TR Emertus

Jan 27, 2014

http://www.tremeritus.com/2014/01/27/how-much-tax-are-sporeans-really-paying-7/

By Roy Ngerng and Leong Sze Hian

This is a 10-part series which will analyse the tax that Singaporeans are paying, in comparison with the Nordic countries. It has been said that Singaporeans pay one of the lowest taxes in the world, and that the Nordic countries pay one of the highest taxes in the world. This series would explore this matter in greater depth, and seek to have a better understanding of what the truth really is.

In brief:

• Singapore has a surplus of $36.1 billion. There is more than enough money for the government to spend for out-of-pocket expenditure that Singaporeans have to pay for healthcare, education and retirement, and ensure that even the poor are protected in Singapore.

In the previous articles, we have showed you how Singaporeans are actually paying as much in tax as the citizens in the Nordic countries do, but yet their governments would spend more in return for them, whereas the Singapore government would spend much lesser.

We have also been told by the Singapore government how it is difficult to increase subsidies for healthcare, education and retirement.

Today, we will show you how this is not true, and how there is more than enough money to increase expenditure to cover all Singaporeans adequately.

According to the official records, the Singapore government has accumulated $55.2 billion in revenue and $24.8 billion in CPF contributions – which would make up a total of $79.9 billion in revenue.

In terms of expenditure, the government had spent $50.1 billion and there were $11.7 billion in withdrawal, which would make up $61.8 billion in expenditure.

When you look at the expenditure as a proportion of revenue, from a cashflow perspective, the Singapore government is only spending 77.3% of the revenue collected (Chart 1). So, already, you can see that there is about 22.6% that is not spent that can be used to provide subsidies for healthcare and education and increase expenditure for retirement funds.

Chart 1

We are primarily concerned about expenditure on social protection, so let’s take a look at the expenditure on social protection as a proportion of total expenditure.

When we look at what Singapore is spending on social protection as a proportion of total expenditure, we would see that Singapore spends only 55.2% on social protection. In comparison, Sweden spends 68.3%, Finland spends 69.7% and Denmark spends 72.9% (Chart 2). So, is there more room for Singapore to increase our expenditure on social protection?

Chart 2

But, this isn’t the end of the story, even though the Singapore government has declared a revenue of only $55.2 billion, according to the International Monetary Fund (IMF) Special Data Dissemination Standard, Singapore has actually earned a revenue of $82.3 billion!

After the expenditure of $49.1 billion as reported by the IMF, Singapore would have a surplus of $36.1 billion.

As calculated in part 4 of the article, Singaporeans have to spend an additional $29.8 billion on healthcare, education and retirement. And as discussed in part 1 of the article, because low-wage Singaporeans earn the lowest wages among the high-income countries, they simply do not have enough purchasing power to spend on healthcare and education, which means that they would be left out from being protected from their health and receiving higher education.

On top of that, we have illustrated in the previous parts of these articles that if the out-of-pocket expenditure, coupled with the personal income tax and CPF, that Singaporeans are paying is similar to what the citizens in the Nordic countries only need to pay into personal income tax and social security, and receive healthcare, education and retirement for free, shouldn’t that mean that Singaporeans should receive the same treatment?

Indeed, if Singaporeans have to pay $29.7 billion using our money, and the government already has a $36.1 billion surplus, wouldn’t it make sense if the government channels part of this surplus into subsidising for the healthcare and education of Singaporeans, and to increase the returns to our retirement funds?

Even if the government were to fund the $29.7 billion fully, Singapore would still have $6.4 billion in surplus (Chart 3)!

Chart 3

So, should the government spend more, especially when the poor in Singapore are being forced to keep themselves out from the system? Should the government spend more if it can, especially since at 26%, Singapore has the highest poverty rate among the high-income countries, and Singapore also has the highest income inequality among the high-income countries. And as we have shared in part 2, the poor in Singapore has the lowest share of income among the high-income countries.

In view of such inequalities and high prevalence of poverty, should the Singapore government start taking some form of responsibility and increase the government’s expenditure on social protection, to truly protect Singaporeans?

So far, we have talked about how Singaporeans actually pay the same amount of “tax” as do the citizens in the Nordic countries. However, this is only half the story. When compared to how much wages Singaporeans are actually paid, how much tax are we truly paying? Here’s a hint – Singaporeans aren’t paid high wages. Watch out for the next article for more shocking truths.

You can read the other parts of the article here.

Roy Ngerng

Roy blogs at http://thehearttruths.com.

Leong Sze Hian

Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, Wharton Fellow, SEACeM Fellow and an author of 4 books. He is frequently quoted in the media. He has also been invited to speak more than 100 times in 25 countries on 5 continents. He has served as Honorary Consul of Jamaica, Chairman of the Institute of Administrative Management, and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional qualifications. He blogs at www.leongszehian.com.