Tan Kin Lian / Columnist
Introduction
Singapore’s economy is in recession. It will get worse and may take one or two years to recover.
Senior Minister Goh Chok Tong has advised people to continue spending, to keep the economy growing and avoid the downturn getting worse. (See here) Many people do not agree with this call. They are afraid of losing their jobs. They prefer to save more, in case the need they money in the future. The reduced domestic spending is now being felt in many sectors of the economy.
I wish to suggest two measures to overcome the fear and stabilise the economy – relief loan and cut in GST.
I suggest that the Government introduce a new scheme, to provide a relief loan to Singaporeans who are retrenched or face a reduction in earnings due to a shorter work week.
The relief loan is to be provided by a Government agency and is subject to certain conditions. Interest rate shall be charged at 2.5% per annum. The amount of the loan shall be for the loss or reduction in earnings, and shall be available for a period of up to 24 months.
Certain measures can be implemented to prevent abuse, and ensure that the relief loan is used for the right purpose. The loan has to be repaid at a future date, when the borrower is able to find a better paying job, e.g. when the economy recovers. If not paid, it can be deducted against the CPF savings payable at age 55.
The existence of this relief loan will give comfort to the working people that they can continue nearly as usual, and do not need to cut down their spending drastically at this time. It will support the suggestion made by Senior Minister to keep the economy going.
Those employed will have the comfort that if they should be retrenched at a later date, they have access to a relief loan that carries a modest rate of interest. They do not have to borrow from credit cards at 24% interest or from loan sharks at higher interest rate.
The relief loan should also be available to workers who agree to work on a shorter work week (e.g. 3 or 4 days a week) for a proportionate reduction in wages. They can get a relief loan for the difference. This will encourage businesses (facing a drop in demand) to keep their workers on a shorter work week, instead of retrenching the excess workers.
The relief loan is similar to unemployment benefit that is available in many advanced countries. In this case, it is a loan that is required to be repaid in the future.
The Governor of California, Arnold Schwarzenegger, has introduced a simple and effective scheme to cope with the budget deficit of the state. He asked all state employees to take 2 days of unpaid leave each month. This should reduce the expenses by about 10%. This is better than to retrench 10% of the state employees to achieve the same results.
It is not just cutting wages by 10%. The employees get two additional days of free time to spend on other activities. For employees who have been working long hours, this will be a welcome break.
I hope that the employers in Singapore can adopt the same approach. Perhaps the Government can take a lead.
Reduce GST to 3%
There is a need to increase domestic spending and personal consumption, to offset the drop in external demand.
A temporary reduction in GST to 3% will help to stimulate spending. Many people will consider spending now, and enjoy a 4% reduction in prices, due to a reduced GST. Other people will still be cautious and save the money, but a big reduction (of 4% in GST) may spur others to spend now.
If money is given to people to spend, it is likely that many people will use the money to pay off their debts or save for the future. The actual impact on domestic spending is reduced. This was the case of the stimulus package in the USA a few months ago.
A reduction in GST is likely to produce a positive impact on the economy. With people continuing to spend, more people will keep their jobs and the economy will carry on nearly as much as before. There will still be a contraction in demand, but the impact will be minimised.
I agree with the call by SM Goh Chok Tong for people to continue to spend normally, so that the economy will not suffer such a severe decline. I believe that a reduction in GST is likely to encourage people to achieve this desired outcome.
Conclusion
This economic downturn is global in nature. It is the most severe in 70 years. Singapore is likely to face a larger impact from this downturn, due to the structure of our economy. We need to have “out of the box” measures to overcome the challenges.
I hope that my suggestions can be considered.
Tan Kin Lian will be speaking at Speakers’ Corner this Saturday, 27 December, at 5pm. This will be the last gathering on the issue of structured products until further notice.
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I would support the proposal to reduce GST and if possible, remove it altogether to zero for a year.
I would support the proposal to reduce GST and if possible, remove it altogether to zero for a year. To partly compensate for the loss of income for the Government, the top personal income tax for those earning half a million or more could be raised. It is time the top earners help the nation and the poor.
The government should make credit-lines available for families who have a combined income of $2500 and who have been in employment for at least a year. The credit-line could be up to a maximum of the combined one month salary of the family (maximum). There should be minimal interest charged to this line-of-credit.
Hi!
