Tue. Mar 19th, 2024
<a href="https://jakartaglobe.id/context/trade-war-drag-singapore-economy-central-bank-says/">(via)</a>

TL;DR – Most of us get more from the government than the taxes we pay.

Not too long ago, the government announced that about 1.7 million Singaporeans will receive about $1 billion in GST Vouchers and Medisave top-ups. Not long after that, I got a letter from the government. I thought to myself, “Wah not bad. Gahmen so efficient. Just announced only send me letter to tell me how much money I will get in GST vouchers.”

1.7 million Singaporeans to receive S$1 billion in GST Vouchers and MediSave top-ups (via)

 

To my dismay, when I opened the letter, the letter was to inform me how much taxes I have to pay. Worse, the tax I have to pay is quite a bit more than what I would get in GST vouchers etc. At that moment, I couldn’t help but think that the Gahmen gives you a chicken wing only to take back a whole chicken!

Actually…

But after I cooled down a little, I realised that what I get from the government is more than what the government takes from me. You see, I recently became a father (yay to sleepless nights!).

Not too long after welcoming my baby to the world, the government gave my wife and me a wonderful ang bao to celebrate the birth of my baby ($3,000! Woots! And there’ll be more to come! A total of $8,000! Yay!). Then there’s the money that the government will give me if I put money into my child’s Child Development Account (CDA). That’s a total of up to $6,000. Add together, that’s already a lot more than income tax that my wife and I pay.

Ah. What about the GST my family pays? Since it’s levied on all sorts of goods and services, surely it’s quite a lot?? Well,  I suppose that’s true. But many countries have some form of GST or sales taxes. At least in Singapore, there is a system where the government gives lower income Singaporeans some money to defray the increase of costs of living due to GST. That’s the GST Vouchers system. Which, by the way, contrary to what some people say, is a permanent system.

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The permanent GST Voucher scheme was introduced by the Government in Budget 2012 to help lower-income Singaporeans (Image source)

 

Speaking of the low income, even with the GST, the low income still get a lot more than what they pay in taxes. That’s because the government gives the low income money via the Workfare Income Supplement (WIS).

My semi-retired parents benefit from the WIS scheme. Because they only do some part time work now and then, the income they earn qualifies them for WIS. So, as a result of the GST Vouchers and WIS, they definitely get more from the government than the taxes they pay.

But what about the rest of us?

Most of us get more than a chicken…

The reality is that the taxes we pay go to pay for all the essential government services that all of us enjoy. You know, things like… street lamps, police force, things that make Singapore the safest country in the world. And then there are things like schools (somebody has to pay teachers’ salaries, right?), roads, parks, overhead bridges and what have you.

In fact, the total government expenditure is about $90 billion, but the government only collects about $73 billion from all the different types of taxes. The difference comes from the money we get from the returns on investment of our reserves.

So, unless you earn a lot, and therefore pay a lot in income tax, and/or spend a lot, and therefore pay a lot in GST, chances are, you get back more from the government than what you pay in taxes. By some estimates and Senior Minister Tharman had also mentioned it before, the lower income Singaporeans get $4 back for every $1 of taxes (mainly GST) that they pay. For every $1 paid in taxes by a middle income family, they will get back $2 in subsidies.

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Another reality is that only about half of Singapore’s workers pay personal income tax. In fact, the average Singaporean pays no or little personal income tax and he pays GST on whatever goods and services he consumes.

So, we know spending will go up and we have to raise revenues, but what should the Government do?

It’s clear to see that the Government will need to find additional or new sources of revenue. They will likely need to raise taxes as national spending goes up, but must keep the features of our system that keep costs in check. We need the system to keep our subsidies targeted at the poor, with some support for the middle class.

Senior Minister Tharman once said this, “Our fundamental approach is to keep our overall scheme of taxes and benefits fair and progressive. ”

“It is the overall combination of taxes and benefits that matters in achieving a fair system, not each individual tax or subsidy on its own. Some taxes are progressive, like income taxes, and some are on their own regressive, like GST without offsets. But what matters in a fair system is the overall mix – when we take all the taxes and their offsets, together with all the subsidies and other benefits, their overall impact must favour the poor and middle-income groups.”

Senior Minister, “Currently, for the lower income group (those in the bottom 20%) for every dollar they pay in taxes, they get $4 back in benefits. For the middle income group, every dollar they pay in taxes, they get $2 back in benefits.” (Image source)

 

Can the government give us more while taking less?

Maybe. Probably. But it would be nearly impossible for the government to not have to collect any form of taxes from us at all. So I have decided not to focus on how much taxes I have to pay and how much subsidies or whatever I am getting back.

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Instead, I have decided to think about how I can improve myself, deepen my skills, pick up other skills that are in greater demand, so that I can earn more. Hopefully, I will soon reach a stage where I pay more tax than what I get back. And I’ll be OK with that.

 

(Featured image via)

By Joey Wee

I am nice, most of the time!

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