“Younger S’poreans should not be burdened with taxes” and “only about 50% of S’poreans pay taxes”

In Financial competency, Political governance, Property on 14/03/2012 at 9:13 am

Minister K Shanmugam has said that the Government does not want younger Singaporeans to be saddled with tax burdens, even as it ensures that the elderly are taken care of and no one is left behind.

When I read the above, I could only chuckle and then sigh. I had juz posted my very mixed tots about Mohammad Charlie Jasni who is earning $850 a month, buying a $99,200 HDB 2-room flat, noting that after the $40,000 grant the HDB loan is $59,220. On a 30-year mortgage at the HDB Concessionary Loan rate of 2.6%, the monthly repayment is $237. Mohammad is only able to pay $83 a month because the mortgage was reduced to slightly more than $20,000 because he and his wife have used up their CPF monies of $40,000. If they default, they have lost serious money.

About 15 years ago, in 1997 or 1998, I had an interesting conversation with some expat couples in their early 30s at my club . What surprised them most about S’pore was the financial commitements that their S’porean contemporaries had: 20 to 25 year loans to buy public housing apartments, and 10–year car loans. They said that back home (Canada, OZ or the UK), they would never have dared to make such long-term financial commitements. But it was par for the course here. And they would have not needed to, I added. They agreed. Well, now HDB mortgages are an “affordble” 30 years.

Of course, the PAP doesn’t want to burden the young with more taxes. The young can’t afford to pay higher taxes: they are juz managing a decent, comfortable life after meeting the interest and principal payments on their 25 to 30-year HDB mortgages. More will vote Opposition if taxes are increased. And I don’t mean the bluish near-clones of the men in white. They will vote for the people in red. Or they will riot.

The minister also said, “[W]e also have to send another message, which is that, only about 50 per cent of Singaporeans pay taxes”. This surely is wrong? If only 50% of S’poreans pay taxes, then why is the government giving a permanent rebate for the poor so that GST becomes a lot less regressive*?

We all (rich, poor and so-so) pay GST. That is why economists consider this tax to be the most efficient and effective way of taxing people. Tax is paid when one consumes. We all consume. 

(It also has the added advantage of taxing consumption, not savings or investments. In traditional economics savings and investments are good, consumption is bad. Bit like how the PAP thinks? Investing in a 30-year mortgage is good, but spending more on consumables is bad.)

What he means by “taxes” is “income tax”. The minister when he was in legal practice was one of the top litigation lawyers around. He was very, very good. Err I hope that now he is a minister he doesn’t join the likes of PritamS, Vikram Nair and Hri Kumar Nair. Their use of words reminds me of::

    “I don’t know what you mean by ‘glory,’ ” Alice said.
    Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’ ”
    “But ‘glory’ doesn’t mean ‘a nice knock-down argument’,” Alice objected.
    “When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
    “The question is,” said Alice, “whether you can make words mean so many different things.”
    “The question is,” said Humpty Dumpty, “which is to be master      that’s all.”
    Alice was too much puzzled to say anything, so after a minute Humpty Dumpty began again. “They’ve a temper, some of them—particularly verbs, they’re the proudest—adjectives you can do anything with, but not verbs—however, I can manage the whole lot! Impenetrability! That’s what I say!”

(Lewis Carroll’s Through the Looking-Glass, and What Alice Found There )


*But TOC’s Uncle Leong has described the problem with the government’s “solution”, “A new GST voucher will be given to help particularly lower-income and elderly Singaporeans, comprising three components – cash, Medisave top-up and U-Save.

‘So, you pay for your GST increase in cash, but you get the bulk of it back not in cash, but as Medisave top-ups which you can only use for medical purposes, and U-Save which helps you to pay for what has historically been generally increasing utility bills.”

A wicked, mean tot. Could one of the reasons for putting the money into CPF accounts rather than pay cash be to lessen the cost to the government? The real value of the cash in the CPF accounts are steadily and steathily eroded by inflation. With the Medisave account paying 4%, and the ordinary account 2.5%, and inflation at juz below 5%, could the government be hoping that inflation reduces its headline cost by the time the money is withdrawn? Even if inflation returns to the 2% range, the real cost to the government is reduced. As I said, a wicked, mean tot that would never occur to a PAP supporter or a journalist in our constructive, nation-building local media.

