How Are Taxes Built For The Rich In Singapore?

We are told that Singapore’s “top marginal individual income tax rate is 20%“. However, what exactly is our “real overall tax rate”, and how much are Singaporeans really paying?

By “real overall tax rate”, I am referring to what we pay through our personal income tax and CPF, or social security. In some other countries, the taxes that people pay would include what they pay for their healthcare and retirement as well, which in Singapore’s case, has been split into taxes and CPF. In the KPMG’s Individual Income Tax and Social Security Rate Survey 2012, they had thus “compiled personal income tax and social security rates from 114 countries for each of the past 10 years,” to give a better comparison of tax rates around the world. We will come back to this survey later.

First, let’s look at how much tax Singaporeans are actually paying.

In Chart 1, you can see the personal income tax rate that Singaporeans of different income brackets have to pay. I had used the tax calculator (which you can find here) to calculate the tax rate. I had not included the reliefs and bonuses in this calculation.


Chart 1

Even though it is said that Singapore’s top income tax rate is 20% on chargeable income of above $320,000, do you know that this does not mean that if a person earns more than $320,000 in a year (or around $27,000 in a month, without including bonus) that he/she will be charged the full 20% tax rate on the whole income?

The tax rate for the person’s income is staggered according to the income brackets, as outlined in Chart 2 below.

photo (1)

Chart 2: Inland Revenue Authority of Singapore

Which thus explains why in Chart 1, for a person who earns $27,000, his/her tax rate is still only 14%. Whereas, the “top rate” of 20% is only finally achieved by a person who earns $13 million in a month. Even then, the tax rate is 19.99% and does not go any further beyond that higher up the income ladder. But then, who earns $13 million in a month?

In Chart 3, you can see the CPF contribution rate for the employee. I had used the CPF Contribution Calculator to compute this. You can find the calculator here.


Chart 3

Do you know that for the CPF, “the Ordinary Wage Ceiling is $5,000“. This means that the “maximum amount of CPF payable” for anyone is based on a wage ceiling of $5,000. So, if you earn above $5,000, you still pay a 20% CPF based on a $5,000 monthly wage, or $1,000 every month. You don’t have to pay CPF for the rest of your income. The ordinary wage refers to “wages due or granted wholly and exclusively in respect of an employee’s employment in that month and payable before the due date for payment of CPF contributions for that month.”

CPF also needs to be paid for additional wages, which are “wages which are not granted wholly and exclusively for the month,” such as bonuses.

For the purpose of this illustration, I had only looked at the CPF for ordinary wages, and not other bonuses.

Chart 3 (above) is what you get.

Which means that even though the CPF contribution rate is 20%, after the wage level of $5,000, the contribution rate actually becomes increasingly much lower. So, for someone earning $30,000 every month, his/her CPF contribution rate is only 3% (based on the ordinary wage), and not 20%.

So, all in, what is the real overall tax rate (personal income tax rate + CPF contribution rate)? You can see this in Chart 4. The blue bars are the additions of the yellow (personal income tax) and pink (CPF) bars.


Chart 4

For a clearer picture, you can look at Chart 5.


Chart 5

Did anything struck you?

Perhaps I could explain this further in Chart 6.


Chart 6

If you look at Chart 6, you can see that for low- to middle-income earners earning below $5,000, their real overall tax rate is actually higher than the high-income earners.

What this means is that for someone who earns $3,000, he/she is actually paying a tax of 21%, whereas for someone who earns $15,000, he/she would pay a much lower tax of 15%.

What this also means is that Singaporeans who earn below $5,000, or the lower-income earners, seem to be shouldering the financial burden in Singapore, and the rich would have it much easier in Singapore.

When I first found out about this, I was taken aback. This is because first, we are told that the highest income tax rate is 20%. We are also told that the CPF contribution rate is 20%. So, I’ve always worked on the assumption that this means that for the top earners in Singapore, they would effectively pay 40% (20% tax + 20% CPF) in real overall taxes. But, it comes as a huge surprise that in fact, they pay much lower overall taxes. Someone who earns $15,000 monthly only pays 15%, and this is much lower than what the lower-income earners pay.

Take a look at Chart 5 again – do our “taxes” look progressive to you?

I decided to look at the actual number of Singaporeans earning the different wage levels – Chart 7.


Chart 7: CPF Board Annual Report 2011

(In case you are wondering why I am using statistics from the 2011 annual report, it is because this set of statistics on the distribution of CPF members by monthly wage levels had mysteriously disappeared in 2012’s annual report.)

Chart 8 gives you a better perspective to this – nearly 1.4 million Singaporeans earn less than $5,000, according to the CPF Board, or 79% of the CPF members.


Chart 8: CPF Board Annual Report 2011

Are the 1.4 million low- to middle-income earners shouldering the financial burden for one another then?

I had roughly estimated how much Singaporeans would actually be paying through their CPF and tax, which you can see in Chart 9.


