The Online Citizen A Community of Singaporeans 
By Leong Sze Hian
I refer to the article “Taming inflation” (ST, Nov 25). Amidst all the statistical jargon in the media such as:
... September CPI year-on-year 2.7%
... October CPI year-on-year 3.6%
... October CPI month-on-month 1.3%
... the good news is that inflation is set to come down by the end of next year. The bad news? It is likely to climb higher before coming down.
... Trade and Industry Minister Lim Hng Kiang recently told Parliament that inflation could go as high as 5 % in the first quarter of 2008 before moderating for the rest of the year to range between 3.5 and 4.5 %.
... Singapore's central bank announced its new 2008 forecast on 19 November, raising it from the 2 to 3 % projected last month. The figure is expected to be 2 % this year.
... a hike next January in the annual assessed values of HDB flats by the tax authorities will push CPI up by 1.5 to 2 percentage points.
What exactly in one line does it all mean to the average man on the street?
Well, if I have to put it in a one-liner – inflation has gone up by 4.1 % already this year, just 4 months after the GST increase.
Wage increase eroded by inflation
The expected average wage increase for workers this year may thus be eroded by inflation. The median wage increase and wage increase for lower-income workers may be negative in real terms.
It may appear that the central bank may not be very good in forecasting inflation, with its inflation forecast jumping from 2 to 3 %, to 3.5 to 4.5 %, in just 1 month.
So, how accurate do you think is its forecast now that inflation is expected to be 2 % this year?
I also tend to agree with Citigroup economist Chua Hak Bin, that the hike in HDB property tax on 1 January 2008, may push CPI up by 1.5 to 2 percentage points.
So much for the statement when the property tax hike was announced that most wouldn't have to pay for the increase (more on this later in this article).
Ministers pay rise – again
Perhaps Ministers may not be very much affected by inflation increases, because Minister Teo Chee Hean said when announcing the increase in Ministerial pay that the second tranche of the pay rise for Ministers will be implemented at the end of this year.
"Salaries at the MR4 Grade are currently at 55% of the benchmark. Given the large gap, it is not realistic to close the gap fully in one go. Instead, we will close half of the current gap, that is, from 55% of the benchmark, to 77% of the benchmark by the end of this year. This will be effected in two steps - one step now, and another step at the end of this year. Next year, we aim to close half of the remaining gap, bringing salaries to 88% of the benchmark by end-2008." (Sprinter)
Highest property tax for smaller flats
I refer to the articles “Annual values of HDB flats to rise” (ST, Nov 14) and “Taxman raises HDB property value, most unaffected for now” (Today, Nov 14).
3-room flats will face the greatest increase in property tax of 25 per cent, followed by 20 per cent for 1-room, 2-room and 5-room, and 18 per cent for 4-room and executive flats.
Why is it that smaller flats which generally are lower-income households are shouldering the highest increase in percentage terms of 39 per cent for 3-room, and 11 per cent for 1 and 2-room, compared to the largest flat type, i.e. executive and 4-room flats?
Isn’t this in a way, akin to the poor paying more, and the rich paying less?
How is the quantum of increase determined, and what criteria were used?
With about 40 per cent of households having monthly household income that has hardly gone up in real terms over the last six years or so, shouldn’t affordability be a key criteria in deciding the increase for smaller flats?
In this connection, Reuters news reported that:
“The proportion of Singapore residents earning less than S$1,000 (US$690) a month rose to 18 percent last year, from 16 percent in 2002, central bank data released late last month show… and Singapore's Gini coefficient, a measure of income inequality, has worsened from 42.5 in 1998 to 47.2 in 2006, and is now in league with the Philippines (46.1) and Guatemala (48.3), and worse than China (44.7), data from Singapore's Household Survey and the World Bank show”. (“Singapore’s economic boom widens income gap”)
Why not exempt 1 and 2-room flats from the increase?
Although about 90 per cent of all owners of HDB flats will not pay more property tax next year and 2009, because of the GST offset package of an extra $100 rebate annually for the next two years, the $100 may not be enough to offset the current hike in inflation to five per cent.
When the GST offset package was announced, it may not have accounted for the possibility of inflation rising from one to five per cent, after the GST increase.
To put this into perspective, just $10,000 of annual spending may mean an increased cash outflow of $600 (2 per cent GST increase plus 4 per cent increase in inflation).
In this example, this amount of $600 may wipe out any GST offset.
Therefore, in reality, from an actual cash-flow perspective, the increase in property tax may have to be paid out-of-pocket by flat-owners.
Moreover, what will happen from 2010 onwards, when the GST offset ends?
Why raise property tax?
With members of Parliament (MPs) raising in Parliament on 12 November, worries over food and other price increases, the timing of the property tax increase announcement on the same day could not have come at a worse time, as it may be like a double whammy to Singaporeans.
Will the MPs’ concerns result in any concrete measures to alleviate the burden of simultaneous property tax and inflation increases?
In this context, why is property tax being raised when owner-occupied HDB flats do not gain in anyway when rental income goes up, particularly for the lower-income living in smaller flats?
Disappearing statistics
In the articles "S'pore way to fight rising cost of living works: PM" (ST, Nov 12), and "S'pore won't fight inflation with price controls" (BT, Nov 12), the former article states that :
"Its aim is to get the basics right - housing, jobs and affordable necessities... So, when rentals go up, you are not affected because you have your house, and you have something for your old age to retire by”.
In respect of housing, and having your flat as something for your old age to retire by, the basic assumption is that flat-owners can service their mortgage.
In this connection, according to the HDB's latest Annual Report 2005/2006, why is it that the statistic for the number of flat-owners whose applications for financial assistance were approved, appears to have disappeared?
This statistic has been disclosed in it's previous annual reports. The figure was 39,308, 25,168 and 16,475, for FY 2003, 2002 and 2001, respectively.
In summary, the number of approved financial assistance applications increased by 53 and 56 per cent from 2001 to 2003, and declined by 3 and 26 per cent from 2003 to 2005.
So, has the number gone up or down, compared to the 28,386 figurefor FY 2005/2006?
It may also be helpful to include statistics on the number of applications that were not approved.
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