  1. If you smoke or drink, you pay the excise duties.

    If you have a maid, you pay a levy tax.

    If you have a car, you pay vehicle, road, and petroleum taxes.

    If you don’t have a car, your taxi and bus fares include an indirect tax as a result of high taxes on these vehicles.

    If you own a flat, you pay property tax.

    Are we at 100% now?

    • But you forgot that the overriding death duty has been removed to benefit the not-so-old-to-die-yet.

      • I am well aware of the death tax and its removal. As a result, it spares the estate of LKY and the rich from being eventually taxed and also avoided public disclosures. This is in contrast to the campaign by Gates and Buffet to get the rich to pledge a substantial portion of their estate to good causes. Now you see the true color of your so called leaders. What have done to help the poor and weak? Is 50% all they can spin? Even if they pledge only 50% of their estate, I would be super impressed. Show me the money!

  2. Xmen

    Even in the land of the ” free”, more than 200 years ago, there was the saying, the only things which cannot be escaped is death and taxes by Benjamin Franklin.


    For taxes, as someone who is very familiar with the topic, Singapore and HK are the few countries which taxes are actually imposed with the intentions of the govt behind instead of the special interest groups as there loopholes tend to be interpreted in due accord or change thereafter in the courts of law.

    For the OECD countries, well, as they say the tax code does depend on the tax partner/specialist/lawyer you talk to.

    Can there be more progressive taxes, of course, but first, you make sure the rich are established here and raise them thru different means.


    • @ajohor,

      You will be surprised by the proportion of American and European population that actually receives net income after taxes from their governments today.

      • GST which covers all consumers in Singapore (100% of Singaporeans) is here to stay simply because 50% of Singaporeans pay income tax.

        As income and corporate tax gets lower for Singapore to remain errr competitive, GST would get higher. Is that a fair trade-off? Depends as it screws the lower income most unless the current GST changes.

  3. Can you believe that they are trying to smoke people with “only 50% of singaporeans are paying tax”?! Indirectly, Mr Tharman is trying to say – hey everybody, stop laying claims to “why are you using taxpayer money to do this or do that…” just so we can stop holding them accountable….clever but we see through that.

    Mr Sham is like the predictable loyal lawyer who would come in to do the closing arguments after everybody has spoken. Unfortunately, the jury out there has a different judgment.

  4. […] 2012 – Thoughts of a Cynical Investor: “Younger S’poreans should not be burdened with taxes” and “only about 50% of S’poreans pa… – Yours Truly Singapore: Tharman gives assurance on CPF retirement […]

  5. Xmen

    I am aware of that, at the same time, it is in USA.OZ, Kiwi etc, cut first, rebate later,
    unlike in Singapore which is not deducted upfront.

    For the poor, yes, but how effective are the programs etc, considering the natural angst despite increasing amounts of funding. There are still cracks in the system.

    Just like in Singapore, for those who fall thru the cracks, do not disagree what must be done eg kids with disabilities or those who are homeless, but will people welcome the instituitionalisation of such and less home care is yet to be seen.

    The question is are we combating absolute poverty or relative poverty.

    To reiterate I have no qualms in putting extra funds/taxes into children’s education/medical care but for adults, they have to live by the choices they make excluding basic healthcare/housing/medical conditions which are congenital (does not include diabetes/smoking/etc).

  6. Fantastic analysis! Kudos to you.

    1) I have always felt that 30-year mortgages are an anchor tied around your neck. It makes you shut up, put your head down and work hard without complains. It also discourages risk-taking and entrepreneurship for fear of losing everything.
    2) It is disingenuous for the minister to say that 50% do not pay taxes when everyone pays at least 7% GST. Hope they keep their GE2011 promise of not increasing this in the next 4 5 years!
    3) Our government has failed to control inflation in past few years (most recent was at around 4-5%), but they did not raise the CPF OA rate to match. This represent a loss of capital…

  7. Hey dumb shits, even your sickening 1-month old baby pays tax when he eats and shits. All the stuff he requires has GST, and you have to pay the waterborne fees for his shit and urine, not forgetting there is still GST on-top of the waterborne fee and water conservation tax.

    And when you die, you also need to pay tax to NEA for cremating your bloody body.

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