Chart 9

Those earning below $5,000 would pay around $665 million to tax in total, while those who earn above $5,000 would pay around $516 million to tax in total (note that this is a low estimate as I do not have the exact distribution of the workers who earn higher incomes).

Now, back to the KPMG’s Individual Income Tax and Social Security Rate Survey 2012.

Do you know compared to other countries, high-income earners in Singapore actually pay a very low overall tax? According to the KPMG, even after accounting for CPF, those earning $10,655 monthly pay about 20.6% of their wages to tax and social security (CPF) (Chart 10).


Chart 10: KPMG’s Individual Income Tax and Social Security Rate Survey 2012

And for those earning $32,000 this actually goes down to 18.5%, and this is including the CPF, which is rightfully 20% (Chart 11)!

Does this make sense to you that for a higher income earner who earns $32,000, he/she actually pays a lower tax than someone who earns a lower income of $10,655?

And of course, the income earner of $10,655 would in turn pay a much lower tax than someone who earns $5,000 or $2,000.


Chart 11: KPMG’s Individual Income Tax and Social Security Rate Survey 2012

And why do the high-income earners in Singapore pay such low taxes?

Because in Singapore, the highest income tax rate only takes effect at a very high income level, of $320,000 annually, when compared to other countries (Chart 12)! Which explains why, if you are a high-income earner, it’s much better to escape to Singapore because first, you don’t get charged the top 20% tax rate on all your income and second, the top tax rate kicks in only at a very high income level. Not only that, according to the survey, “capital gains are not subject to tax in Singapore.” And as can be seen from above, the richer you are, the more you can benefit from Singapore’s system.


Chart 12

But do you find the tax structure in Singapore skewed? Why are the lower-income earners made to pay an overall higher tax rate and why is it the lower-income earners have to shoulder a heavier financial burden than the rich in Singapore?

The Singapore government has created a system that has allowed the rich to benefit a lot more in Singapore. But worryingly, who is left to pick up the pieces? 80% of Singaporeans are left to shoulder the burden in Singapore, even though we can rely on the rich can do more to alleviate the plight of those, especially of the poor and elderly in Singapore.

Actually, should everyone be paying a 20% contribution into their CPF, regardless of their wage level, as in Chart 13?


Chart 13

And when that happens, won’t the overall real tax rate be more evenly distributed, where the higher-income earners would then pay a higher tax rate (Chart 14)?


Chart 14

You can see a clearer picture in Chart 15. Even then, someone who earns $15,000 a month would still only pay 29% in tax.


Chart 15

Do you think that this (Chart 15) is a fairer tax distribution, as compared to Chart 5, where the lower-income earners were paying higher taxes than the high-income earners?

I did another rough estimation of what Singaporeans would pay through their CPF and tax, based on this more “progressive tax structure” (Chart 16).


Chart 16

Those earning below $5,000 would pay around $665 million, while those earning above $5,000 would pay around $787 million (note again that this is a very low estimate).

What this means is that as compared to the existing tax structure, a more progressive (and fairer) “tax” structure where the lower-income earners pay a lower proportionate tax, we would be able to yield another $300 million or so in “taxes” (note that because this is a low estimate, the actual amount would be higher) (Chart 17).


Chart 17

Why is a progressive tax structure important, you ask? Or actually, and honestly, we are not even talking about making it more progressive – just equal. Should everyone, regardless of their wage level, pay the same proportionate contribution of 20% to their CPF? Right now, the higher-income earners get to pay a lower proportion of their wages into CPF, but why do the lower-income earners have to pay more, and eat into their already constrained disposable wages?

Already, for the low-income earners, their wages have been depressed and for the lowest-income earners, their real wages have dropped. Yet, they are made to fork out an even higher proportion than the rich into taxes and CPF. What’s more, the higher-income earners have seen their incomes grow the fastest, yet they are allowed to pay the lowest overall taxes. We talk about being worried that the poor will leech on the system, but then, who could actually have an easier way to skid their way out of the system?

We are not talking about the higher-income earners paying a higher proportion, but paying the same, and fair, proportion, as the lower-income earners. Do you think this is fair and equal?

This is important because, can you imagine that with more CPF monies, if the government pegs the Medishield premium, and CPF contribution rates, according to income level, this would mean that there would be a bigger pool of Medishield which would allow for higher payout for Singaporeans from their Medishield (if the government is fair in their distribution and doesn’t siphoned the money off for other uses). Thus if the CPF contribution rates are equally contributed by all Singaporeans regardless of wage level, we would have a bigger pool to draw from, and be able to benefit a wider group of Singaporeans, especially those in the lower-income families and older Singaporeans.

Also, the government uses our CPF for investment in GIC and Temasek Holdings. If the government gets the higher-income earners to pay the same CPF contribution rate of 20%, this would give more to the government for investment, and more could then be done to alleviate the burden on the poor and elderly. But why didn’t the government do this? Do you think we could ask if high-income earners could contribute more, so that the poor’s plight can be alleviated?

But more importantly, research has also shown that higher taxes result in lower income and social inequality (Chart 18).


