Friday, February 21, 2014

Singapore Budget 2014 tax increase on alcohol, tobacco and bets

Singapore Budget 2014 is announced by Tharman Shanmugaratnam, deputy prime minister and finance minister. It seems like Singapore Government is trying to balance increased social spending by increasing tax on tobacco and liquor while avoiding a tax hike for the wealthy.

Tobacco taxes will rise by 10 percent, liquor taxes will rise by 25 percent across the board and the betting duty rates will rise to 25-30 percent of gross bets at Singapore Pools, effective immediately.

It seems "fair" for the man on the street to increase tax on "wealthy" and unfair to increase tax on something most people uses like "liquor" or Singapore Pool bets (not everyone drinks but almost everyone bets in Singapore). You can see this sentiment now in the twitter or Facebook where many complain about these increased "sin" taxes.

In reality it is not fair to increase tax on "wealthy" and it is not unfair to increase tax on "liquor" or "tobacco". When was the last time you have invested in a business? If you are the average man on the street, you have probably never done something like that. But if you ask this to a group of wealthy people, you will get some "dates". In a society where there is some rule of law, some wealthy people are those arrogant parasites living on others shoulders but vast majority of wealthy people are entrepreneurs investing in businesses. You tax them more, they will have less money to invest into businesses. This will in turn create less wealth in the future.

On the other hand, tax increases on liquor, tobacco and bets are "great" because these are avoidable taxes. If no one smokes, drinks alcohol or bet in an economy, nothing will happen to that economy. If you do not smoke, drink liquor and bet, nothing will happen to you. Indeed, if you do not smoke and drink a lot, it will be better for you. Only people in these businesses will be effected but since the money will flow to other businesses, they will also eventually find job somewhere.

I believe taxes should be low for everything but if they will increase for something, this should be an unproductive thing like cigarette or alcohol, not productive being like an average wealthy person.

But if no one invests in an economy or people invest less, that economy will not have wealth.

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