What's going on, really? One and a half year to discover a mistake and unconventional adjustment for the mistake......
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Jan 3, 2006
Iras says there's error in GST figures for 2004
It admits collecting $208m less and makes adjustment to 2005 figure
By Narendra Aggarwal
Economics Correspondent
EVEN the taxman gets it wrong sometimes. The Government has admitted making an 'error' in its goods and services tax (GST) figures for 2004. It collected $208 million less than stated originally.
The error came to light after a report was printed in The Straits Times last week on data released by the Inland Revenue Authority of Singapore (Iras) for the first 10 months of last year.
The Iras data showed that GST collection shrank 5.1 per cent compared to the same period in 2004. This, despite takings from income tax surging 10.2 per cent. Higher incomes should have led to more consumer spending, which usually translates to more GST raked in.
In an e-mail to The Straits Times, Iras said it had overstated 2004's figures: 'The correct amount should have been $730.43 million instead of $938.53 million. We have corrected the GST collection figure for 2004 and informed the Department of Statistics (DOS) accordingly.'
It did not say how the mistake occurred, or why it has taken 1 1/2 years to release the updated figure.
Going by the updated GST collection data, instead of a 5.1 per cent drop last year, takings actually rose 11.2 per cent.
And so instead of the Government's overall tax revenue for last year posting a modest increase of 2.4 per cent over that for 2004 - leaving little room for giveaways in the upcoming Budget - it turns out there was a healthy 5.1 per cent growth.
At the time, economists had said the modest 2.4 per cent increase in the Government's overall tax revenue 'did not fit in' with the economic recovery story.
Despite the new figures, economists have new cause for confusion - the way Iras has moved to correct the error in its latest data.
While the overstated $208 million has 'disappeared' from the May 2004 GST collection, the figure seems to have 'reappeared' in March last year.
The result is a neat squaring off, with the 'error' having zero impact on Iras' GST collections in its April 2004 to March 2005 financial year.
As Iras put it, an 'adjustment for the error of $208.1 million that occurred in May 2004' has now been made by revising the previously reported March 2005 GST collection figures upwards by an equivalent amount.
However, Dr Choy Keen Meng of the Economics Department of the National University of Singapore said that adding the same amount to the March 2005 GST collections might amount to over-reporting the revenue for the year.
He said if the same amount is now being adjusted under March 2005, the question that arises is: 'Was the GST collected or not?'
Iras has told The Straits Times that the $200 million in GST was not collected.
Dr Choy branded Iras' 'adjustment' as 'unconventional'. 'If there was an error in reporting in May 2004, and it has been corrected now, that should have been the end of the story.'
Another senior economist was puzzled not just by the error, but also by how it went unnoticed for so long.
'I wonder how they made the mistake,' said Mr David Cohen at Action Economics.
'That GST collections had gone down was not consistent with a growing economy. But they deserve the benefit of doubt. They are honest bureaucrats. If it were another country, one would wonder what is going on.'
He thinks the 11 per cent growth in GST revenue last year would be more consistent with local spending and record tourist arrivals.
'There is a correlation between growth in tax revenue and economic growth, so the new figure of a 5.1 per cent increase in the Government's tax revenue is a good proxy for gross domestic product growth,' he added.
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We commoners are not even a peanut's skin...so...what do you expect?