Chart 18: The Facts about Tax Progressivity

A more progressive tax structure would also result in better social equality (Chart 19), because there can be more resources that can be redistributed more fairly to the poor.


Chart 19: The Facts about Tax Progressivity

It has also been found that for countries with more progressive taxation and higher equality, their citizens also have “higher levels of subjective well-being, (as) mediated by citizens’ satisfaction with public goods, such as education and public transportation.” (Chart 20) People will be happier. And there are theories which link a higher state of happiness to higher productivity.


Chart 20: Progressive Taxation and the Subjective Well-Being of Nations

Finally, the issue of trust has kept cropping up in the sociopolitical discussion in Singapore, most often spoken by the PAP, which continuously ask Singaporeans to trust them.

But according to numerous research, it has also been shown that in countries where there are higher income inequalities, there are lower levels of interpersonal trust (Chart 21).

photo (7)

Chart 21: Income Inequality, Trust, and Population Health in 33 Countries

Also, not only does “improving the distribution of income … also contribute to economic growth in the long run via enhanced social trust“, “greater progressiveness allows countries to engage in countercyclical fiscal policy and thus creates the policy space to stabilize economic fluctuations, both in the short-run and long-run.” So, there are clear economic benefits to reducing the rich-poor gap and implementing a progressive tax structure.

For Singaporeans who are concerned about maintaining the stability of the Singapore economy, they would be comforted to know that it has been said that, “industrializing economies can raise economic stability through progressive income taxation“. If the PAP believes in ensuring stability in Singapore, it is clear what needs to be done, isn’t it so?

So, if the government wants Singaporeans to trust them, it’s very clear what they need to do, right? At this point, Singaporeans do not trust the government because they do not trust that they know fully how their monies are being used and what they are being used for.

Already, you can see that our real overall tax structure isn’t that fair and actually penalises the lower-income groups more so than necessary. The Ministry of Finance might claim that “Singapore’s individual income tax schedule is progressive, with higher income earners paying proportionately more income tax,” but the evidence in these charts clearly show that it is not, as can be also seen when in comparison with other countries in Chart 20. In fact, Singapore most probably have the most regressive taxes in the world. Whereas in other countries, the richer you get, the higher the tax you pay, in Singapore, it’s the other way round instead – if you are poor, you pay higher taxes than the rich!

But with this information in mind, the rest is really up to you now. Do you think that all Singaporeans, regardless of their income levels, should pay the same, and equal, proportion of their incomes into CPF? This CPF eventually goes into the Medishield, which is the “national health insurance scheme”. Do you think that we would be able to accumulate more wealth in the Medishield, by having the higher-income earners pay the same 20% rate as other Singaporeans into the CPF? Do you think that, in doing so, we would be better able to provide for the poorer and older Singaporeans, who have seen their incomes diminish, while their purchasing power have also dropped in the face of prices that have rose faster than their wages?

Medishield Pays for Only 2% Of All Health Spending

This is to note too that in 2011, Medishield accounts for only 2% of the total health spending in Singapore – just 2%. Perhaps with a fairer contribution system from the higher-income Singaporeans, we might be able to allow the Medishield to pay for 3% or 4% of the total health spending? This would still be a very small proportion, but would it be able to benefit more Singaporeans, especially the poorer and older Singaporeans?

Then again, do you also not find it suspicious that the Medishield is supposed Singapore’s national health insurance scheme, but accounts for only 2% of all health spending? Do you think that this is universal healthcare? And now that it’s compulsory, how useful will it be? What’s behind the mechanics or computation that is making this scheme?

But Who Will Take Care Of The Poor And Elderly?

Finally, are we taking the protection of the rich too far, while the poor are left to fend for themselves? The Singapore government has created the Singapore system for the rich, so that the rich can flourish in the system. This is not to say it’s wrong, but this system is at the expense of allowing the rich to benefit but where the poor has become left in the lurch. My question is, are the poor undeserving? Does it make sense that for higher-income earners who are earning significantly higher wages, that they need only pay a lower proportion of their wages on taxes and CPF, while for the lower-income earners, where every cent counts, that they have to take out a higher proportion of their wages into taxes and CPF?

While the government had announced in Budget 2013 that the low-income earners would in 2014 pay the full CPF contributions of 20%, why was it not announced that high-income earners would have to do the same as well? I am worried that the government seems to be squeezing the poor, when their livelihoods are already so desperate? The government could have implemented minimum wage, so that even as the poor is squeezed, they would have some breathing space in the form of higher wages – do you think this can be done? If the poor are being disadvantaged by depressed wages and higher CPF contributions which gets locked up, how would they be able to have a better standard of living in Singapore?

Meanwhile, the high-income earners have seen the fastest rises in their incomes, and the most relaxed curbs on their wages, with comparatively lower taxes and CPF contributions. The question to be asked is, why did the government allow the rich to pay staggered tax rates, and why did they cap the CPF contribution to the $5,000 wage ceiling, so that the rich do not have to pay further CPF on top of higher earnings?

