Singapore has been noted for introducing innovative ideas to collect great billion-dollar revenues ranging from foreign worker levies to land sales to purchase of motor vehicles (See IRAS annual report 2010/2011).
However, it has being slow in trying to distribute the billion-dollar revenues to its people.
The government’s contribution to the health care sector, for example, remains below 5% of the total budget allocated all this while – far below than that of other developed countries which often spent more than 10% of their annual budget on healthcare alone.
It’s self-dependent policy means that the population will need to co-fund many of it’s own welfare policies e.g. healthcare, retirement and education.
For example, any local Singaporean who is enrolled in polytechnic or university here needs to pay a part of the tuition fee or take a loan from their parents’ CPF and repay it back later when they are working.
The irony is that many foreigners are studying here on government’s scholarship programmes and even paid an allowance per month.
Many eligible Singaporeans also have no choice but to foot five to six figure sums to study abroad as less than 26% of our primary school cohort will only have the opportunity to study in our esteemed universities here.
Later in life, they will find that they have to compete with foreign graduates knocking on our shore with dubious low-grade foreign degress hail from third-world educational institutions.
The government’s argument on it’s co-payment plan for many of its’ welfare programmes is that because it taxes little it could not dish out much more to the population without incurring a budget deficit.
This is perhaps why it could enjoy a very low taxation system on its population unlike other developed countries which tax its’ population by the high twenties’ percentage on average of earned income.
The average Singaporean will not have to pay any income tax unless his annual income averages more than $35, 000 and even that he will enjoy further tax exemption if he has a family with children and other dependents.
The government’s eventual plan is to incentivise executives to work hard and to retain a large slice of his income so that he can enjoy the fruits of his labour compared to other developed countries which tax it’s general population to the tune of close to 20% on average.
This is one huge reason why many foreign top earners prefer to work in Singapore as they could retain a huge chunk of their income as compared to when they work in their own host countries.
Nevertheless, because of our general low base salary system cripped by the lack of a minimum wage, not many local executives could enjoy the benefit of the low-taxation system except for the top 20% high-income earners.Many Singaporeans do not pay income tax at all due to a host of tax rebates and incentives.
Moreover, income has been sliding down lately due to the oversupply of labour through the recent contentious foreign influx policy. Many fresh graduates now start off with $2000 to $2300 if he has a general degree whereas polytechnic graduates start off lower at between $1800 – $2000.
Introducing a controversial GST taxation system in April 1994 was also seen as regressive as it taxes the low income workers more while the rich manages to get away with a bulk of their earnings through investment in properties and shares.
All this high-powered investment income is non-taxable yet.
Even the monthly housing conservancy collection ekked out of HDB dwellers could boost the reserve coffers by close to $1 billion just by trying to keep the surrounding compunds clean. The charges never come down at all even with large economies of scale and a buoyant reserve.
The current S&CC and rebates for Year 2011 are shown below.
|Flat Type||Reduced Rates
|Year 2011 S&CC Rebates (in months)|
This is probably why many Singaporeans felt squeezed dry by a government that keeps trying to ooze out every dollar from the very poor to the filthy rich. You even have to pay for internet access in the public library if you use their computer system – first of its” kind in the world!
The average Singaporean never felt so suffocated by the government’s hand in trying to squeeze out any extra dollar from any living creature that breathes here.
Worse of all, the government is also seen as very pro-business – preferring to spend on helping businesses stay float than the general population.
For example, the recent government’s intention to spend $1.1 billion to help SBS Transit and SMRT buy 550 buses also angered many Singaporeans as the company is a public listed company. Singaporeans always felt that the government is very pro-business and will do anything to help them stay afloat than spent a cent for the people.
If they ever spend a cent on the population, they will plan to take back ten cents in return!
We featured the top five revenues collected and unsurprisngly, most of them are in the solid billion-dollar category:-
1. Land Sales – $10 billion
Citi estimates Singapore collected nearly S$10 billion in land sales in the 10 months to January 2012 (Asiaone, Feb 17, 2012 Reuters).
In Singapore, income from government land sales is booked directly into reserves and not reflected as revenue in the annual budgets.
Singapore will likely report an overall budget surplus of around S$4 billion (US$3.2 billion) for the fiscal year ending March 2011 – or about 1.2 per cent of GDP – far higher than the government’s initial estimate of about S$100 million.
Land sales definitely contributed to the fattening budget surplus for our country and in land-scarce Singapore, every inch of land helps to beef up our coffers especially in good times.
2. Foreign workers’ levies – $4 billion
This is another fat cow for our government but it has cost the government much political headache and they are trying to bring down the intake of foreign workers.
The issue of foreign workers have cost the ruling party much backlash during GE 2011 as the population voted against the government causing it to have a slide of 6% in majority votes.
Employers have to pay levies for any foreign worker hired except those coming in via the covetous Employment Pass category.