Governor Arnold Schwarzenegger plan will work well. From the looks of it. It seems to be a very workable proposal with even favorable uptake incentives on the part of employees. We should consider it. On a separate note. I just came away from your site. It seems mr tan kin lian you are looking for 100,000 supporters. I support you. But that doesnt count for much. I have a tip for you. You need to talk to those brotherhood people. They can be very sticky and difficult. But if you can get over their nonsense. I really believe they might be able to help you better than anyone online. The beginning of the year is usually the best time. This is the period, when all their readers buy into their annual circular. They actually lay it out like some great soviet plan. It may be a good idea to talk directly to their rep. They will do a write up on you for all their readers and they will usually just do as they say. No questions. Knowing them, this will not be easy, they will always ask for terms and conditions before support is given. But if you are prepared to make concessions. I am sure at least half your problems, statistically can be handled with great ease by those chaps.
Just my two cents. Merry Christmas all.
My proposed solution to end the recession in Singapore
1. Retrench (and send away) all foreign workers whilst employing all unemployed Singaporeans. Definitely to reduce local unemployment
2. Stop all upgrading and construction projects and use the intended money to provide subsidies for lower income group people
3. Reduce GST to 5% to stimulate consumer spending.
The reason for being 5% is because I felt anything below 5% would be too much, which may spark further taxes in other forms. Another reason being 5% is easier to calculate.
4. Close the income disparity gap. I think the rich are too rich, the poor too poor.
5. Remove ERP – it’s a stupid invention by some stupid outdated old fashioned people
The title of this article should be “Helping Singaporeans cope with recession”. I have asked the editor to correct this mistake.
I doubt the government will reduce GST. This issue has cropped up many times in the past and the response of the government has always been the same.
What do you think of the proposals?
Give your views in this survey:
http://www.surveymonkey.com/s.aspx?sm=aY9oQl_2fZCD23kLx8r6_2f2dw_3d_3d
Very good suggestions or perferably, proposals for the government to consider seriously.
One thing to add. If the GST comes down, CASE should be empowered to take action against vendors e.g. hawkers and restaurants etc, that do not reduce their prices.
In Malaysia there are inspectors who conduct checks at markets, etc to ensure prices of essentials are fair. Supermarkets like Giant, Tesco and Carrefour, were roped in, in the price reduction campaign. Thus food hawkers and restaurants have no excuse to maintain high prices.
i propose that instead of reducing the gst, certain goods should be exempted such as food stuff, books, clothing apparel and restaurants where the money will go back into our economy and stimulate it.
luxury goods such as cars, branded goods and non essentials should continue to attract the current gst of 7%.
aiyoyo
not sure if the ELITEs also do as they preach?
(spending their own $$$ to keep economy growing..)
maybe can see more results with ELITEs $$$ (because of their BIG package)
“…advised people to continue spending,
to keep the economy growing and avoid the downturn getting worse.”
aiyoyo
I agree with the suggestion to exempt essential items from GST… At the very least food stuff should not have GST…
Yes, all basic food necessities should be GST exempt – rice, oil, salt, sugar.
GST for public mass transportation, ie, MRT and buses, should be reduced and permanently fixed at 2-3% or even 0% since travel is essential to a thriving economy.
The big issue is and has always been govt refusal to earn less through taxes even when times are hard. It is not as one with the people.
Dear all,
I have the same opinion as Kay, on that the possibility of a reduction in GST is quite slim. Honestly, I do hope for the best (GST is reduced to 5% or even to 3%), but prepared for the worst (no reduction).
Why not :
1. CPF could be temporarily reduced to 1 or 2 % to lower cost to businesses in return that less jobs be cut. With job secured, people can continue to spend with the cash in hand (salary) since cpf is not so immediately accessible for spending and it forms a substantial amount in relation to the salary.
Which is better? keeping your job or lesser cpf?
2. With the realisation of the huge reserve in the sinking fund, it could be used to lessen the amount residents have to Pay and Pay for the new lifts which costs around $700 (or more) per lift per household, based on my understanding.
The cost savings to residents makes them feel more comfortable to spend on more consumer items.
which is better? more burden on residents or more money spent on economy?
These are temporary or 1-off solutions that can increase spending.
so easy right? anyone can suggest. still need financial experts for this?
GST & other taxes can only go on way – upward! Btw, Australia started its GST in yr 2000 at 10% so We’re still to catch up.
Irrespective where U’re, there is also only one way to countering the recession – Manage your money in that income = expenditure.
