The Singapore General Election will be held on 11 September 2015.
Has the current ruling party, the People’s Action Party (PAP), done its job or has it hurt Singaporeans instead?
Over the next two weeks, I will be compiling the past articles that I have written into the different thematic areas, so that you can see for yourselves if the PAP has helped Singaporeans or if it has actually make lives more difficult for Singaporeans.
In today’s article, the focus is on TAXES.
You can click on the red headers below to read more of each of the articles.
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%.
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.
This means that low- and middle-income Singaporeans have a much lower purchasing power than the high-income earners in Singapore. And mind you, more than 75% of Singaporeans earn below $5,000, which means that 75% of Singaporeans have a much lower purchasing power than the top 25% high-income earners. And may I remind you again, the richest 20% in Singaporeans earns as much as the poorest 80% in Singapore.
Not only that, since 1995, the richest 10% has seen their share of income in Singapore grow from 30% to 42%, while the richest 5% has seen their share of income grow from 22% to 31% over the same period. So, you can see that the rich has grown richer and richer while the poor has grown poorer and poorer in Singapore – you can see that the real income of the richest 20% has grown the fastest while that of the poorest 20% had remained stagnant.
The aim of this article is to let you know that first, tax is not low in Singapore. In fact, when you look at what Singaporeans have to pay, for the same things that the people in the Nordic and other developed countries have to pay, you will realise that we are paying the same amount of money, if not more, for the same things.
Also, the CPF has a tax component to it and the PAP is clearly making money out from it. Take a look at the illustration below.
For the median income earner, he/she has to pay a tax of 2.5% and 37% into CPF. And as we have discussed earlier, of the CPF, nearly 15% of our CPF actually becomes profit that the government is letting itself earn from us.
Also, there is the implicit tax. In the example above, if the CPF were to earn 6%, the person would have ended with $450,000. However, at the current interest rate of 3%, in order to still end up with the same $450,000, the person would have to contribute another 20% of his/her salary into the CPF – thus this additional 20% is actually the “implicit” tax that Singaporeans are paying to the PAP, or rather it is money that we are losing which we should otherwise have.
Finally, for the expenditure for healthcare, education and retirement that we would have to pay from our own pockets (which citizens in the Nordic countries and Germany only need to pay into tax and social security for), this would make up another 8% that we have to pay from our salaries.
Thus in total, the true “tax” that Singaporeans are actually paying (to get the same things as what the Nordic and German citizens pay into tax and social security) is a total of 67.5%.
Clearly, “tax” is not low. In fact, Singaporeans have to sacrifice the most – 67.5% – from our already low wages, which is why Singaporeans also have the lowest purchasing power among the developed countries.