Plainly, there’s not enough to spend for the poor and elderly in Singapore because unlike in other countries, because of low taxes on the rich, the country hasn’t been able to accumulate more tax monies and also, has the government has chosen to invest disproportionately in their own investment companies. I do not blame the rich people, but the government needs to take on a fairer stance to protect the poor.

Should We Value Someone Based Only On Their Wealth?

For the high-income earners who are reading this, perhaps let me explain myself better. What I’m saying is this – whether someone is rich or poor, there are always people whom we can term as “not hardworking” or “leeching on the system”, if we may so say, but there are as well people who want to do good and want to help others, and all these attributes can be found in anyone, regardless of their wealth status.

I’m discussing about this not of us looking at this as a matter of personal interest. I’m asking about what a government should do, as a matter of public policy. Is it fair for the government to believe that only the poor might over-consume on the system, for example, when there are just as well the rich who might do so? Is it a fair to have a blanket policy that favours the rich while discriminating against the poor, even if what distinct the two groups of people are not the constructed beliefs of their personality traits about them, but their level of wealth?

What I’m saying is this – as a government, there is a responsibility to ensure that the poor are provided for at least a subsistence standard of living. Once the government can do that, if it wants to talk about what it can do for the rich, by all means, go ahead and do so. But in Singapore, the starting point of the conversation has been this – what can we do for the rich, first and foremost? Then after we have taken care of the rich, then let’s look at the poor. By then, there’s nothing much left for the poor. That’s our current situation.

To put it in the simplest terms, if we put aside wealth, what makes one person more deserving that the other. Or in other words, is anyone person more deserving that another, if we don’t look at people by how much they earn or the status we then confer to them? Would anyone be better than the other then?



  1. faber

    Hi Roy,
    Great article. I wrote the following comment in Yawning Bread’s latest post Comments under moderation.



    Roy Ngerng just published an excellent blog post on Singapore taxes (income tax + CPF). See Its a long one, but well worth the read.

    He concludes that “…In fact, Singapore most probably have the most regressive taxes in the world……”. I could not agree more with his findings. Two examples to illustrate this conclusion further.

    Roy’s analysis left out bonuses in his computations for a simpler illustration. We all know that top civil servants and politicians are paid bonuses based on performance and KPIs. In the past few years, it was rumored that such GDP bonuses hit as high as 12-18 months. As pointed out by Roy, monthly CPF contributions are capped. So high income earners (> $5,000 pm) do not pay more than the maximum CPF contributions monthly.

    What is less well known is that there is a annual cap on CPF contributions. If a high income earner gets a huge annual bonus, the bulk of these do not attract CPF contributions. And as highlighted by Roy, income tax is capped at the highest tax bracket of 20%.

    Put it in another way, a higher income earner (say $20,000 pm) pays taxes & CPF the same rate of taxes/CPF as a lower income earner ($5,000 pm) for the first $5,000. But a lot less taxes/CPF for the balance $15,000. This is the regressive-ness in the system.

    Another example of regressive-ness is found in the corporate tax structure and dividend payments. More than 10 years ago, tax on dividend was eliminated with the abolition of input franking credits. If a low income earner ($5,000 pm) earns all his income from dividends, he is effectively paying net 17% of tax, as this is the flat corporate tax rate and dividends are paid from after tax profit. If a very high income earner ($20,000 pm) earns all his income from dividends, this person is still paying the effective net 17% of tax. This is regressive.

    There are many other examples of such regressive nature/characteristics in the tax system. If we were to take all these into consideration, Roy’s conclusion is the TRUTH.


  2. Weiliang

    How did you miss out GST? Roy, please put in more thoughts into this instead of churning out so many articles. Have someone review your work first. Else the PAP dogs will keep barking on the flaws and distract other readers. Nice effort though. But you need to be more careful, really.

    • Roy Ngerng

      Hmm. GST is broad-based though. It’s not tiered to income, so assuming someone spends proportionate to their income, they are spending the same 7%. In effect, it creates more burden for the poor.

      • Jovian Ng

        ROY! CPF IS NOT A TAX! You didn’t know that?!:0 come on. Go to PM Lee Facebook page, he posted a video of finance minister Tharman talking about tax and benefits. Said that for every tax dollar from the rich, they get $0.20 back, and for every tax dollar from the poor they get $6 back. Whether you are Pro pap or anti pap, go check out the video. And one more thing Roy, CPF is a savings scheme. It’s designed such that in your old age everyone has about X dollars of money to spare. So obviously the lower income will contribute a larger percentage of their income to hit that same quota. But it’s is an excellent scheme, you get 1-2% interest on your CPF compared to putting it in the bank, and you also get to use CPF for medical care or buying your house! What disadvantage is there? Probably only if:
        1. You wanna invest in a big business or your own start up and lack the capital
        2. You wanna go on a big holiday and travel round the world at age 60+ but you can’t get your money out… Probably so that you won’t spend everything and then become a burden to your children and society after you have depleted your savings.