No other routes, do not hope that gahman will heed. They couldn’t even make sinking fund grow.
good suggestion. there is this 69 year old guy who is on public assistance and is given $150 a month. the info is posted in sunkopitiam.
i will go and advice him to manage his income against his expenditure. i think he will be very grateful.
both ideas seem sensible and workable. but, pap is pap, i doubt they will implement either of them. chances are higher than they will come up with some “reasons” why both ideas should not be taken up.
“Many people do not agree with this call. They are afraid of losing their jobs. They prefer to save more, in case the need they money in the future. The reduced domestic spending is now being felt in many sectors of the economy.”
Sincerely the Newspapers reports dun seem to agree.
http://informationreadbyme.blogspot.com/2008/12/i-wonder-which-is-right.html
http://informationreadbyme.blogspot.com/2008/11/watching-down-turn.html
Under 22nd, 21st, 20th, 14th
Anyway, I guess maybe shouldn’t decrease GST. Since those who can spend will still continue to spend. Rather, increase Specific Hand Outs. But of coz, in the first place our safety nets got big big holes, so maybe 1stly need to repair those holes first.
Sincerely, by reducing GST, it doesn’t really solve the problem. I mean assuming a mthly NECCESSARITIES expenses of maybe 300 ~ 500. A decrease from 7% to 3% is only $12 ~ $20.
It doesn’t really help those whose pay is low in the first place.
It doesn’t really help those who ve big families.
It doesn’t really help those who need to c docs often.
There’s so many more pple who won’t really benefit from a reducation in GST.
I noe the arguement tat to a poor, $12 ~ $20 will mean alot. But isn’t it better instead to give them $200 per mth rather then give them a discount of $12 ~ $20? (Numbers are just a assumption, not facts)
Reducing GST ultimately only benefit those with money to spend since 4% of 1,000 = 40 where as 4% of 100 = 4. Tat’s a 10 times difference. It’s like pple saying tat u SAVE money when SHOPPING for Shirt/Shoe/Bag/Watever becoz there’s a DISCOUNT.
Tan, I support the call for GST reduction. May I humbly suggest you send an email to Nathan and urge him to support your call?
SM GOH advises people to spend more. He can talk cos money is all he and his ministers have from the huge salaries they get!
He should give some of his salary to others so that they can follow his call to spend. Those who have can easily talk and preach but what about those who don’t have. Where in the world do want them to get the money to spend even on the simple necessities of life?
And for those who spend the rich will benefit in the end more than the poor. Cos the rich will still have mega bucks but the poor would have depleted all thier cash and savings!
as usual
another stupid remark from a former highest paid prime minister
do he think every sinaporean is earning $3000/day?
machiam machiam liked him?
you wil be LUCKY
if you can earned $30/day
spend what?
with what?
even when i buy udongs
you know the $0.80cents type
i also checked values
if possible
try to get 2 similiar type @ $1.20 per packet
nabei
talk co ck like sink song
Good Afternoon,
I don’t think it’s a good idea to reduce GST. Even if that were really possible, it may not be effective in alleviating hardship where its most needed; as these proposed cuts will only mean single digit reductions which will simply have a negligible effect on the cumulative cost savings.
A better idea would be to moot a hard hitting approach that is focused DIRECTLY on lowering the price of necessaries (bread and butter stuff). And to accomplish this, it may be a better idea to encourage civic society to look into the whole issue of starting food cooperatives e.g provision shops.
I believe this will be an EFFECTIVE solution to slash the price of necessaries by at least thirty to forty percent by amplifying the purchasing power of those who may be currently experiencing difficulties in stretching their dollar.
I could provide more information as to how this might be organized or how it may be even expected to work financially, but unfortunately, there is a restriction on me to post material from a certain person and group. So I am unable to help in this regard.
However, despite these restrictions. I will try to provide a working example; if lets say a pair of bicycle wheel sets retail for $1,500 in the high streets. The cost can be reduced by getting a group (has to be quiet a big consortium) of cyclist to buy in bulk directly from the manufacturer. This will not only do away with the extraneous cost such as the mark up of the stockist, but also retailer along with warehousing, marketing, inventory etc, thus reducing the per unit cost to maybe a manageable $500 per set of wheel sets.
I have personally done this a few times (I wish, I could give you all specific details, but I would have to mention a certain character, so that is really out of the question) to get around the exorbitant cost of purchasing bicycle componentry and I wonder why it has NOT been mooted as a solution to help lower the price of necessaries to people who may be suffering in such tiring times.
