Tax Goods not Subsidise To Eliminate Poverty and Reduce Waste

Subsidies on any consumer item has the following effects:

1. benefit the consumers who can afford to consume more, which are the rich and their businesses;

2. encourage buying unnecessarily because the goods are cheap to the rich who can buy a lot and hoard for reserves, unlike the poor;

3. discourage production because it is cheaper to buy than compete with the cheaper prices of subsidises goods;

4. benefits Foreigners more than locals because Foreigners also get the subsidies either directly or indirectly through lowering of workers' wages and other production costs;

While taxes on those consumer goods should have the opposite effect:

1. the rich and who can afford to buy more consumer goods will pay much more than the poor, but despite the poor paying more, the taxes can be given to the poor directly;

2. higher prices will surely discourage unnecessary spending even among the poor, so less imports which strengthen local currencies. If the tax income were properly utilised by giving the poor direct cash, the poor can benefit more by encouraging them to save which can increase the value of local money even more;

3. because the taxes increase the price of manufactured goods, but not labour costs, the proportion of labour cost is lower so this encourages people to manufacture instead of just consume, the opposite of subsidy;

4. Foreigners contribute to increase local economy instead of benefiting from the hard labour and resources of the locals.

This is true for all goods including essentials. Instead of giving exemptions for essentials which will make the tax collection difficult, it is best to just give out cash to the people so that they can decide what items are essentials to them. The management of cash handouts will be much easier than subsidies or tax exemptions that has made taxation so complex that the cost of paying taxes is so high for everyone because they need to pay accountants.