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.
- The Singapore government spends the least on social protection, as compared to the Nordic governments.
In the last part of the article, we showed you that what Singaporeans pay into personal income tax and CPF, and what we spend out-of-pocket for healthcare, education and retirement, is actually almost about the same as what the citizens in the Nordic countries pay into personal income tax and social security. Yet, they are able to receive healthcare, education and retirement for free, whereas we would have to pay out-of-pocket. The flipside is that the poor in Singapore is thus worse-off and if they cannot to pay, they cannot access services, such as healthcare and education.
Yet, this shouldn’t be the case since Singaporeans pay as much as the citizens in the Nordic countries do.
In this article, we will show you that for whatever Singaporeans pay into personal income tax, CPF and out-of-pocket expenditure, we may at most only get back what we pay. However, for the citizens in the Nordic countries, they get back significantly more than what they pay.
According to the Ministry of Finance, the Singapore government spends $22.4 billion on social development, which includes healthcare. There was also a $11.7 billion withdrawal from CPF by Singaporeans.
However, the above amount may be inflated, as we understand that it may include transfers to the Endowment funds, which are not social expenditure in the current year per se.
At this point, it would be worth to note that of the $24.7 billion contribution by Singaporeans into CPF, there was only $11.7 billion withdrawn – Singaporeans do not even withdraw out half of what we put into CPF. Thus for some Singaporeans who might believe that the CPF is “our money” and that we should be able to take it out when we want to, the statistics doesn’t seem to show that. This would explain why the CPF have thus accumulated $230.2 billion of our monies thus far – 10 times what we have put in!
Thus in total, the Singapore government would in a sense, if we look at it from a cashflow perspective, spend $34.1 billion on social protection for Singaporeans (combining social development expenditure with CPF withdrawals).
In comparison, in the Nordic countries, the Finnish government spends $122.8 billion, the Danes would spend $170.0 billion and the Swedes, $228.9 billion.
This means that for each citizen, the Finnish government would spend $23,699, the Swedes, $28,072 and the Danes, $33,421. In comparison, the Singapore government spends a paltry $8,942, significantly much lower than the governments in the Nordic countries (Chart 1).
In the previous article, we had showed you that the Finns would pay $23,699 into personal income tax and social security per citizen, the Swedes, $28,072 and the Danes, $33,421. Singaporeans pay $8,486.
If you compare what the citizens in each country pay into personal income tax, and what they receive in terms of social protection, you would see that the citizens in the Nordic countries receive much greater returns on what they pay.
The Swedes would have a return of 136.1% on what they pay in personal income tax and social security, the Finns would have a return of 137.0% and the Danes would receive 149.6%. However, for a Singaporean, they would only have a return of 105.4% (Chart 2).
This means that the citizens in the Nordic countries are able to receive 36 percentage points more returns than we do, on what we pay to the government.
But as we had illustrated in the previous article, Singaporeans also spend an additional $7,774 from our own money to pay for healthcare, education and retirement – this is something the citizens in the Nordic countries don’t have to do, as all of it is covered by the government for free.
Thus if you add it all up, Singaporeans are really paying $16,260 in total for personal income tax, CPF and our own expenditure for healthcare, education and retirement.
Seen in this light, the expenditure on social protection by the government would be only 55% of what we are paying.
Now, if you compare with the Nordic countries, again, you would see that for what the citizens in the Nordic countries pay, they get back a return of between 136.1% and 149.6%. However, Singaporeans are only getting back 55% of what we pay – not even the full amount of what we pay (Chart 3)!
In short, in the Nordic countries, the government pays more than the people to take care of its citizens. However, in Singapore, the citizens pay more than the government and the people may, arguably, be taking care of the government instead!
In other words, the governments in the Nordic countries give back to their people only a third as much as what the Singapore government does.
Now, mind you, as we have discussed in the previous article, Singaporeans pay the same into personal income tax, CPF and out-of-pocket expenditure as what the citizens in the Nordic countries pay. But yet, the Singapore government spends only half of what the governments in the Nordic countries are spending!
The question then is – would you prefer a system where you could park your money with the government, where they would redistribute it back to you, and not only that, but top up a bit more and give you more than what you have put in? Or would you rather the Singapore system where the government gives back less, and on top of that, you still have to pay extra? And if you cannot afford to pay extra, you would be left out in the cold.
At this point, it is quite clear that if Singaporeans are paying as much as the citizens in the Nordic countries, and the citizens in the Nordic countries are able to receive free healthcare and education, and higher retirement funds, while we have much lower subsidies for healthcare and education, and lower retirement funds, and still have to pay more out of our pockets, then wouldn’t it make more sense to follow the Nordic system, where we receive more returns from what we pay, and where everyone would be protected, and not like now, where the poor are left to fend for themselves?
Still, we are not done yet. There is another twist to the story. Singaporeans might think that we pay low taxes, if we look at personal income tax – or direct tax. But what if we include indirect tax, or tax on goods, services and products that we purchase?
Now, that’s another story which would again show you that Singaporeans are not paying the lowest tax. Look out for the next part of this article to find out more.
You can read the other parts of the article here.