As I said, I wish, I can elaborate further on the mechanics and even provide specific case studies to illustrate how this might be accomplished, but regrettably, I am compelled to abide to some restrictions – I hope as patchy as this may comes across; it will hopefully make sense.
We believe very strongly every Singaporean and resident has a right to three square meals a day.
SD (Internet Liaison officer of the Brotherhood)
SD, you pathetic man! go study the rationale for implementing GST, go work out the mechanics of GST, and then come back here, and indicate whether reducing GST can help Singaporeans in today’s climate.
Mr Tan Kin Lian,
I’m sure if you have the power as the leader of this country, you’ll implement measures to help the needy. But then you are not the leader. Our leaders will never do anything that hurt their pockets. The bottomline will always be, don’t hurt my pocket. Money they are willing to give out are always string attached for political gains. This, they had proven time and time for the last fifty years!
Those who had voted them in all these years and are now in trouble should reflect on their past decisions!
Dear all,
The relief loan is certainly an excellent idea to help those who are retrenched or face a reduction in earnings, since this measure provides much needed funds at a low cost, which enables them to have their monthly bills paid, have food on the table and the children have clothes to wear.
On the other hand, we need to be aware of the drawbacks of the repayment method stated.
To me, I would regard the relief loan as a loan that lends an amount equal to the loss or reduction in earnings, and his/her CPF is used as a “collateral”, in the event the loan is unpaid. The question is can CPF be used as a collateral?
For example, a household of 4 people living on a take-home pay of $1,200, which the pay is now reduced by 20%, he/she will owe a total of $5,904 (principal and interest). The possibility of this household getting a higher pay check after 2 years is low, which means that he/she will be bearing the repayments on the same pay check of $1,200.
In the above situation, this household will be most likely to opt to use the CPF as a repayment option, so as to reduce their financial burden. In such a situation, will this relief loan be viewed as a “backdoor” to withdraw the CPF funds? If this measure is approved, will this result in a floodgate situation, where others will propose reasons and situations where the CPF should be used as a “collateral”? If CPF can be used as a collateral, will this lead to another suggestion of allowing them to “borrow” from their CPF, which is similarly to those who used their parents’ CPF to pay for their tertiary education.
This measure is worth further consideration and at the same time, I would strongly appeal for an alternative repayment method.
Spent more? Wait long long. You give me my CPF first. With that, you can also do away with GST 0%. Then public transport should be free, Govt should give unemployment money, at least 60% of my last income for the next 3 years. My insurance policy should cover all medical expenses. Can or not? Cannot rite? Then dun ask me to spent, you wait long long first.
Good Afternoon Your father,
“SD, you pathetic man! go study the rationale for implementing GST, go work out the mechanics of GST, and then come back here, and indicate whether reducing GST can help Singaporeans in today’s climate.”
Yes, I understand completely how you may have derived at that “logical” conclusion, but always bear in mind the heading of this essay is helping singaporeans cope with recession, not making microscopic cosmetic changes which will have little or no effect on the final outcome.
So at the end of the day, it is NOT abt ‘rationale’ -’mechanics’ or even abt ‘philosophy.’ As it remains what is EFFECTIVE and what will WORK or would not.
But really to argue this matter in comprehensively so that you may somehow come to see my point in marvellous completion; I would have to access certain material from a group of people and from one character especially who I cannot mention here due to certain restrictions. I dont know how to do this now. So I may need a few more days to find a way to put it in my own words.
Pls give me some time. I will come back to you.
SD
loans?
every months no needs to pay is it?
everytime when i intend to take a loan
or buyin a REPLACEMENT motorsikal
i think 5 TIMES hard
simply because no matter how
a loan is a loan
let used basic 12 months
to us all maybe
we think
aiyah $200 (basic min example hor)
is nothing what
sured can settled
siap siap suay
kechil kechil ayer
than howlian have a little extras
go to court
buy 55″ lcd tv
@ the same time
buy that blueray dvd
not enough?
how bout that 2″ minature super duper dvd/vcd/icac/cpib videocam as well?
when you finished all this?
alamak
my month ends loan is near $999 nia
still have enough budgets to tarhan ley
mei wun ti
imagined that you worked for dbs/sony/stat compaines
guranteed aluminium ricebowls what
no problemo
this month this year
just received your retrenchment notice of permanent shakeleggs extended holidays?
where on earth
are you goin to find $999
every month till you finished?
my living example is here
i have a 2 year installment plan to settle my motorsikal
only $295/month nia
i still have 14 months to go
yet i already settled in FULL!
how come?
did i striked lottery?
no
i told you peeps before
i have the 3rd eye vision
when i was doin well
i paid doubled
sometime tripled the monthly loan
see?
so young couples
spent within your means
heck i still have budget sulphus
to go on a feb 09 holiday in china if i want to
but i am not
because
i know
you know
jan09
what is not gonna happenned
snow drops that for sured…
We should avoid condensing poverty reduction only to GST. As I said, the heading in this article is very specific; helping sg’s cope with the recession.
