On the NETS fee hike

Nets, or Network for Electronic Transfers, is raising its transaction fees for retailers in three batches starting July 1 - the timing of which has also come under fire because it coincides with the 2 per cent goods and services tax hike.

Now, isn't this smart? Raise the fees together with the GST increase and the resulting increase in prices can be 'hidden' or explained away as: its due to the GST! It's due to retail merchants profiteering on the GST!

Seriously, NETS is just another profiteering monopolist profiteering from the GST hike. And we are not talking about a small increase here, it is an up to 300% increase!

The rates will go up from the current 0.35 and 0.55 per cent of purchases to between 1.5 per cent and 1.9 per cent - this represents an up to three-fold increase in the amount merchants will have to pay for each transaction.

And in the land of competition of Singapore, where commercial viability is oft cited as justification of government, GLCs, private businesses, we see it in this issue again:

Chief executive officer Poh Mui Hoon said the system will be squeezed out of the market if it does not raise its rates: 'It is a tough but commercial decision that we have to make. We haven't raised rates for 22 years, it has to be done.'

But excuse me?! NETS is not charging a flat fee in the first place, but instead it is a percentage fee. We have always heard that companies cutting costs, cutting prices to maintain competitiveness and commercial viability, and calls for workers to accept lower wages to ensure our competitiveness with the cheaper China/India/SEA workers. But in the case of NETS it is a monopoly RAISING rates to prevent it being SQUEEZED out of the market???

What a way to turn competitiveness (This term was actually used in zaobao as justification for the hike) and commercial viability on its head.

And since they talk about the competition being strong, let's look at who is behind NETS and who are their competitors.

Nets, which is owned by DBS Bank, OCBC Bank and United Overseas Bank...

Banks, she said, have been aggressively promoting and issuing debit cards because they get more money each time these cards are used. Each transaction with a debit or credit card earns the bank between 1.15 and 1.69 per cent of the purchase price.

Now now, it seems that their 'competitors' are actually themselves, as the 3 major banks in singapore most probably have the largest debit/credit card market share here. Except in the case of debit/credit card, the international card company(VISA/Mastercard etc) takes a share of the fee.

Compare the NETS after hike rates of "between 1.5 per cent and 1.9 per cent" to the 1.15-1.69 percent of debit/credit cards... Now we really see what this competiveness/commercial 'viability' really means.

After this hike, NETS would most probably be just as expensive to use as credit/debit cards, and if this is the case, I see no point in using NETS anymore. NETS does not offer the consumer any reward points/discounts, it does a direct debit the moment the transaction takes place (as opposed to debit cards where the money is deducted a few days after), it has a lower charging limit (of $2000, if I remember correctly), and now it is more expensive.

So much for a cashless society, and not to mention the biggest group of people that will be ripped off are those older people who have no knowledge/access to debit/credit cards.

I do hope CASE's complaint does go through, but given the Singaporean system I am not optimistic.

Source: Case slams Nets fee hike as a 'great disservice'

Singapore 90 days T-Bill auction yields from 2006

Here's something I did for fun since I was bored and was looking at renewing my T-bills:

Interest rates have dropped sharply across the board in Singapore since March, and all the savings accounts offering higher interest rates (like Stan Chart, Maybank) have lowered their rates. The same goes for many fixed deposits.

Nevertheless, T-bills still offer decent rates for small amounts (lowest denominations is 1k), and the rates is still much better than most Fixed deposits (Unless you happen to have large sums like above 50k and 'threaten' to deposit your money elsewhere) . Stan Chart's Esaver (1.5%) is still excellent given its no conditions on withdrawals, and Maybank should be similar too, although I do not know the exact rate.

However, the biggest drawback to T-bills is the hassle of having to go on a Friday and wait at the bank(and its a long wait, as it is the same queue as those buying investment products). The Phillips electronic T-bill portal is more convenient, but at the cost of losing around 0.05% due to the spread.

How MNCs minimise taxation

Ever wonder why a lot of large companies are incorporated in obscure countries like Canary Island, Bermudas, etc, when their main offices/markets/production sites are far away in every other corner of the world?

The answer lies in taxation....

Came across this interesting example of how Microsoft minimises their tax on profits, and in this case its Ireland.

"Round Island One Ltd., has a thin roster of employees but controls more than $16 billion in Microsoft assets. Virtually unknown in Ireland, on paper it has quickly become one of the country's biggest companies, with gross profits of nearly $9 billion in 2004.

Ireland's citizens may not have heard of Round Island One, but they benefit greatly from its presence. Last year the unit handed the government of this small country of four million citizens more than $300 million in taxes ... Microsoft routes the license sales through Ireland and Round Island pays a total of just under $17 million in taxes to about 20 other governments that represent more than 300 million people.

(This is not my comment, but the comment from the blog I am quoting from)But Microsoft does some real stuff in Ireland, so at least you can drive by one of their facilities and see the buzz of activity at Round Island? Errr.. No:

Round Island's legal address is in the headquarters of a Dublin law firm, Matheson Ormsby Prentice, that advertises its expertise in helping multinational companies use Ireland to shelter income from taxes. It represents other U.S. technology companies including Google Inc., which recently set up an Irish operations center that the firm credits in its SEC filings with reducing its tax rate. A Google spokesman said the company set up in Ireland to be close to its European customers. "Because that business is done outside of the U.S. it is taxed according to international law," he said. "

On deposit accounts

In my previous post I blogged about the amazingly "high" interest rates of POSB savings account, and in this post I shall blog about the alternatives.

Here's a site that I found: Ask Dr Money; and it compares the various deposit accounts out there in the Singapore market, weighing their pros and cons, ranking them.

I will list a few of the outstanding/interesting ones here....

• Your standard savings account(POSB/DBS): 0.25% p.a. credited annually
• Standard Chartered e$aver/e$saver kids: 1.88% p.a. 2.45% p.a. for deposit above $50,000, no lock in period, no fees, no minimum balance. $5 surcharge for counter withdrawals
• Maybank Isavvy: 2.88%, 1 yr lock in $25,000 minimum
• Fundsupermart: 2.45% (The rate is actually calculated daily from the Singapore interbank lending rate minus 0.5%, minus 0.25% annual management fees, as it is actually a fund buying portal, so this will be the first to receive high interest rates if the interbank rates move up) This one is interesting
  
• Most of the banks' fixed deposits are at around 2.8% but this is for large sums like minimum 20k- 50k
  

In my opinion, for a poor guy like me, the Standard Chartered e$aver is the way to go, since it has much higher rates than even fixed deposits for small sums), its flexible with no conditions attached, the internet banking only facility is of no trouble to me. Now that there's the kids e$aver even those below 21 can have an account, provided you have a parent with you.

The bottom line, do not let your $$ rot in your POSB saving accounts, stash those savings somewhere else and leave enough for your normal usage and to maintain the minimum balance needed before the surcharge kicks in. Your $$$ can't even catch up with inflation with a measly 0.25%

POSB pays interest rate of 4+%!!

Just checked my POSB(now DBS) saving accounts and to my surprise, there's a new entry for interest of $4.47. Given my balance over the new year of a bit below $100.00 its a whooping 4+% p.a.
DBS is so kind to poor people like me to give me such high rates(I have heard rumours that they paid only 0.125% or 0.25% p.a.)

Standard Chartered's 1.88% p.a. and Maybank's 2+% no frills e saving accounts stand aside!

In case you think I am that naive, I do know why I got my apparent 4+%. Its just a simple exercise in statistics manipulation...
I have included a brief explanation for this phenomenon in the comments.