      • Peace

        Finally someone with the right perspective on CPF. It’s a tax disguised as a savings scheme. I arrived at the same conclusion that our overall tax n transfer system is quite regressive.

  3. John MacE

    Dude, you cannot be serious. Whatever your misgivings on CPF, it is not a tax! What’s the point of so many graphs when your underlying premise is all wrong? I mean, how do you expect to be taken seriously?

    All over 100 people ‘liked’ your post?! Jeeze…

    • James

      I think Roy needs to explain it properly and maybe point to a previous link if he has already discusssed this somewhere. This assumption appears flimsy on its own if no proper justification is provided. CPF is a psuedo tax because it is money controlled by the government. It appears to be yours because the money is spent on yourself. It is a complicated mechanism of forced contribution not different from tax, but with zero distributive effect.

    • Ace

      If you are a PR, CPF is not a tax because you can draw it out when you give up your residency status.

      For Singaporeans, CPF is no different than a tax that goes to social security for retirement, since you cannot draw out all your CPF at retirement but is converted to CPF Life. In fact, if there was no such thing as CPF and everyone working in Singapore (residents and foreigners) pays the same higher tax structure (which includes social security tax), Singaporeans will be able to compete on a level playing field and extra money from taxes collected from foreigners and PRs could be channel to social programs for Singaporeans.

      In addition, prices of property would be much lower because Singaporeans would really have to be prudent when they use cash (rather than CPF) to pay for their mortgages. CPF money is like using a credit card to make payment; you do not feel the pain until you reach retirement age and then you realize that you need to continue to work because you have an expensive property but no cash. You get a grade “A” for balance sheet but a grade “F” for your cashflow statement. The symptoms are already apparent for all to see currently (more and more people in their 70s and 80s are working).

      So no CPF=lower property prices=lower percentage of salary goes to paying for housing=lower cost of living=better quality of life.
      That’s how we can achieve the Swiss standard of living which was promised 20 years ago but never fulfilled. Your guess is as good as mine why this will never happen as long as we have the MIW in power.

    • DetachedObserver

      It is perfectly valid to compare CPF’s monthly contributions by both employers and employees to normal taxation in the scope of how much it reduces the available disposable income per income tier. In the scope of Roy’s discussion, you can clearly see that together with effective income rates that the incumbent’s revenue policies are regressive in nature since they have a far greater impact in reducing the purchasing power of the lower and middle income tiers.

      It is however, not complete. To complete it, someone should take Roy’s work and combine it with fees collected from consumptive transactions like COE, etc.However, I do not think taxes of the consumptive nature will tilt the figures that much – it is well established in economic and government policy studies around the world that they are regressive in nature as well.

      In addition, Singaporeans and PRs rely on their CPF to make HDB flat purchases so much so that the majority will not be able to have that one time payoff in the future. In essence, the state is trading away the promise of a future payoff of Singapore dollars for a place of residence on the island for 99 years (or even less).

  4. LP

    Excellent analysis, IMO, I believe you should add in the employer side of CPF contributions as they are pay that company could have given as salary but is withheld as CPF. The figures should change, but your arguement should be more concrete

    • Roy Ngerng

      The intention of the article is to look at the purchasing power that the individual would have after tax+CPF, so essentially what take-home pay is.

      Thus the article stands as it is, because for the poor, after tax and CPF deductions, they would have much lower proportionate take-home pay than the rich.

      The system needs to be more even and fair.

  5. Pingback: How Are Taxes Built For The Rich In Singapore? | The Heart Truths « Tax Rate Calculator
  6. Lim Chiang Fong

    Your analysis is flawed. CPF is not a tax. It is a forced national savings plan to set aside $$ for the lower income. If not how would anyone be able to own an hdb? The rich needs to be tax overall on a low level. Consumption taxes like COE, petrol taxes, GST, sin taxes will take care of the in equality. They will need to spend on consumption anyway.

    We need the rich to Spend on our shores, if not who fills up the taxis, the airport cargo hold, the terminals.
    If the tax on e rich is raised to 40%, who is going to book their income in Singapore? If estate duties are still in place, how can we ever become e Asian private banking sector with more than $1 trillion of funds parked here? How much these funds do to the economy and keeping e Singapore dollar strong?

    How much of the government spending today of sgd 50billion are funded by your so called poor tax?

    If you would like to analyse e government policies, please do so in a holistic manner.

    • Roy Ngerng

      So, essentially, you believe in perpetuating inequality in Singapore?

      Sure, we can do that. There are numerous research which shows that income inequality will be detrimental to society and cause it to fall apart. I will leave this to how Singaporeans would like to decide the path of the nation, and history and evidence has a proven track record on this, more than the politicians do.