If it is to remain useful, the focus should be directed specifically at poverty reduction and not ONLY to GST. As its overall is impact is nominal when you see in the cummulative context of expenditure at a macro economic level; tell me; if you dont have alot of money to spend in the first place; then how might a one or two percentile increase in GST even affect you so drastically? The chances are the price of a cup of kopi going up from 50 to 70 cents is likely to impact you more – economist refer to this as reverse or inverse cobweb theorem.
As I said, I can talk more abt this screwy theory, but there are currently restrictions on me to share openly. That is most regrettable.
This brings into sharp focus the appropriateness of the question which should be posed here is therefore; what is the most effective way to reduce poverty?
SD
I do not agree with the loan suggestion. I still feel (as I have been saying, and almost out of breath already) that since we have our CPF contrbutions because we have been working hard, it is only fair that that govt look into allowing us to dip into it at least this once. What is the point of keeping it till we reach CPF puberty and nearing our death bed?
Give us back 2%, 3%,4% now. It does not make much difference if we keep it till we reach retirement age but it makes a huge difference if we are given this small percentage sum at this moment of global financial turmoil. We, Singapore, has a ready-made solution but we are not using it.
I would say, use it, and go blow your own trumpet so that other countries may follow you and introduce CPF for their own workforce. I would even allow you to glow in the praises and I would go even further to tell of its wonders.
Do it, Mr PM.
30) Singaporedaddy on December 26th, 2008 2.17 pm
“As its overall is impact is nominal when you see in the cummulative context of expenditure at a macro economic level; tell me; if you dont have alot of money to spend in the first place; then how might a one or two percentile increase in GST even affect you so drastically?”
If you are facing a crunch, every cent (or %) counts. If you are one of those on the borderline case or very low income earner, 1% & 2% gst of sgd1000/- spending is actually = sgd10/- & sgd20/- (a tidy sum for those households who never get to earn more than sgd1000/- per month.
How many households are there in such category (below sgd1000/-) ?
TKL, Great suggestion, but LOL
If PAP adopt this pro-citizen policy, the Sun will rise from the west instead
You’d only pay more during recession to top up the billions they have lost from their stupid investment.
This is Singapore, this is PAP, this is wtf&^*$#%^ tax haven for the elites !
Wake up, and stop making suggestion which does nothing but a sense of false hope.
singaporedaddy (#23):
I don’t think it’s a good idea to reduce GST. Even if that were really possible, it may not be effective in alleviating hardship where its most needed; as these proposed cuts will only mean single digit reductions which will simply have a negligible effect on the cumulative cost savings.
I think the rationale of lowering GST is to increase spending and not so much of helping individuals cope with the recession, and thus fulfilling SM Goh’s desire of keeping the economy going.
Sure, ultimately it only moves a few cents in daily spendings and probably some dollars for larger spenders, but I think it will nonetheless have a psychological effect in encouraging people to spend more. What’s more, for those rich guys who are not as much affected by the financial crisis, the reduction will serve as real advantage for spending now than before or after, since it may be thousands of dollars that they save.
Of course, the main difficulty of this idea, as I see it, is how to translate the reduction in GST to a real reduction in prices among the vendors.
Here is the results of a survey conducted in my blog. It is based on 25 replies.
1. What do you think about the relief loan for Singaporeans to cover loss of earnings caused by reduction or a shorter work week?
