Opposition member Lim Tean posted a message on his Facebook page today (11 Oct) highlighting that in the recent Oxfam Inequality Report, Singapore in fact, came in last in terms of government policy on progressivity of taxation.
Mr Lim also noted that this ran contrary to what Heng Swee Kiat said last December at the Straits Times Global Outlook Forum 2018, “Our overall system of taxes and transfers must remain fair and progressive.”
“Well, Guess what? In the Oxfam report on Governments’ commitment to reducing inequality 2018, the People’s Action Party (PAP) government comes last out of 157 governments when it comes to the progressivity of taxes! This is another instance when the PAP says something in public which is quite different from what it practices,” Mr Lim wrote on his Facebook page.
“As Oxfam noted, Singapore has become a tax haven for the rich. The PAP believes in trickle down – that if you make the rich richer, their wealth will percolate down to the rest of society. Alas, ordinary Singaporeans have not been getting even the crumbs below the table from the rich and powerful! Instead, they are being taxed mercilessly to subsidise the rich.”
“I always advise my friends that the only words of Heng Swee Keat worth remembering are those he uttered in the 2017 Budget Speech where he said that the government will have to find new ways to tax in order to raise revenue in the coming years,” Mr Lim added.
“If you remember those words of Mr Heng, you will have a foreboding of the kind of dark future in store for ordinary Singaporeans if the PAP remains in power.”
Minister Heng: Tax must remain fair and progressive
At the Straits Times Global Outlook Forum last December, Finance Minister Heng Swee Kiat told everyone that Singapore needs to “preserve fiscal sustainability” so as to develop an adaptable and innovative economy, nurture a caring and strong society and keep the country secure and resilient amid the “unpredictable and complex changes” ahead.
“This is about staying responsible and spending within our means. As expenditure increases and revenue growth slows, we must think of ways to manage expenditures and raise revenues,” he said.
“Our system must remain pro-growth. Our overall system of taxes and transfers must remain fair and progressive. We must keep our revenue base diversified.”
However, based on Oxfam report, which put Singapore at the 157th position out of 157 countries in terms of policy on progressivity of taxation, it shows that Minister Heng has failed in keeping Singapore’s taxation fair and progressive.
What is progressive tax?
According to investopedia.com, a progressive tax is a tax that imposes a lower tax rate on low-income earners relative to those with a higher income, making it based on the taxpayer’s ability to pay. That means it takes a larger percentage from high-income earners than it does from low-income individuals, relatively speaking.
The degree to how progressive a tax structure is depends on how quickly the tax rates rise in relation to increases in income. For example, if one tax code has a low rate of 10 percent and a high rate of 30 percent, and another tax code has income tax rates ranging from 10 to 80 percent, the latter is more progressive.
The rationale of progressive tax is that people with a lower income will usually spend a greater percentage of their income to maintain their standard of living. Those who are richer can typically afford the basic necessities in life.
In Singapore, even though the lower income group generally don’t even pay any income taxes, Singapore has a lot of other indirect taxes. Chief among them is GST, which basic necessities like food are not exempted.