Sunday, January 31, 2010
Personal savings
This writer wants to take care of his own money, rather than let the Government decide on how the money is to be spent.
Cash loan - 16% effective rate
Dear Mr. Tan,
Financial Institution: (bank)
Amount of loan: $1500
Purpose of loan: Personal use
Number of repayments: 12
Amount of monthly repayment: $136.10
REPLY
You are paying a total interest of $133.20. This works out to 8.9% of the amount that you have borrowed. However, as you have to make monthly repayment, the outstanding balance of the loan reduces monthly. Based on the average amount that has been borrowed, the effective interest rate is 16% per annum.
The bank pays 0.5% to its customers on their savings. They charge 16% on loans given to other customers, giving a hefty margin to make a good profit for the bank.
Financial Institution: (bank)
Amount of loan: $1500
Purpose of loan: Personal use
Number of repayments: 12
Amount of monthly repayment: $136.10
REPLY
You are paying a total interest of $133.20. This works out to 8.9% of the amount that you have borrowed. However, as you have to make monthly repayment, the outstanding balance of the loan reduces monthly. Based on the average amount that has been borrowed, the effective interest rate is 16% per annum.
The bank pays 0.5% to its customers on their savings. They charge 16% on loans given to other customers, giving a hefty margin to make a good profit for the bank.
Creating productive employment
Someone said that the selling of financial products, e.g. insurance, properties and investments, is necessary to create employment. Unfortunately, these activities are unproductive. They do not improve the outcome for the economy or lead to a better life for the people. They may create asset bubbles, which make some people rich. But, at a future date, the asset bubble will burst and many people will become poorer.
What are productive work? Here are my views:
- build houses for people to live in
- build roads and public transport
- more teachers to give proper education to the young
- more doctors, nurses and carers to take care of the sick and the weak
- more policeman to ensure security, law and order and reduce crime (including cheating)
- more people to work in restaurants and food courts
- more artists to provide leisure, culture, art, entertainment
- fewer bankers to manage the savings and investments for the economy
- farmers, fishermen, factory workers, retailers
We still need bankers, but we do not need an over-sized financial sector that is based on speculation and trading.
We also need to change the competitive system, and ensure that the available work is distributed more fairly. It is better to have more people working (for lesser hours), rather than fewer people working (for longer hours) while a high percentage is unemployed. We also need more people to have sufficient income, so that they can spend and create useful employment for others.
If people have more time and financial security, they are able to send their time on family, friend, art, culture and religion. They will then be willing to raise children for the future generation - a KPI that Singapore has fared poorly.
Tan Kin Lian
What are productive work? Here are my views:
- build houses for people to live in
- build roads and public transport
- more teachers to give proper education to the young
- more doctors, nurses and carers to take care of the sick and the weak
- more policeman to ensure security, law and order and reduce crime (including cheating)
- more people to work in restaurants and food courts
- more artists to provide leisure, culture, art, entertainment
- fewer bankers to manage the savings and investments for the economy
- farmers, fishermen, factory workers, retailers
We still need bankers, but we do not need an over-sized financial sector that is based on speculation and trading.
We also need to change the competitive system, and ensure that the available work is distributed more fairly. It is better to have more people working (for lesser hours), rather than fewer people working (for longer hours) while a high percentage is unemployed. We also need more people to have sufficient income, so that they can spend and create useful employment for others.
If people have more time and financial security, they are able to send their time on family, friend, art, culture and religion. They will then be willing to raise children for the future generation - a KPI that Singapore has fared poorly.
Tan Kin Lian
GST - who benefits and who loses?
Who benefits from GST:
- accountants, lawyers, civil servants, as more jobs and business are created for this wasteful work
- big businesses and high income earners, as GST is accompanied by lower income tax (personal and corporate)
Who loses from GST?
- consumers, as GST adds to the cost of living through wasteful and unproductive work
- lower income people, who has to pay GST and do not benefit from lower income tax
- the economy, as the increased cost of doing business reduces competitiveness.
Someone told me that many businesses that were engaged in entreport trade decided to move their activities outside of Singapore, after the implementation of GST. I do not understand why, as there is no GST involved in exports. Perhaps, it is due to the fact that compliance with GST adds to the cost of doing business.
I hope that the Finance Ministry can carry out a review on GST in Singapore - is it really necessary or is it wasteful (as I have claimed)?
Tan Kin Lian
- accountants, lawyers, civil servants, as more jobs and business are created for this wasteful work
- big businesses and high income earners, as GST is accompanied by lower income tax (personal and corporate)
Who loses from GST?
- consumers, as GST adds to the cost of living through wasteful and unproductive work
- lower income people, who has to pay GST and do not benefit from lower income tax
- the economy, as the increased cost of doing business reduces competitiveness.
Someone told me that many businesses that were engaged in entreport trade decided to move their activities outside of Singapore, after the implementation of GST. I do not understand why, as there is no GST involved in exports. Perhaps, it is due to the fact that compliance with GST adds to the cost of doing business.
I hope that the Finance Ministry can carry out a review on GST in Singapore - is it really necessary or is it wasteful (as I have claimed)?
Tan Kin Lian
GST is wasteful
Question: What is worse than income tax?
