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December 27, 2008

Free public transport

I read about the idea of increasing GST in order to offer free public transport to Singaporeans on phishie’s blog. Not really sure where he read that from since there’s no reference.

While most of his reactions are psychological and behavioral (what beeping of gantries, sound of doors and students taking space on free trains), I’m more concerned with the effects of such a policy. Firstly, how much GST increase will we need to actually cover the costs of transport operators? What if we actually need to change GST to 50% in order to cover the costs? Then this wouldn’t be feasible at all.

So I did a quick search and found the following.

SBSTransit operating costs (2007): $616,686,000
SMRT operating costs (2007): $625,600,000
Total “public transport” operating costs (2007): $1,242,286,000
   
GST revenue estimate for FY2007 (at 7%): $4,850,000,000
Total Goods and Services taxed: $69,285,714,286
Total GST needed to cover “public transport”: $6,092,286,000
New GST: 8.79%

Of course these are estimates and do not include all costs such as future expansion costs that need to be borne by this scheme. Their dates corresponding to these figures are not properly aligned as well. Also, with the opening of the circle line, it means such operating costs will increase significantly. Therefore it is possible that the GST % can move up another 1-2% in the next 2 years.

But let’s say we also have a corresponding increase in GST revenue due to increased spending over this period, and we manage to keep the GST at 9%. Whether it benefits an individual will depend on two main factors: public transport expenditure vs GST taxable expenditure. A Singaporean might spend $2 per trip to get to work currently, and therefore spends about $100 per month. With the new scheme, he pays $0. For him/her to benefit, his/her increase in GST paid should not exceed $100. Since the increase is 2%, the person’s GST taxable expenditure must be kept below $5,000.

Sounds perfectly reasonable, as most people should be spending below that amount per month (earning below that?). And if another person has a short-trip, direct-bus and costs him/her $50 in transport per month currently, a spending of $2,500 per month will break even with this scheme.

Secondly, the beneficiaries of these schemes are COMMUTERS. So if a person do not take public transport (e.g. walk to work), they will be totally hit by the GST hike. In fact it does not make it better even if they change their job to commuting-based, since commuting will be free. So how many lower income people currently have jobs that just require them to walk from their home? Or they work from home? How can they be assisted?

Maybe our Department of Statistics have the numbers for these (which I might try to find if I have this urge again). Maybe it’s worth for the majority of people (who are commuters) to bear the increase than to transfer them to these non-commuters. Or if the correlation between income and number of people taking public transport is a normal distribution, why not use an increase of 0.5% in income tax to pay for public transport?

This response comes from a person with zero economics knowledge or public policy background. Views expressed are entirely personal. Critiques welcome.

3 Responses to “Free public transport”

  1. eddie said:

    lol
    Well, you got the stats right. The proposed GST increase from the idea was 8.5%.

  2. eddie said:

    =x set to 8.5% rather.

  3. stoopidboi said:

    well… could have saved me some work if i got the link earlier – the numbers i’m looking for were in just one sentence in the referenced article.

    But i’m still amazed by how close my estimates are to the figures given ($1.2b operating costs and 1.5% increase). i’m tempted to praise the availability of information in the World Wide Web, but it’s strange cos i didn’t find your original article when i tried.

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