$5 benefit for every tax dollar a fairytale?

Posted by on April 17, 2012

~ By Leong Sze Hian ~

I refer to the article “How 2-room households get $5 for every $1 tax” (Straits Times, Apr 10). According to the report, a household income of $1,200 income can buy resale flat?

How likely is it for the example given of a low-income household which has a combined income of $1,200 (excluding employer CPF contribution), with the husband earning $800 and the wife earning $400 from part-time work, that they would be able to buy a resale 2-room HDB flat?

Would they have the 5% cash down-payment required or the typical cash-over-valuation (COV)?

This means that the family may only qualify for the Additional CPF Housing Grant and Special Housing Grant, but not the CPF Housing Grant which is only for a resale flat, if they are financially not able to purchase a resale flat.

How many households earning $1,200 or less at the time of purchase, have purchased resale flats? I believe the number may be very small. If so, why use resale flat as the example for benefits to low-income households?

In this connection, it is also interesting to note that CPF housing grants are included in the estimated lifetime benefits, but not “the appreciation in the value of the government’s contribution”.

As to the home-based care and nursing home benefits, how likely is a family with a household income of $1,200 to afford the minimum 20 and 25 per cent fees for home-based care and nursing home, after the maximum 80 and 75 per cent subsidies, respectively?

The reality is that low-income families may not even be able to pay the minimum costs after the maximum subsidies, and thus such benefits may be just an academic exercise in computation. How likely is it for this low-income family, to be able to come up with the cash in the Baby Bonus Scheme (matching government contributions)?

Medical and training subsidies are benefits?

With regard to Inpatient, Specialist Outpatient Clinic (SOC), Day Rehabilitation and Medifund subsidies (polyclinic subsidies are not included in the calculation of benefits), how real is the impact of these subsidies when the costs (even after the subsidies are applied) are so high and ever -increasing in Singapore?

Benefits like the WDA Course fee subsidies and WTS Training commitment award, meanwhile, assume that a low-income family of four, can have the spare time and resources to undergo such training schemes.

The assumption that the husband and wife will each experience four spells of unemployment (for two months at a time) and attend training courses twice (and therefore enjoy benefits via the CCC ComCare Fund) may be a bit far-fetched. In reality, the total of 16 months of unemployment between them would possibly be extremely challenging financially as such households generally have little in the way of emergency reserve funds.

How many households earn less than $1,200? As a first-world country, I think we should be ashamed that $1,200 is “the 10th percentile of monthly household income from work, excluding employer CPF contributions, among citizen-headed non-retiree households in 2011”. Does this mean that the bottom 10 per cent of such households earn $1,200 or less? How many of such households are there?  –   about 100,000?

And finally, how does a family of four survive on a combined household income of $1,200?

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.