A Practical Approach to Balancing the GST Burden

One way of making GST less regressive would be to simply make it progressive along the lines of income tax. (As an amusing side effect, children would be exposed to how to calculate income taxes.)

Consider the following (consumption) tax rate scale:

• First $5 at 4.0% (Up to $5; GST up to $0.20)
• Next $5 at 4.5% (Up to $10; GST up to $0.43)
• Next $5 at 5.0% (Up to $15; GST up to $0.68)
• Next $5 at 5.5% (Up to $20; GST up to $0.95)
• Next $30 at 6.0% (Up to $50; GST up to $2.75)
• Next $50 at 6.5% (Up to $100; GST up to $6.00)
• Next $400 at 7.0% (Up to $500; GST up to $34.00)
• Next $500 at 7.5% (Up to $1000; GST up to $71.50)
• Next $1000 at 8.0% (Up to $2000; GST up to $151.50)
• Next $1000 at 8.5% (Up to $3000; GST up to $236.50)
• Next $2000 at 9.0% (Up to $5000; GST up to $416.50)
• Next $5000 at 9.5% (Up to $10000; GST up to $891.50)
• Item value above $10000 taxed at 10.0%

Here are some worked examples:

• Fairprice Kaya (400g) costing $2.40: $2.40 at 4.0%, GST $0.10.
• McSpicy Double Meal (Upsized) costing $8.80: $0.20 on first $5, remaining $3.80 at 4.5%, GST $0.37 (Effective rate: 4.22%).
• Dell UltraSharp U2412M 24" LED Widescreen Monitor costing $299.00: $6.00 on first $100, remaining $199.00 at 7.0%, GST $19.93 (Effective rate: 6.67%).
• Kate Spade Signature Spade costing $429.00: $6.00 on first $100, remaining $329.00 at 7.0%, GST $29.03 (Effective rate: 6.77%).
• XFX Radeon 7970 Black Edition 3GB costing $938.00: $34.00 on first $500, remaining $438.00 at 7.5%, GST $66.85 (Effective rate: 7.13%).
• Qatar Airways Economy SG to Paris, Rome to SG (incl. taxes) costing $1030.30: $71.50 on first $1000, remaining $30.30 at 8.0%, GST $73.92 (Effective rate: 7.17%).
• iPad with Wi-Fi + 4G 64GB (3rd generation) costing $1088.00: $71.50 on first $1000, remaining $88.00 at 8.0%, GST $78.54 (Effective rate: 7.22%).
• Hermes HER Bag costing $1690.00: $71.50 on first $1000, remaining $690.00 at 8.0%, GST $126.70 (Effective rate: 7.50%).
• Hermes Picotin Bougainviller costing $3690.00: $236.50 on first $3000, remaining $690.00 at 9.0%, GST $298.60 (Effective rate: 8.09%).
• Toyota Prius 1.8 costing $170k: $891.50 on first $10k, remaining $160k at 10.0%, GST $16891.50 (Effective rate: 9.94%).

Note: Effective GST only hits 7% for items costing more than $700.

In this tax regime, it makes sense to levy taxes at the "item level", meaning that a multi-item purchase would have tax assessed on items individually before everything is aggregated to give the final payment amount. This would enable sticker prices to continue to make sense, and would prevent perverse incentives to perform "purchase splitting".