REITs Should Not Maximise Profits?

31 May 2014

Mr Paul Chan Poh Hoi ("REITs Should Not Maximise Profits At Expense Of SMEs" TODAY 31 May 2014) fears that real estate investment trusts ("REITs") are raising rentals beyond what small and medium enterprises ("SMEs") can bear.

While conceding that SMEs compete for space and location to do business in a free-market society, he postulates that the Government, conglomerates and REITs should refrain from any profit maximisation approach at the expense of SMEs.

 

I wonder what Mr Chan thinks the raison d'être of REITs, or for that matter, any for-profit business should be.

 

Should REITs leave some money on the table for SMEs because of the tax exempt status that the Ministry of Finance has granted on distributions by REITs to individuals?

 

How many SMEs selling products and services to the man in the street refrain from charging what they think their customers will pay, or more?

CPF LIFE Payouts To Keep Pace With Inflation

29 May 2014

When CPF LIFE started in 2009, some people realised that its payouts over a period stretching three or four decades should be indexed to inflation, either actual or approximately. Their suggestions fell on deaf ears.

Now the Government is studying how to improve CPF Life so that payouts keep pace with cost of living ("Parliament: PM Lee Says Aim Is For CPF LIFE Payouts To Keep Pace With Inflation" The Straits Times 28 May 2014 5:09 pm).

CPF LIFE for each age cohort is supposed to be a fully funded entity. Where will the money to increase its payouts to keep pace with inflation come from?

The alternative — in which the front end payments are reduced so that the future payments may be higher (in nominal terms) — is unlikely and politically impossible, given that the quantum of the payouts is virtually cast in stone.

The Government needs to tread carefully. If the higher payouts in the future are funded by tax payers, the arrangement will be structurally inflexible and will be a burden on future generations.

GST — Paying The Comptroller Before Receiving Payment

28 May 2014

Mr Manmohan Singh wrote ("Payment Woes Of Cash-Strapped GST-Registered Businesses" The Straits Times 28 May 2014):

[A business that is registered for Goods and Services Tax ("GST") is] effectively an agent of the Government to collect GST from its customers. It has to submit the returns and tax due within one month from the end of each [calendar quarter].

When a customer delays payment, the burden then rests solely on the GST-registered business to pay the tax. If the business is cash-strapped and unable to pay, the consequences can be serious.

The Comptroller of GST can appoint any bank where the business maintains an account as an agent to pay the GST due. When this occurs, the bank account of the business is effectively "frozen" and all payments to employees and suppliers cannot be made.

The Ministry of Finance should clarify whether a GST-registered business can enforce payment of the tax it is merely collecting on behalf of the Government, and the options available should customers delay payment."

It is one thing if a GST-registered business has collected the GST and does not pay the Comptroller by the due date. It is quite another if a GST-registered business has yet to collect, or has difficulty collecting, the GST but has to pay the Comptroller in advance of receiving payment from his customers.

While the Comptroller should collect all GST due to the Government, requiring businesses to pay GST that is notionally, but not actually, collected puts an unfair burden on businesses.

MediShield's Premiums Far Exceed Claims Payouts

28 May 2014

Non-Constituency Member of Parliament Gerald Giam said in Parliament on 27 May:

"The MediShield Fund had a capital adequacy ratio of 161 per cent in 2012, which is more than 40 per cent higher than what the Monetary Authority of Singapore expects commercial insurance funds to hold. MediShield's loss ratio averaged just 63 per cent from 2001 to 2012. This means that it is collecting a lot more in premiums than it is paying out in claims."

Hospitalisation insurance such as MediShield (and its successor MediShield Life) should operate on the basis of pooling risks for the current, or at most two, financial years.

 

MediShield should not be collecting premiums far in excess of claims year after year.

 

If MediShield's capital is found inadequate because of a widespread outbreak of an infectious disease such as SARS or MERS, the Government should provide temporary financial support; MediShield can adjust premiums upwards subsequently to rebuild its capital and repay the Government.

Asia In 20 Years

26 May 2014

In a keynote address on Scenarios For Asia In The Next 20 Years at the 20th Nikkei International Conference in Tokyo, Prime Minister Lee Hsien Loong said that the next two decades presented a historic opportunity for Asia, if the dominant regional powers — the United States, China and Japan — could work together peacefully. But there were uncertainties and challenges that could lead to tensions and disputes.

I was disappointed that Mr Lee took the current situation and extrapolated it two decades forward. Looking back 20 years ago, how many people would have forecast the state of the region now? Extrapolating is something that many analysts do, we don't need anyone to do for us something that we are capable of doing ourselves. And even when extrapolating and presenting different scenarios, good analysts should assign probabilities for each of the scenarios.

Singapore Digest 18 May 2014

OBLIVIOUS, REALLY?
Educate Children and Curb Sale of Spray Paint to Them TODAY 13 May 2014

A reader saw young children spray painting on public premises, oblivious to the damage caused by, and the consequences of, their inconsiderate action.

It is doubtful whether those children were really oblivious to the consequences of their actions. They were spray painting in public because their parents likely forbade them to spray paint at home or immediately outside their home.