Three more reasons for not giving goods and services tax a chance

WHEN YOU ARE treated to a rare feast, you tuck in. Pardon me for having a go three days in a row at the government's proposal for a goods and services tax, but there is so much for a columnist to feed on here that I just cannot resist.

I shall keep it today to three facets of GST, which I think need closer examination. The first of these is one of the reasons our government gave for introducing this new tax, to wit, that governments everywhere are reducing their profits and personal income tax rates so that Hong Kong no longer stands out as quite so low a tax regime as it previously did.

Singapore's corporate profits tax rate, for instance, has been reduced to 20 per cent from 26 per cent over the past five years while Hong Kong's has risen slightly to 17.5 per cent. Singapore's top personal income tax rate has also been reduced to 21 per cent from 28 per cent over the period while Hong Kong's has edged up to 16 per cent.

The consultation paper on GST then presents it as a given truth that we must have a lower tax regime than anyone else to attract business and thus we must find a way of supplanting our profit and income taxes with some other form of revenue. Presto, GST.

But let us put this into perspective. In the first place, we still score very low on standard tax rates. Second, we have no capital gains tax, no dividend withholding tax and no interest withholding tax. Put all these in the mix and by comparison with other countries, we come out much better yet.

And when comparing with Singapore, specifically, let us remember that its Central Provident Fund takes a 40 per cent bite of wages and salaries, taking both employer and employee contributions. Our Mandatory Provident Fund takes only a 10 per cent bite. We also have no GST yet. Singapore does.