      • Fred

        I just came across this blog – and like others I wondered how you could take an accumulative and non-redistributive system like the CPF as a tax. Like it or not, it is money set aside for yourself! The whole idea of real taxation is money taken out of your pocket to benefit the general public (you included) for roads, security, social benefits for the poorest, etc. CPF is NOT that. The fact that the money is not immediately available and comes with conditions on how you use it is the pendant of being tax-efficient throughout your life, but that money goes entirely to you – and you only. It’s just not a tax…
        As for taxing the rich more, of course that’s possible! But then, why would the rich come and stay in Singapore? For the harsh climate of permanent heat and humidity? I don’t think so – think Miami or Tuscany and you see a much finer climate. For the cultural activity that competes with NYC’s, London’s, or Paris’? I don’t think so – think about the last time you came across a Picasso or a Rembrandt painting here. Come on! Rich foreigners, whether Indonesians, Indians, Americans, Brits or others – they all come here because of the safety and low taxes. Rich Singaporeans – like it or not – became rich because of the presence or other (and even richer) people = look at the fortunes built in property over the past decades, or those in the catering, hotels, or private banking sectors… The “Singapore Boom” of the last 30 years is because of the low-tax system. Otherwise, companies would have started their local presence elsewhere – like HK.
        If you want to help the poor, here is what could be done = change the CPF from a “self-rewarding” system (where you hoard money tax-free, including local, normal, not-rich workers) and change it into a pure redistribution system (like the ones in France – I’m French – and Germany) where the money is shared equally amongst everybody… I doubt anyone here would like that – including those Singaporeans who can’t stand the system as it is… In France, you give 25% of your gross salary for Social Security (while you boss gives 40% on top = yes, that’s 65% of your total gross that goes into taxes), and then another 30% to the income tax = those 55% of your income are gone, whatever the amount you gave. And then, you have a 20% sales tax. So, let’s say your boss sets aside 140.000 to pay you. Out of this, he give 40.000 to the state for social security and 100.000 to you. Then you give 25.000 for social security as well, then you pay income tax of about 30%, which takes another 25.000. You now have about 50.000 in your pocket – and everything you buy comes with a 20% sales tax = that’s 10.000 more. You ended up with a NET spending power of 40.000 while you cost your firm 140.000 !!! Do you now see how a fully redistributive system can lower your income? And why people cannot tolerate it anymore? This is also why France is loosing all its companies, and jobs, and brains – all leaving a country that truly taxes you to death… and a lot of these companies, jobs, and brains are relocating to Singapore…
        But in return of these very tough taxes, of course, everyone gets 1000 to 2000 euros per month upon retirement… Now, that’s MAX 2000 euros per month for about 15 to 20 years, even though you contributed 10.000 euros per month for 40 years… How would people in Singapore like this system? I’m not sure…
        I agree, it’s terrible to see old people pushing carts or selling paper towels in the street. But the cost of changing this is a total change in mentality, where people agree to pay money for other people as a whole societey. It’s hard, and also probably not in the mentality of most people in Asia – where you put your parents and family first, where you believe (rightly) that wealth is fine if it comes from your hard work, and that the lazy should not necessarily get the money you’ve worked so hard for…
        I’m not saying those with low wages are lazy – really not my point here. But it takes a different kind of mentality than the one that prevails in Singapore, which is mostly “Help yourself, and God will help you”…
        Good luck,

  7. georgia tong

    To Lim C F – Roy’s analysis is solid. Please read his other articles and comments on this article. Your definition of ‘tax’ is too rigid that is why you are unable to appreciate Roy’s in depth analysis.

  8. Roy Ngerng

    Hello everyone,

    CPF has an element of risk-pooling within it, which means there are CPF functions which are similar to tax.

    “As with any other annuity product, CPF LIFE operates on the principle of risk-pooling. Interest earned on the refundable LIFE annuity premium is pooled and shared among the surviving participants. This allows some people to pay a smaller premium compared to the total income they can expect to get.”

    Click to access CPFLIFE_FAQ.pdf

    In this context, the poor in Singapore are shouldering the burden of one another.

    • Jovian Ng

      Roy, a completely equal society is not possible, that would mean communism. Sure there are definitely gonna be rich people cause some people are just born more gifted, got lucky, or worked harder and of course a lot of luck. While others may have been born into broken families, influenced by poor role models and stuff like that. That’s why there is a divide. We should target the root cause of the problem, through education, ensure everyone gets a good education and is taught the right moral values . Not just taking from the rich and giving to the poor, but of course we nut ensure a minimal standard of living for the poor.

  9. Lim Chiang Fong

    To Roy, Georgia,

    I will read e articles in more details and will be happy to discuss as a Singaporean.

    I do not love e CPF system, neither do I love e regressive tax policies. But I believe one thing our CPF system vs CALPERs, vs Australian vs Malaysian EPF, at least it delivered some benefits to the Singaporeans.

    Competing for e rich to park $$, pay tax in our system is akin to attracting “talent”. Let’s see. A millionaire investor like Jim Rogers, Modi, ecuarin, every $1m income they book in Singapore, we tax them say 20% which is $200k per $1m of income. I take your argument of the inequality . Singaporeans with $60k of annual income. 22% of tax including CPF : $13.2k. It takes at least 16 Singaporeans from e lower income bracket to fill every $1m that the rich book in Singapore. How many Singaporeans with jobs can fill that?

