Simplify taxation

A government needs to collect tax to pay for its expenses and social benefits. It should simplify the system of taxation and make it equitable. Those who earn more can pay higher taxes. The exemptions and reliefs should also be simplified.

Income should only be taxed once. As owners have to pay property tax, they should be exempted from paying income tax on the rental income. The rate of property tax can be adjusted for this loss of tax.

The worst type of taxation is GST. Apart from being inequitable and regressive, i.e. the lower income pay proportionately more tax, it imposes a heavy burden on the economy to account and collect the tax, and add to the cost of doing business. GST of 7% can be replaced by a flat rate of 4% deducted from the payroll and on investment income. The payroll tax of 4% should be paid by the employer and treated as the cost of doing business. This may be recovered from employees earning above a certain threshold.

Even a sales tax, used in USA, is better than a value added tax (like GST). The sales tax is simplier and less costly to administer. (The accounting firms love GST as it gives them business and profits.)

As we introduce new taxes and make changes, we must also take the opportunity to simplify and streamline our tax system. We need to take a bold step in this direction.

Some countries have introduced a flat rate tax system, for ease of administration. To relief the burden on the lower income, they provide generous deductions, so that the lower income do not need to pay tax. More details are provided here.

Tan Kin Lian