the direct effect of GST increase is felt the most by the poor because they spend the largest part of their income on necessities.
but the govt says it will use the GST money to pay for safety nets for the poor. so i guess what it means is that the ones that will be most squeezed at the end of the day are the middle-income folks.
well said!
in a hypothetical country X, of population 4.49million and gdp usd28,600.
the garmen of country X recently increased the VAT by 2%.
assuming a small family of total income $2000 and they spend, say $1000 on food and necessities, it means $70 on VAT per month versus current $50 and therefore a a difference of $20x12=$240/- per year.
assuming 10% of the population is 'lower income' (hypothetically speaking). then it needs an extra budget of 4.49million x 10% x $240 = $107.76 mio.
assuming this is borned by the whole population, which is = $24 per capita per year.
GDP per capita is = $44,330
let's say all spend half the GDP per capita, =$22,165 (conservatively speaking. consumption per year), but some will spend more and some will spend less.
$24/$22,165 = 0.108%
if the population spend more of the gdp, then the percentage will be even lower.
yet gst is increased by 2%!! (nearly 20 times the needed budget).
can deduce that 'garmen X' may give $22,165 x 2% per year to offset the lower income group?
don't think so..
this is only simple math, an approximation that is simple enough for the common man to understand simple economics.
pls correct if there is a better way to understand the impact and the implications.
