be shifted to corporations so as to treat companies well, but workers better.

Similarly, CPF contributions should be returned to their original levels.

That would be a good way to guide the Budget for 2007.

Other articles for The Nanyang Chronicle

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