Drawbacks to raising GST

A receipt indicating the cost of GST.
A receipt indicating the cost of GST.PHOTO: THE BUSINESS TIMES

The goods and services tax is set to rise to 9 per cent between 2021 and 2025.

Raising taxes means higher prices for consumer goods, including necessities such as rice, salt and sugar. This will adversely affect the spending power of lower-income residents. They will have less disposable income for other expenditures and may become unhappy.

High tax rates can negatively affect economic growth. The cost of production will increase for firms, making them less willing and able to invest in their businesses. They may even cut back on production, resulting in unemployment.

Moreover, the increased cost will deter foreign firms from investing in Singapore, resulting in the loss of job opportunities.

To combat inequality, progressive taxes can be used instead, so the rich get taxed instead of the poor.

Marcus Aw Chen Feng, 21

Undergraduate Year 1

A version of this article appeared in the print edition of The Straits Times on July 08, 2019, with the headline 'Drawbacks to raising GST'. Print Edition | Subscribe