Rencently, I’m sure you all have heard the GST in Singapore is increasing 2% from 5% to 7% in this July.GST was introduced in Singapore on April 1, 1994 at 3%, but later increased to 4% on 1 January 2003 and 5% on 1 January 2004. It is raised again to 7% on 1 July 2007.
Singapore’s GST is a broad-based consumption tax levied on import of goods, as well as nearly all supplies of goods and services. The only exemptions are for the sales and leases of residential properties and most financial services. Export of goods and international services are zero-rated.
The prime minister of Singapore Lee Hsien loong cites 3 reasons for the increase:
Because he needs to finance the “enhanced social safety nets needed to help the lower income group”, which means that “government spending will have to go up”. He emphasizes that “the offset package would more than counter the rise in GST”.
Because Singapore’s economy is doing so well, so it is “natural” that we follow other countries and increase our GST accordingly.
Because we intend to cut our corporate tax.
Reference:
http://kitana.wordpress.com/2006/11/14/gst-to-increase-to-7/
http://www.channelnewsasia.com/stories/singaporelocalnews/view/241058/1/.html

Disadvantages
First of all,the point is means that most of the 2% increase will put into account to help the lower income group, such as older people or a family that income is less than 1,600 per month. It is good if the government helps the disadvantaged minority, in other hand, there are some other not very low income party that cannot afford the increase of the 2% GST, for example, Mr. Chou is a cleaner whose salary is $800 per month, before the GST haven’t increase, he can live a simple live. Afterwards, when the GST is increased, he founds that some daily commocity is more expensive than before, so he has to use less shampoo every times, that will make him buy less shampoo. That is because when a increase in GST, or lets say an increase in price, there will be a decrease in demand.
Lets conculate the increase in percentage. Before it is 5% tax rate, now increase 2%, which is 40% of 5%, let’s say theres a family that should pay $1,000 GST every year, but when the GST is increased, the family have to pay more $400 every year, it’s not a small dish.
Although the increasing GST is not so good for some citizen in Singapore, but some of the businesser get the benefit of the situation. Theres always compitition in the economic market, for example, Chinese resterant. if some of the owner of the resterant decide to increase the price of his foods, what happen to his customer? They will run out to the one who do not increase the foods’ price. It’s a very good opptunity to attract new customer and should be success.
Another example , the shop that sell electric equipments. The owner of the shop will sell less goods than before , and only sells the goods which is popular and easy to sell it out. In this situation, the shop owner is making a decision that helps him to get far away from loss, or get a little profit accouding the “play save” rule.
Reference:
http://www.epochtimes.com/b5/6/11/24/n1533003.htm

Advantages.
Increase the GST theres also some advantages.
Firstly, when the GST increased, it will build up the area compitition between Sigapore and other countrys;
Secondly, the increase in GST, that present there is a good view in Singapore’s future, that will attact foreign organisation come to Singapore and do some investment, afterwards, make profits for both of them. Nowadays, the reason which attract foreigner company come to Singapore an invest, it is because the base-equipment in Singapore is convinient, but the transport fees are very hard to afford. To increase the GST will get money from the firm which can get a plentiful profit, and use the money to help the poor profit company, thus, get the income balance.
Thirdly, when the GST is increase, it will stimulate the inflation of Singapore, the value of Sigapore dollar should be increase, that will make a profit with the money changer when someone change another currentcy to Singaopore dollar.
Lastly, when the government get the extra money from citizen, it could be used of parts of protection fees. The terrorist attact is arrogant in modern times, the money that the government get can put into the investment of the security of Singapore.
Reference:
http://www.epochtimes.com/b5/6/11/24/n1533003.htm
http://www.aladding.com/newsDetail.cfm?lv=big5&postid=395937
Another change in Singapore economy is the rate of accumulate fund that the employer pay for their employee. The rate of the fund is increase from 13% to 14.5%. For the employees, it is a good news, for the employers, it is not a bad news, the situation will not bring a bad effect to the employers. Because this year the salary in Singapore is increasing, after July 2007, the increase rate of salary will decrease when the accumulate fund increase, it means that the employees bring less money home, but the total in the accumulate account is more than before, so the total cost of the employers are still the same.
Theres someone over 45 years old but salary is below $1,000 per month, and someone less than 35 years old but salary is less than $1,500 per month, their employers are paying less accumulate fund for them, of course the emplyers are pleased to hire people who has the lower income level. Does it means the lower income level party have less money in their accumulate account?
It is not, the account should be more money than before. This is when they are working in their job, the government pay them allowance, they put the allowance to the account of the emplyees. Some part of the allowance is pay by cash. In the other hand, the lower income family might have a heavy burden when the GST increase.
The increase 1.5% of accumulate fund will save 1% in the common account, and 0.5% of the fund will save in the healthy account.
The financial budget of Singapore is, to help lower income level people to get in with the situation of the international economy stress and compitition, and try the best to improve the competition ability for the future. It will come true.
Reference:
http://www.zaobao.com/special/singapore/pages3/budget2007070216a.html
http://www.nanyangpost.com/Business/2007/0216/content_821.htm







Reference webpage:
http://kitana.wordpress.com/2006/11/14/gst-to-increase-to-7/
http://www.channelnewsasia.com/stories/singaporelocalnews/view/241058/1/.html
http://www.epochtimes.com/b5/6/11/24/n1533003.htm
http://www.aladding.com/newsDetail.cfm?lv=big5&postid=395937
http://www.zaobao.com/special/singapore/pages3/budget2007070216a.html
http://www.nanyangpost.com/Business/2007/0216/content_821.htm

Reference book

N. Gregory Mankiw “Principles of Ecomomics” 4th edition, Thomson high education

Allan Layton, Tim Robinson, Irvin B. Tucker “Economics for Today” 2nd edition, Thomson high education