    So when we chase e rich out with higher progressive taxes. Who have to pay for e services?
    Remember, the rich are very mobile. we are not.

    Then we go into e situation of Malaysia, We have to increase government debt just to fulfill e citizens medical, housing needs. And when the government cannot pay, who pays in the end? still e citizens right? See e case of Greece. The civil servants gets retrenched. E economy becomes a standstill.

    We do not have our own natural resources, we have to import almost everything. If we do not import e RICH. Are we going to find enough economic sustenance and also even land to grow food to fill our stomachs.

    • samuel

      Either u are rich speaking for urself or u are a defeatist. Singapore is not going to die without these millionaire blood suckers. If inequality can be reduced, even the lower income would have sufficient income to spend and boost the economy. It us absurd to depend on people like saverin and gongl

      citizenship is to rake in more profit from property investment and m

    • Roy Ngerng


      First, Singapore’s CPF is the smallest retirement funds among the developed countries and even compared to the developing countries like Malaysia, Thailand, Indonesia, Philippines, China and India. So, Singapore’s CPF isn’t strong.

      Second, in Sweden, tax for the rich is at 56.6%. Sweden and the Nordic countries continue to be one of the most competitive, innovative and creative economies in the world.

      Higher taxes will drive the rich out? Well, look at the other countries and see for yourself what the reality is.

    • Roy Ngerng

      Hi, perhaps you would like to ask the author what he thinks before quoting him out of context.

      I wrote the article.

      And let me say this – based on historical evidence, a society where there is high inequality will tear itself apart.

      So, let me say this – if Singapore continues to pursue policies which create inequalities, we will breakdown. So, if Singaporeans and our government want to save out country, as I’ve stated, it’s very clear that we need to ensure that the country reverse our current course.

      • Jovian Ng

        What policies are exacerbating inequality? CPF? I don’t think that is the main cause. I say target the root, education, retraining, skills future is hence a good policy.

        I guess society is like a maxwell Boltzmann distribution curve. When you raise the temperature of the system, meaning making it more competitive and open globally, there is a wider range of kinetic energies, hence higher inequality. But in general there is a larger proportion of molecules who can overcome the activation energy, or so meet a decent living standard. Still there are the slowest molecules, they will always be there, but we can decrease the proportion of them.

    • samuel

      There are many ways to build abd sustain economy. Depending on foreign millionaires and fair weather investors is certainly the stupid way. The government must be really stupid. Abd people who believe that this is the only way to sustain our economy are equally stupid.

  10. sbksim

    Ok, could be a dumb question to ask. Typically, your very rich people own businesses, so for this category, everything is channelled through the companies they own. Income tax may not even apply to them, much less CPF? No capital gains tax, so I just make lots of money spinning investments, will I be taxed?

    • faber

      Good question. Only naïve people believe that the very rich millionaires coming into Singapore pay taxes close to the 20% rate. The American billionaires do not want to pay the 15% capital gains tax in USA (capital gains are not taxed at marginal tax rates). They want to be in Singapore where capital gains tax is ZERO……….

      Corporate tax rates in Singapore starts from ZERO to 17%. With tax holidays, investments schemes, etc…. effective tax rates for the rich investors starts from ZERO to 5/10%……….


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  12. Hmm.

    ‘According to Black’s Law Dictionary, a tax is a “pecuniary burden laid upon individuals or property owners to support the government […] a payment exacted by legislative authority.” It “is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority” and is “any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name.”[1]’
    For a quick and dirty overview. That said, taxes themselves are a sort of risk pooling. They spread the risks as well as costs of moral hazard as well as uneven distribution associated with providing of public goods.

  13. Ripped Off

    We have been ripped off by the CPF scheme. The government has been paying pittance in return and has succesfully ties up all our retirement funds with inflatered housing cost and medical funds. If I have contributed the same CPF amount in Malaysia, I would have 3 times more money in my retirement account based on their returns below.
    1983 to 1987 1988 to 1994 1995 1996 1997 to 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
    8.5% 8.0% 7.5% 7.7% 6.7% 6.84% 6.00% 5.00% 4.25% 4.50% 4.75% 5.00% 5.15% 5.80% 4.50% 5.65% 5.80% 6.00% 6.15%

  14. henry

    We can have a comfortable society without the millionaires. The argument that it is because of their presence is absurd. If any, their needs are being served by an army of cheap workers to clean and cook for them. This type of jobs we do not want! Have they created jobs that are unique for Singaporean talent?
    The answer is no. Instead we have allowed, invited them to prostitute us… with a smile and applause too!

    CPF is a tax. Not a pure bred but still a tax. COE is a tax, a consumption tax, so is GST, petrol tax. The difference is that CPF and COE, you get it back in some small portion. I just wish the opposition could offer us some other alternative. Until then, we are very much stuck, with endless grumblings and hummphs.