It is a good idea 32.0%
It is worth a try 56.0%
It is not practical 12.0%
2. Is there a big risk that the relief loan can be abused?
It is a big risk that cannot be managed 12.0%
There is a risk, but it can be managed 84.0%
The risk is small, and worth taking 4.0%
3. If a business faces reduced demand, what is the best way for the business to cope?
retrench employees 4.0%
cut wages 36.0%
ask the employees to take no-pay leave 60.0%
4. Many countries have unemployment insurance. Is it time for Singapore to introduce such as scheme?
Most countries find it difficult to prevent abuses 20.0%
The abuses are small and can be managed 40.0%
It is better to start offering a relief loan along the lines proposed 40.0%
5. Should Goods & Services Tax (GST) be reduced temporarily to cope with the recession?
Yes – to encourage consumer spending 75.0%
No – people should reduced spending in hard times 12.5%
No – there are better ways to encourage spending 12.5%
6. How much should GST be reduced to encourage spending?
reduce by 7% replies: 8.0%
reduce by 4% replies: 48.0%
reduce by 2% replies: 20.0%
0% – do not reduce GST replies: 24.0%
7. How should the Government cope with a reduction in GST revenues?
Increase personal income tax 8.7%
Reduce government spending 30.4%
Draw down on past reserves 60.9%
8. What is the best way to encourage consumer spending?
Give cash handouts 29.2%
Give food and other coupons 16.7%
Reduce GST and charges 54.2%
Singaporedaddy
I have heard of cob web in econs. But I have never ever heard of how this may apply to explain the idea GST rises will have a marginal impact on the poor.
Another thing is GST prices do affect right across the board and I dont see how the poor could in any way be exempted.
Kelly
Btw I dont like your new way of writing. I prefer the old fluid style.
Just to add on further. One way to resolve the low purchasing power of the poor maybe to give them food vouchers or coupons. I used to study in Ireland and I do remember very clearly this was widely used in some parts to supplement the welfare system.
Wouldn’t this be a better idea when compared to cooperatives? Another thing is how do you expect a cooperative to work. As I believe most commercial products have a rsp (recommended selling price) and that means even if you want to reduce the price. You cannot.
Kelly
38) Kelly on December 26th, 2008 5.04 pm
NTUC, CC, CDC etc do give out food vouchers or coupons to help the poor.
NTUC Fairprice being a giant super market chain has a very big bargaining in getting discounts from suppliers. Besides, they can always get their own house-brand products that is much cheaper and RSP does not apply.
1) Provide Relief Loan
- Should be applicable only to those who are retrenched and not those who are gainfully employed but faced reduced earnings. Rationale being those who are retrenched would face the greater hardship of cash liquidity (assuming they have not saved for rainy days) and should be priority in the queue. Those who faced reduced earnings should instead review their own finances and spendings and respond accordingly to maintain prudent financial discipline.
- For those who are retrenched and facing hardship, the relief loan should be drawn in this manner:-
a) CPF account – to be repaid in installments/whole (with interest) from a period of six months after subject gets re-employed. Interest rate will be set by the CPF board to allow the authority to compensate for the sudden withdrawal of funds that might have been deployed elsewhere to earn the interest required. This should not be subjected to case by case review as long as the subject can prove he is unemployed(since it is his money to begin with).
b) Govt Relief Package – This should only be drawn if the subject does not have enough in the CPF. However, this should be on a case by case basis to prevent abuse (since this is the tax-payers’ money loan out and govt have the fiduciary duty to ensure accountability to the tax payer)
2) Helping business reduce operating expenses
Suggestion of encouraging no-pay leave monthly to reduce operating expenses is an excellent idea and is a sustainable option for the company. This has been proven to be workable in many countries(with strong union hand) and is a reflection of the company’s attitude towards its employees and also a form of CSR.
Like you mentioned, the govt should take the lead in this. Next in line would be the GLCs and the peer effect would be felt hopefully on the rest of the corporate world.
3) Reduce GST
Reducing GST will have its side-effect of:-
a) Govt have to find another avenue to increase its revenue and this means increase in other direct/indirect taxation measures aim to balance the budget (eg, it could be increase in ERP or Property tax or income tax). This means net net, people might still not be better off.
b) Reducing GST might not encourage spending as people are still wary of the downturn and there is no real incentive to spend.
c) The reduction in GST will not reduce consumer prices as businesses do not reduce prices correspondingly to the decrease in percentage of GST.
d) If the purpose of reducing GST is to help domestic consumption, then I would think the current govt implementation of GST rebates would achieve the purpose mentioned. Although imperfect, it has minimized issue mentioned in pt a and c. With pt b, that is entirely up to the businesses to innovate to entice consumers to spend.
