By Chris Kuan
When the Straits Times reported on The Singapore Public Sector Outcomes Review by the Ministry of Finance (MOF), it did not attract a single comment of praise and roundly condemned as bias and fawning.
Readers are not wrong. Let me just pick out just the point about “our tax and transfers system remaining progressive”.
Page 20 of the Review noted the additional financial assistance to the poor and the needy and that the top 20% quintile pay the largest share of taxes and the bottom quintile receive the largest share of transfers from the government. It went on to state “The redistributive effects of these policies are evident: Singapore’s Gini coefficient is lower after government transfers and taxes are included.”
Jeez, is the MOF expecting all of us to be daft? The issue is not whether the top 20% pay the most taxes or the bottom 20% received the most transfers – the issue is whether the top 20% pay enough taxes and the bottom 20% received enough transfers to make a significant enough difference, i.e. progressive enough.
The game is given away at the bottom of the page in the chart which provides the 5 year series of the Gini Coefficient before tax and transfers and the Gini Cofficient after tax and transfers.
In 2015, these are 0.463 and 0.41 respectively. That is a difference of just 0.053 – that’s peanuts. Even in the less equal Western countries like US, the difference is more than 0.10 while in the more equal ones like Germany and the Scandinavians, the difference is more than 0.20.
Did the system become more progressive, i.e. in lowering inequality? Yeah, it did but you need a microscope to spot the difference. In 2010, the Gini before tax and transfer is 0.473 and after tax and transfer 0.42. That means tax and transfer reduced inequality by 10.2%, In 2015, the difference between 0.463 and 0.41 given above shows that tax and transfers reduced inequality by 11.4%. A barely perceptible difference.
So yes the government engineered a slight reduction in inequality but the 2015 Gini before tax and transfer is lower than that of 2010 (0.473 vs 0.463). That means market forces has as much a role as the government in engineering the slight reduction. Even so, inequality remains highest among economically advanced nations.
By the way, I wonder what happened to Tharman’s claim back in August 2015 that the Gini has fallen from 0.43 to 0.38 which took some academics and myself by surprise. That is yet to be proven.