    Why oh why is the opposition does not counter this at all?

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  17. Curious

    I find your article very interesting. However i would like to inject that making all income levels pay 20% in CPF contribution would not be feasible. This is because CPF is used as a “back up plan”. Its used to ensure that singaporeans and PRs dont be penniless at an old age. It can only be paid for certain areas when u are younger, like housing and medical fees. With that in mind, having a 20% CPF rate for a person who gets for example, 1 million a year, would be contributing 200k to his/her CPF account every year. And thats not feasible because CPF is non withdrawable. Within a few years that person’s CPF account would be exploding and with no where to spend it on. CPF as i mentioned, is a back up plan and thus for people who are more affluent, naturally there would be less of an issue about paying for their retirement, thus there would be no need to “force them to save up”.

    You may argue that the CPF is a form of tax that the government earn from the people to generate more money. And i do believe that this is true. However i would like to highlight that that is exactly the same as putting your money in a bank. No money ever just stays anywhere. The money you put into the bank is used to generate more money, it honestly doesnt just stay there. Similarly for the CPF, it probably is true our money is being used. But when we need it to pay for our housing, medical fees or retirement, it can be used and you will get the money that numerically you have. Its the same concept as withdrawing cash from the bank, just that for CPF you cant wathdraw it in the form of hard cash and you cant use it in any area of your life. And thats because its a saving.
    So in regards to the government using your CPF money, the reality is that any institution that you keep your money into works the same way. Thats how money is generated. But while your money you cash in is circulated, you still will have that amount in your savings/CPF to use as that is your recorded amount :>

    • Roy Ngerng

      You’ve hit the crux of the argument – “CPF is non withdrawable”. Where will the poor get their money from?

      Some other things to think about:
      (1) Since 2000, the rich has seen their incomes grow tremendously while the poor have seen their real incomes drop. Wealth is not fairly distributed. It’s not that the poor do not want to work hard, but it’s that their incomes are being kept from growing. What can we do here?

      (2) The CPF works the same way as how other institutions use it. Yes and no. There are systems put in place that have prevented people from being able to withdraw adequately. Considering that the poor haven’t seen their incomes grow and their incomes have been prevented from growing, and there is no risk pooling, they have to settle for a CPF which cannot grow and cannot be withdrawn. What can we do here?

  18. Curious

    Exactly, it is a saving, it is not an expense.
    It cannot be withdrawn because it is for future use, it is for retirement and other areas of your life that is important such as housing and medical fees, and not daily expenses. It is because that the lower income group do not have much must they contribute to their CPF more.
    They put in 1k, the employer puts in an additional 1k too.

    And CPF does grow. It has an interest rate of about 3%, even higher than any bank.

    Getting the rich to pay more CPF actually makes the rich richer. Simply because CPF goes 2 ways, employee and employer. If the rich pay more CPF, their employer contributes more CPF too.

    So if we pay 1k CPF and our emplyer pays 1k CPF, we get 2k.
    They pay 200k, their emplyer pays 200k,
    They get 400k.
    They would be able to buy a house every 1-2 years.
    So that would make the rich wven richer.
    Increasing the CPF is not a solution and is not a way to even out the tax rates because it is saving and it is money that cant be withdrawn as hard cash but can be used in other areas

  19. Curious

    The rich poor divide increasing where the rich get richer and the poor get poorer is actually a world wide phenomenon and doesnt happen only in singapore.

    Taxing the rich more and getting them to pay more doesnt help the poor. In fact in contrary it helps the government directly and that may not even reach the poor. To help the poor we must put in social security nets, subsidies and benefits. Increase minimum wages, enhance community involvement and such. Increasing taxes may help in the government’s overall budget but if your intention is to help the poor, then increasing taxes is not a solution.

    • Saachi

      I think it really depends. Taxing the rich more does help if there is social transfer of the tax to the poor. But this is a very cumbersome method has it creates an administrative overhead. But we must also not forget that the government fund the rich too. The millions of subsidies given to companies flows directly to the rich. Even the government’s plan to raise workers’ income also funds the rich. This government is very happy to fund the rich and can even use the poor as an excuse to fund the rich. But when it comes to helping the poor, they stinge on such notion and consider it as giving handouts to the lazy. The problem lies with the government really and the way it continues to help the rich get richer by flooding our island with cheap foreign labour they call “talents”.

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  27. Cory

    CPF is not a Tax as earlier comments given. Hear me on. You can use the money to buy housing from the “force saving”. Majority of people did exactly that I assume. And when you hit 55, you can start drawing. All this time with CPF, you are given reasonable interest rates. After you pass, you can pass to next of kin. By the time you retire, you should have at least this minimum amount set aside anyway (assuming there is no CPF), the so call classified under “disposable income” of your definition, which as many people know is still not enough. The money is always there. People tend to distrust the government so much that CPF conspiracy theory ring around and cloud our minds that it becomes illogical.

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