Hi 40) Wil
a) CPF account – to be repaid in installments/whole (with interest)
the cpf is the citizen’s money to begin with. why do they need to pay interest when it is their own money they are withdrawing in the beginning. it is not a loan they are making. so if they want to implement this, it should allow installment without interest over the a few months after employment…i mean, where in the world do you pay interest for using/withdrawing your own money…
i mean, put in your hard-earned money into CPF and earn peanuts, then you are in hard need of cash, take out your money from CPF and you have to pay an interest for using your own $$$?anyway, not 100% of the money is been put into investment, a percentage has to be kept for reserve and i don’t think that will affect the current investment…until we have to pay to use our own $.
“Govt have to find another avenue to increase its revenue and this means increase in other direct/indirect taxation measures aim to balance the budget”
mmm…please….balance the budget? having surplus in the magnitude of billions, and you have to balance the budget? it is not as though the GST is use to ensure 0 deficit since there are always surplus
“With pt b, that is entirely up to the businesses to innovate to entice consumers to spend.”
well, it is not 100% up to the businesses to entice consumers…even if business came out with great promotions, but the consumer’s livelihood is not protected, do they still want to spend? so in short, the gahmen has to play a part too.
Dear all,
A reduction in GST is generally assumed that that it will lead to lower prices, which in turn, higher consumer spending. The higher consumer demand will keep companies to stay in business and to hire more workers (or at least maintain their current workforce.)
Based on the above assumption, I have 2 concerns:
1) Is GST the main factor in affecting the prices?
In the current economic situation, consumers are generally fearful that the economic downturn will affect their income or even be retrenched, therefore resulting in a lower spending pattern. If the GST is reduced to 3% or even to 0%, will consumers restore to their normal spending pattern? Can a GST reduction alone restore consumers’ confidence in spending?
2) Will a lower GST lead to a actual reduction in prices?
We often see a corresponding increase in prices of consumer goods along with an increase in crude oil. However, when oil prices fell by more than 50%, did we see a corresponding decrease in prices of consumer goods?
The acid test is whether we can see a bowl of noodles in a hawker centre reverting back to $1.50, if GST is reduced to 0%.
I would suggest that a significant reduction in rental costs, employer’s CPF contribution rates and related business costs imposed by the government will have a more powerful effect in reducing the cost of running a business. This will allow the business to sell their goods and services at a much lower price, which will contribute to both higher cash flow and consumer demand in the long run.
Well, GST does affect the price….but i think our forex is an even bigger factor. they are going to further weaken SGD, and if that is done, cost of import increase and you will see prices increase, no matter what is the GST.
Although the relief loan idea is a good one, I am afraid the govt will never approve it for one simple reason – it is borrowing against the CPF. In the last recession, the govt refused to even let people draw out a little of their CPF monies.
Although this relief loan idea has caveats (can only borrow a certain amount and has to be paid back to the CPF), the govt will be concerned about those who may never be able to pay back. What then about their retirement? This, I suspect, is the main worry for the govt. They’re reluctant to help people in retirement. All their policies in the last few years have been geared towards getting people to be “self-reliant” and to “work for as long as you can”.
What could work, however, is unemployment insurance and a minimum wage.
Andrew Loh
The current recession is going global mainly due to extremely deep drop in demands of wide ranges of goods from developed countries such as USA, Europe,Australia etc when their citizens’ purchasing power were wipe off when they lost huge junk of their savings on toxic investments and shares. Many were bankrupted and they were fearful to spend more on future money that is credit from bank loans. Thats why the world big and famous automobiles companies are in troubles now. So to increase domestic demands, may not have much impact on improving the orders of many companies here whose orders come from overseas. Any stimulated domestic demands only help to sustain the retail and services industries but not industries that prodruce electronics-related products, equipment, shipbuilding, manufacturing etc.
The surplus of manpower as a result of retrenchment maybe redeploy in other areas. The government has to take the lead in these such as the recent recruitments of 1,000 people by the home team. For those who are retrenched may be call up for full-time reservist training if they are still eligible until they found their next job. Government may set up more R&D centres for different research into future technologies to employ those who are retrenched. Some retrenched workers may be sent on overseas missions to study other countries’ situations and level of progress to learn the good things from them at the same time to network for future markets when the upturns come.
Therefore the government should increase spending to help the retrenched with the aim to be productive for the future.
Good Evening 36 & 37 Kelly,
As I said previously, we should avoid condensing poverty reduction ONLY to GST.
That’s really only the tip of the iceberg. And we should not be afraid to call a spade a spade.
The target IMHO is poverty reduction i.e how to prevent folk from falling into the vicious poverty cycle. The appropriate question therefore is; what is the most effective way to reduce poverty?
