Tax Part 4: Singaporeans Have To Spend As Much Out-Of-Pocket For Basic Necessities As We Pay Into Tax And CPF

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:

  • What Singaporeans spend out from our own pockets for healthcare, education and retirement is almost the same as what we pay into personal income tax and CPF.
  • Singaporeans pay as much into personal income tax, social security/CPF and out-of-pocket expenditure as the citizens in the Nordic countries pay only into personal income tax and social security and get back healthcare, education and retirement for free. In short, we pay the same as the citizens in the Nordic countries do.

In the last part of the article, we showed you how even though Singaporeans are paying about the same amount as the citizens in the Nordic countries into personal income tax and CPF, we still have to fork out more from our own pockets into healthcare, education and retirement, whereas the citizens in the Nordic countries are able to obtain these for free, from their governments.

In this article, we will look into how much more Singaporeans have to pay, and how this actually compares with the Nordic countries.

So, how much does Singaporeans have to pay by ourselves for healthcare, education and retirement?

According to the Ministry of Health, Singaporeans pay $8,058 million out-of-pocket on total health expenditure. Of these, employers pay about 51% of the expenditure while Singaporeans pay about 49% – this means that Singaporeans pay about $4 billion for healthcare, using our own money.

For education, we compiled the school fees paid to MOE and to universities, polytechnics and ITEs, and to tuition. MOE earned $118.5 million in school and institutions fees, whereas the universities, NUS ($328.7m), NTU ($256.2m), SMU ($77.5m), SUTD ($5.8m), SIT ($4.3m) and UniSIM ($88.7m) earned a total of $761.3 million. The polytechnics, SP ($56.9m), NP ($54.6m), NYP ($44.5m), TP ($40.5m) and RP ($40.2m) earned a total of $246.7 million, whereas the ITE earned $14.9 million. It is also estimated by Member of Parliament Denise Phua that the tuition industry “could be a S$1-billion-dollar industry”. We estimate that another $1 billion would be spent on other enrichment activities. Also, for childcare, the total number of childcare spaces is 92,779 and the full-day childcare median fees is $740 – which means that about $823.9 million is spend on childcare. Finally, there were 20,300 Singaporeans who had gone to universities overseas to study. Assuming that the tuition fees are about $100,000 a year, $2 billion would be spent in university education overseas. In total, Singaporeans would spend about $6 billion on education, by paying from their own pockets.

For retirement, in a study conducted by the Singapore Management University and commissioned by the OCBC Bank, it was “found that Singaporeans aspire to spend $1,800 per month in their retirement years” in 2005. In 2013 dollar terms, this would be about $2,252. The minimum monthly payout from CPF Life for retirement that a member can start withdrawing at age 55 is $350, which may mean that Singaporeans may have a shortfall of as much $1,902 which would not be covered under the CPF. Of course, what we need to know is the breakdown of Singaporeans’ monthly withdrawal amounts in their retirement, in order to get a better picture of how many are short by how much relative to the benchmark of $2,252. The rough estimate of the total shortfall would be about $19.7 billion.

In this connection, we estimate that only about 1 in 8 Singaporeans who reach 55 are able to meet the current CPF Minimum Sum of $148,000 entirely in cash from their CPF OA and SA accounts.

In total, Singaporeans would have to spend, using their own money, about $29.8 billion, for healthcare, education and retirement.

Now, if you would remember, citizens in the Nordic countries would just need to pay personal income taxes and social security contribution to receive next to free healthcare, free education and funds for retirement.

In comparison, in order for Singaporeans to get the same outcomes, we need to not only pay personal income tax and CPF, but we also have to pay the private expenditure for the items outlined in this article above.

Thus, if you add it all up, on top of the personal income tax revenue of $7.7 billion and CPF revenue of $24.8 billion that Singaporeans have to pay, we also have to pay an additional $29.7 billion to fund our healthcare, education and retirement. This is a massive 92% of what we pay into personal income tax and CPF (Chart 1) – almost twice of what we pay into personal income tax and CPF!

Slide1

Chart 1

In total, Singaporeans would pay $62.1 billion into personal income tax, CPF and out-of-pocket expenditure for healthcare, education and retirement. This is in comparison to the $89.7 billion paid by Finns into personal income tax and social security, $113.6 billion by the Danes and $168.2 billion by the Swedes.

But this is where the shocker really comes. When you look at how much each Singaporeans are paying, you will see that each Singaporean is actually paying $16,260. This is compared to the $17,305 paid by Finns, $20,621 paid by the Swedes and $22,336 paid by the Danes (Chart 2).

Slide2

Chart 2

Now, can you see that whatever we pay is actually the almost the same as what the citizens in the Nordic countries pay?

But mind you, all the citizens in the Nordic countries need to do is pay the same amount as what we pay into personal income tax and CPF, and they can access healthcare, education and retirement for free. But for Singaporeans, we have to pay not only into personal income tax and CPF, and because healthcare, education and retirement is not free, we have to pay additional out-of-pocket.

But yet, at the end of the day, we are paying about the same amount!

If you remember, in part 1 of the article, we had shown you how, for low-income Singaporeans, because they are paid low wages and have low purchasing power, they would have to forgo seeking medical treatment for their illnesses and their children might not be able to go to a university or polytechnic. However, for the poor in the Nordic countries, they would still be able to seek medical treatment, and still put their children, and themselves, through universities and polytechnics.

However, for the high-income in Singapore, they would be able to pay for all these services out-of-pocket, yet have even more than their counterparts in the Nordic countries have to save.

Why is it that Singaporeans are paying almost about the same amount as the citizens in the Nordic countries, but all their citizens have equal opportunities to seek medical treatment and education, and be able to retire, but for poor Singaporeans, they would be left out of the system and would be left to fend for themselves?

If we are actually paying almost about the same amount as the Nordic countries anyway, shouldn’t we receive the same benefits? Shouldn’t the poor have equal chances to seek medical treatment, and their children should have an equal chance to attend higher education as well?

So, the excuse as so often been given that because Singaporeans pay low taxes, the government cannot give higher subsidies for healthcare and education can no longer hold water. If we are already paying almost about the same amount as the people in the Nordic countries, and they are able to obtain free healthcare and education, shouldn’t Singaporeans also be able to obtain free healthcare and education, regardless of your income level?

Now, given a choice, would you rather pay a higher proportion of your income into personal income tax and CPF, as the citizens in the Nordic countries do, and obtain free access to essential public services, especially since whatever we are paying, including for out-of-pocket spending for these services, is already almost about the same as what people in the Nordic countries are paying?

But this still isn’t the end of the story. For whatever Singaporeans pay into personal income tax and CPF, and into these essential public services, whatever we pay may only be at most, whatever we may get back. But do you know that for the citizens in the Nordic countries, for whatever they pay into personal income tax and social security, they actually get more than what they pay back?

Tune in to the next part of the article for the shocker.

You can read the other parts of the article here.

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2 comments

  1. Pingback: [Infographics Part 4]: How Much Tax Are Singaporeans Really Paying? | The Heart Truths
  2. Pingback: Singapore: Why Isn’t The Government Giving Us Back Our Money? | The Heart Truths

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