Answer: Income tax and GST.
It is wasteful for a country to have both income tax and GST. It lays a heavy burden on businesses to keep two sets of accounting records to report their earnings (for corporate tax) and for GST. This adds to the cost and complexity of doing business. It is wasteful for a country to collect tax (GST) on every item of transaction every day.
IRAS claims that GST is simple. That is not correct. You can read the GST instructions in IRAS website to know that it has many rules that have to be followed to prepare a GST return - similar to the complex rules needed to prepare income tax returns.
Critics argue that GST is unfair to the lower income group. I agree, especially as they do not earn enough to feed a family. To top it up, GST is also an inefficient tax, adding unnecessary cost to business, that has to be passed to consumers.
I am aware that any Government needs to collect enough tax revenue to fund its operations and take care of the country. Tax is necessary and important. But, we need to have more efficient and fair ways to collect tax. GST is one of the worst methods that has been devised, especially as it is implemented as an additional layer on top of income tax (personal and corporate).
Tan Kin lian
Answer: Income tax and GST.
It is wasteful for a country to have both income tax and GST. It lays a heavy burden on businesses to keep two sets of accounting records to report their earnings (for corporate tax) and for GST. This adds to the cost and complexity of doing business. It is wasteful for a country to collect tax (GST) on every item of transaction every day.
IRAS claims that GST is simple. That is not correct. You can read the GST instructions in IRAS website to know that it has many rules that have to be followed to prepare a GST return - similar to the complex rules needed to prepare income tax returns.
Critics argue that GST is unfair to the lower income group. I agree, especially as they do not earn enough to feed a family. To top it up, GST is also an inefficient tax, adding unnecessary cost to business, that has to be passed to consumers.
I am aware that any Government needs to collect enough tax revenue to fund its operations and take care of the country. Tax is necessary and important. But, we need to have more efficient and fair ways to collect tax. GST is one of the worst methods that has been devised, especially as it is implemented as an additional layer on top of income tax (personal and corporate).
Tan Kin lian
Character building
Singapore Management University has a statement, “Character building, an integral aspect of the SMU education, aims to build the values of ethics and social responsibility.”
Character
Character is the aggregate of features and traits that form the individual nature of a person. It refers to the moral or ethical quality of a person. They include qualities of honesty, courage, integrity.
Ethics
Ethics, also known as moral philosophy, seeks to address questions about morality, that is, about concepts of good and bad, right and wrong, justice and virtue.
Social Responsibility
Social responsibility is a responsibility of government, business or individuals towards society at large. There is the responsibility to avoid breaking the law and also to act proactively to benefit society.
My Personal Values
I wish to share five values that define my personal character. They are:
Honesty
Fairness
Courage
Positive
Public Service.
I shall write more about these values in subsequent postings.
Character
Character is the aggregate of features and traits that form the individual nature of a person. It refers to the moral or ethical quality of a person. They include qualities of honesty, courage, integrity.
Ethics
Ethics, also known as moral philosophy, seeks to address questions about morality, that is, about concepts of good and bad, right and wrong, justice and virtue.
Social Responsibility
Social responsibility is a responsibility of government, business or individuals towards society at large. There is the responsibility to avoid breaking the law and also to act proactively to benefit society.
My Personal Values
I wish to share five values that define my personal character. They are:
Honesty
Fairness
Courage
Positive
Public Service.
I shall write more about these values in subsequent postings.
Improve your negotiating power
Someone said that the car salesman charges a higher price if you pay by cash and a lower price if you take a loan to buy a car. This is the ruse used by salesman.
The consumer should exercise your negotiating power. If the salesman wants to charge a higher price for paying cash, go and look for another car dealer. There are many salesmen who are hungry to get an order. Do not allow the salesman to force you to take a loan and pay interest, when you have the cash to pay outright.
Before you buy any product, always shop around and get a few quotes. You will have a stronger negotiating power.
Tan Kin Lian
The consumer should exercise your negotiating power. If the salesman wants to charge a higher price for paying cash, go and look for another car dealer. There are many salesmen who are hungry to get an order. Do not allow the salesman to force you to take a loan and pay interest, when you have the cash to pay outright.
Before you buy any product, always shop around and get a few quotes. You will have a stronger negotiating power.
Tan Kin Lian
Practical Guide on Financial Planning - book available now
My book, Practical Guide on Financial Planning, will be in the major bookstores by 15 February or earlier. The retail price is $12.
This book is written for the ordinary consumers, so it is easy to understand. It gives tip on saving and investment. More importantly, it advises consumers to avoid financial products that can take away two years of their savings - amounting to several thousand dollars. Invest $12 and 4 hours and have a better financial future. I have just read the printed book, and it looks better than I had earlier expected.
It is available now for purchase from Internet Shop (www.easysearch.sg)
Tan Kin Lian
This book is written for the ordinary consumers, so it is easy to understand. It gives tip on saving and investment. More importantly, it advises consumers to avoid financial products that can take away two years of their savings - amounting to several thousand dollars. Invest $12 and 4 hours and have a better financial future. I have just read the printed book, and it looks better than I had earlier expected.
It is available now for purchase from Internet Shop (www.easysearch.sg)
Tan Kin Lian
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