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.
- Personal income tax in Singapore might be the lowest in Singapore, but Singaporeans pay 3.5 times more into indirect tax than direct tax.
- Singaporeans pay almost the same amount into direct and indirect tax, as the citizens in the Nordic countries do.
In the previous articles, we have shown you that what Singaporeans pay to personal income tax, CPF and out-of-pocket expenditure for healthcare, education and retirement, is actually the same as what the citizens in the Nordic countries pay into personal income tax and social security but receive healthcare, education and retirement for free.
Also, we had shown you how for what Singaporeans pay, the government spends only about 60% of what we pay, whereas in the Nordic countries, their government would spend more than twice as much what the Singapore government would.
In this article, we look at the issue of taxes from another angle – between direct taxes and indirect taxes.
Carrying on from the last article, we would look at what Singaporeans pay into personal income tax, CPF and out-of-pocket expenditure as “direct taxes”, or $16,260. For the Finns, the direct tax is $17,305, $20,621 for the Swedes and $22,336 for the Danes. You can see that the “direct taxes” that we pay is similar to what the Nordic countries are paying.
In Singapore, the total indirect tax that we pay on GST ($8.8 billion), stamp duty ($4.2 billion), betting taxes ($2.3 billion), property tax on private properties ($3.5 billion), excise duties ($2.1 billion), motor vehicle taxes ($1.8 billion), custom duties ($8.9 million), water conservation tax ($177.7 million), estate duty ($8.4 million) and other taxes ($4.1 billion) is a total of $27 billion.
In the Nordic countries, the Finns pay $48.9 billion in indirect taxes, the Danes pay $80.1 billion and the Swedes pay $122.7 billion.
As mentioned, Singaporeans have been told that we pay low income taxes, but when you compare income taxes with indirect taxes, you would see that Singaporeans pay 3.5 times as much into indirect taxes than direct taxes, whereas Swedes and Finns pay about the same indirect taxes as direct taxes, and the Danes pay only about a lesser 70% of direct taxes into indirect taxes (Chart 1).
Thus is it really the case that Singaporeans pay low personal income taxes? When you include indirect taxes, Singaporeans actually pay a lot more of our income into taxes – 3.5 times more.
When we add the indirect taxes into the “direct taxes” outlined above, the total taxes that Singaporeans are paying would be $89.1 billion. This would be $138.6 billion for the Finns, $193.7 billion for the Danes and $291.0 billion for the Swedes.
When seen from a per capita basis, Singaporeans would be paying $23,334. The Finns would be paying $26,747, the Swedes, $35,669 and the Danes, $38,080 (Chart 2). Thus you can see that when “direct” and indirect taxes are combined, Singaporeans are again, actually paying about the same amount as the Nordic countries.
Perhaps the illustration below would be clearer. When we look at “direct” and indirect taxes as a proportion of the total government revenue, we see that this would form 91.1% of the Danish government’s revenue, 94.1% of the Finn’s revenue, and 96.7% of the Swedes’. In comparison, our “direct” and indirect taxes would actually form 85.7% of the revenue – which is again, similar to the Nordic countries (Chart 3).
By now, you would be able to see through the veil of what we have been told.
We have been told that taxes are low in Singapore and thus Singaporeans should not expect the government to step in to subsidise for public services any further. However, in part 3 of the article, we have already shown you that when we look at personal income tax and CPF, Singaporeans are actually paying about as much as the citizens in the Nordic countries. In part 4, we went further to show you that on top of personal income tax and CPF, if we include out-of-pocket expenditure on healthcare, education and retirement, which the citizens in the Nordic countries don’t have to pay but get for free, we again pay the same amount as the citizens in the Nordic countries pay for personal income tax and CPF.
Finally, in part 5, we showed that the Singapore government spends a much lower proportion of what Singaporean spends, whereas the governments in the Nordic countries would actually spend more than what their citizens spend. In effect, the government in the Nordic countries would subsidise the spending on public goods for their citizens, but in Singapore, Singaporeans have to subsidise the spending for government instead! Does this even make sense?
And in this part, we also showed you that, when we include indirect taxes, Singaporeans are again paying about as much as the citizens in the Nordic countries. But as we have shown in part 1, 2 and 3, because of how wages are so unevenly distributed in Singapore, low-income Singaporeans would fall out of the system, because they cannot afford to pay for healthcare and education, and would never be able to retire.
However, for the citizens in the Nordic countries, they would still be able to save on a regular basis, and not only that, they would be able to obtain free healthcare and education, and receive higher retirement funds than Singaporeans do – and it is not just a select group of people who are able to do so, but all of the citizens in the Nordic countries who are able to do so.
Thus if Singaporeans are already paying as much as the citizens in the Nordic countries, but whereas the citizens in the Nordic countries can access the basic services for free, but where Singaporeans have to pay out-of-pocket, which results in the poor and a huge proportion of Singaporeans not being able to access these services, the question is – would Singapore be better off if we follow a tax structure that is similar to the Nordic countries?
Not only is the tax structure in the Nordic countries more streamlined and straightforward, it is also more transparent. It is clear how much citizens give and how much they get in return. On the contrary, the tax and expenditure structure in Singapore is messy and Singaporeans have been made confused by how much we should get back in return. The result is that when we are told that the government does not have enough money to increase subsidies for healthcare and education, we blindly believe.
But very clearly, the government can still increase its expenditure, and increase the subsidies for Singaporeans.
Why do we say so? In the next part of the article, we will show you how.
You can read the other parts of the article here.