Employers have to pay levy from $190 for the manufacturing skilled basic tier one category up to 30% of the total work force to $470 for the services tier three category between 30 t0 50% of the total work force.
The levy charge is due at the end of each month. Employers are given up to 14 days to make payment before the payment is deducted three days later. If it falls on a non-working day, the deduction will be on the next working day. If there are insufficient funds in your bank account for the deduction, interest for late payment will be charged.
For FY 2011, the government revised its surplus to $2.3 billion, boosted by foreign worker levies’ increase of $600 million collected to $3.34 billion.
This surplus is believed to go up for FY 2012 as after 1 July, the foreign levy fee has also gone up.
Levy rate ($)
|Sector||Dependency ceiling (DC)||Worker category||Monthly||*Daily|
|Manufacturing||Basic Tier / Tier 1: Up to 30% of the total workforce||Skilled||190||6.25|
|Tier 2: Between 30% to 50% of the total workforce||Skilled||270||8.88|
|Tier 3: Between 50% to 65% of the total workforce||Skilled (1)||450||14.80|
|Construction||1 local full-time worker to 7 Foreign Workers||Higher Skilled (2) and on MYE (4)||200||6.58|
|Basic Skilled (3)and on MYE (4)||300||9.87|
|Experienced and exempted from MYE (5)||450||14.80|
|Marine||1 local full-time worker to 5 Foreign Workers||Skilled||190||6.25|
|Process||1 local full-time worker to 7 Foreign Workers||Skilled and on MYE (4)||180||5.92|
|Experienced & exempted from MYE (5)||380||12.50|
|Services||Basic Tier / Tier 1: Up to 20% of the total workforce||Skilled||210||6.91|
|Tier 2: Between 20% to 30% of the total workforce||Skilled||330||10.85|
|Tier 3: Between 30% to 50% of the total workforce||Skilled (1)||470||15.46|
Worker foreign levies source MOM
3. Certificate of entitlement (COE) – $2 billion
Every domestic car owner has to bid for a certificate of entitlement (COE) through their car agent. This is the first of it’s kind in the world and makes ownership of a vehicle a status symbol for many Singaporeans.
If you own a car, you will be perceived as someone who has make it and doom if you don’t own one…and if you are in the dating game it is almost imperative that you own a car. If not, it is really tough to get someone out for a date.
Car ownership has being on the rise as the country prospers in it’s economic growth and we may see the first $100,000 COE price in the near future. The highest COE recorded so far is $92,000 for the $1600cc and above category.
The COE is the brain child of ex-minister Mr Mah Bow Tan who developed this ingenious plan to levy motor vehicles so that they can be restricted on the road.
In FY 2011, COE boosted the coffers of the government by $2 billion without really having to do much except to set quota for each month.
We haven’t even add up those levies collected from ERP gantries!
4. Betting tax from casinos and other legal entities – $2.4 billion
The two integrated resorts have added an extra $2.4 billion to the government coffers last year and the collection is projected to raise as they try to get in more high rollers to gamble here.
I have heard of a few business friends who lost millions and their businesses to the casinos. Suffice to say, their famileis are likely to be gone too.
Nevertheless, the two casinos have added alot of international prestige and glamour to the city as our PM has mentioned six years ago when Parliament debated about the casino issue that Singapore is boring and lacklustre.
The Marina Sand theatre has hold some world-renowned concerts and many international conferences were also held here.
However, it is unsure how much social cost the two casinos have impacted on our society as we grabbled with high-class prostitution, cheating and white-collared crimes.
I have also heard that the government levies gambling tax on the many jackpot machines here but the collection won’t be much compared to the two giant casinos.
5. GST – $8.75 billion
GST collection is the second largest contributor to the Singapore tax revenue at $8.2 billion after income tax and it has grown by 18.6% as compared to the previous financial year. GST now accounts for almost one quarter of the Singapore tax revenue. From a GST compliance perspective, $105 million in taxes and penalties were collected as a result of GST audits and investigations conducted by the Inland Revenue Authority of Singapore (IRAS). (Source: IRAS Annual Report 2010/11)
Introduction of GST is seen as a means to lower personal and corporate income tax rates while maintaining a steady revenue base for the government. GST is an indirect tax as it taxes expenditure. The current rate of GST is 7%.
However, many critics have argued that GST negatively affects the low wage workers more as they earn far less but yet have to pay the same amount of GST as the rich.
The low income also does not pay any taxes to enjoy the low taxation incentive and thus GST is an additional burden for them besides the high-inflation draw back enveloping the country currently.
There is also the fear that GST will increase to 10% in the near future and this was frequently played up by opposition politicians during general election.
GST has actually widen the social divide between the poor and the rich as every percentage is an additional burden on our low wage workers whereas even a 10% GST is a light worry for the rich.
Written by: Gilbert Goh