Kelly, why is cob web theory so pertinent? Firstly, although it is an agricultural model; the value it brings is, it provides plenty of vignettes into why giving direct hand out’s in the form of aid to those in need – don’t usually work – so to some extent this rubbishes the assumption that if we cut GST, all our problems will melt away like lemon drops.
The cob web theory also provides us with warnings that if we don’t handle this problem wisely and only choose to resolve it point wise, instead of right across the board, then we may find ourselves inadvertently in something very similar to the African aid paradox; the more you give; the more nothing happens.
So I really believe the cob web theory provides us with many insights as to how best to crack this nut. One valuable thing it gives us is strategies to short circuit the poverty cycle by promoting sustainable income earning opportunities to the poor. This can very well be stimulated by making loans available to people who are currently retrenched or will be soon. Or through other means.
IMHO the govt is slow to pick up the slack; they should just take a look at what’s really going on in the job market and learn to call a spade, a spade. Instead of spouting the same litany of useless advice such as retraining and reskilling; just accept the fact that some of these jobs are gone for good and no about of retraining is going to plug the hole and start by looking into ways and means to free up liquidity so that entrepreneurs can find a dignified and meaningful way to side skirt poverty. And at the same time kick start the local economy.
IMHO, no one at ministerial level wants to broach this issue by even mooting it as a strategic vision; all they seem to do is hold to their guns steadfastly and say tampering with CPF is out of the question; then I think, it is reasonable to expect nothing will ever happen. As for the banks they are tapped out.
The 1st division should really come in with 1st division ideas – as it is, I cannot understand why they are just sitting around rain dancing.
I cannot understand. I really cannot. This is the time to move decisively.
SD
aiyoyo
think in the 70s & 80s do we see prices so sky high?
with so many ELITEs and need to pay them with BIG package,
if the top management in an organization take lead to cut $alary,
think should see some effects very soon…
aiyoyo
The two suggestions by Tan Kin Lian are worthy of consideration by the Govt. Let the Govt consider the suggestions and to let the people know whether the suggestions are workable. If not they should come up with some ideas to help the people. So far only one of our leaders has put forward some suggestion.
SM Goh has asked the people to spend the way out of the recession if they have the means to do so. PM Lee said the idea might not work because of possible leakages. Whatever we spent will leak out of the country because we import most of the raw materials and food.Other leaders are surprising silent on helping the nation getting out of this situation.
One way, govt can help is to allow CPF fund for payment of rental accommodations subject to conditions, of course.
It makes sense to help the unemployed in Singapore.
In some countries you can go back to the land.
I am living in such a country and it has vast stretches of land.
My friends or my fellow villagers here are also very good at foraging and in fact it is built into their psychic.
We have some land in Singapore and there is a huge patch in front of my HDB block in Singapore and it gets flooded during the monsoon.
I want to grow some rice to show fellow Singaporeans what wet rice looks like.
But I know the garmen is one kind and do not like smart alecs and people with novel and new ideas and so I just keep quiet.
I practice what I preach. I grow sugar cane and I sell them to the local hawkers who crush them and sell one packet or ning tong for pun ning or just 14 Singaporean cents. No bluff.
I also dug a lake and I rear fish. For the past three years they were stolen by thieves.
I work too and for free. I sub-edit, report on news and do some press photography.
I live on very little and try to go local or go bush.
I hit on all these by accident.
My little message to my fellow Singaporeans is that there are other ways of solving the recession problem and one of them is my diy method. For Singaporeans who can and who are looking for a Brave New World they can use my method or an adaptation of mine. Just to stay in Singapore and to be struck by retrenchment, you just die slowly from starvation. Get out and look at the new brave worlds outside. Wait for the upturn, you will die too as this is going to be a bad one. All the other recessions are just Sunday school picnics.
Bonnie
Singapore is freaking exploitative.
I think the gist of the problem is anover paid government
who has been giving us all the bull shit and have failed to perform
Their talk down approach, refusal to admit mistakes
They are not demi gods or gods as we are overpaying them
just like those non performing CEOs who brought down the whole
economy like GM Chrsyler Fannie Mae Barclays Merrill Lych
The 60pct of the voting population still have not get their act together
it the same with the financial industry where the CEOs gets to keep
their multi million stock options for non performance
Same with the politburo here what miracle can they perform aside
from overtaxing us to upkeep their lifestyle
When it comes to a recession it the same of shit and jargon being said
Please spare me