Claims that middle-income Singaporeans are overtaxed an 'outright falsehood', says Lawrence Wong

Claims that middle-income Singaporeans are overtaxed an 'outright falsehood', says Lawrence Wong
Compared to other advanced economies such as the US and UK, Singapore’s tax burden is significantly lower, said DPM Lawrence Wong. PHOTO: ST FILE
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SINGAPORE -  Compared with citizens elsewhere, Singaporeans pay much less in taxes and yet are able to enjoy high-quality public services, said Deputy Prime Minister and Finance Minister Lawrence Wong on Friday, as he debunked claims that middle-income Singaporeans are overtaxed.

The impact of the Budget on the middle-income had come up during the Budget debate, with MPs from both sides of the aisle asking for more help for the sandwiched class who have to care for both young children and elderly parents.

In response, Mr Wong cited figures to show that for households in the middle quintile, taking into account their total taxes paid – not just personal income tax, but other indirect taxes as well – the effective tax burden is around 10 per cent of income.

Compared with other advanced economies – using estimates for the United States, United Kingdom and Finland based on publicly available data – the Republic’s tax burden is significantly lower than that of these countries, said Mr Wong.

During the Budget debate on Feb 22, Progress Singapore Party Non-Constituency MP Leong Mun Wai said that middle-class Singaporeans are overtaxed relative to their income, as they pay a wide range of indirect taxes, such as the goods and services tax (GST) and the certificate of entitlement.

“I think the facts and figures speak for themselves,” said Mr Wong. “What Mr Leong said is an outright falsehood.”

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Among advanced economies, Singapore is also one of the few economies in which people in the middle have enjoyed significant increases in real incomes in the last 20 years, said Mr Wong.

Median household real income growth here over the last decade was 3.2 per cent per annum – higher than what the middle-income in the US and most other European societies experienced, and well above other Asian societies like Japan and Hong Kong.

“So we will continue to do everything we can to help our broad middle raise their standards of living, and support them in meeting their aspirations,” Mr Wong said.  

He stressed that one should not just look at the individual schemes and changes, but also focus on the overall taxes and benefits for the middle-income.

Here again, he pointed out, it is clear that the middle-income overall still receive more in benefits than the taxes they pay.

In particular, for the middle 20 per cent, the amount of benefits they received was about twice the amount they paid in taxes.

This compares favourably with other jurisdictions like the UK and Finland, where the middle quintile received around $1.25 of benefits for every dollar of tax they paid, compared with Singapore’s ratio of 2 to 1.

Even the upper-middle-income groups, or those in the 61st to 80th percentile, received about the same or slightly more in benefits compared with what they paid in taxes.

“They may not get as much in direct cash benefits compared to the lower-income groups, but they enjoy access to affordable housing, healthcare, and world-class education,” said Mr Wong.

He added that the overall tax burden on Singaporeans, at 14 per cent of gross domestic product, is also lower than in most other advanced economies, and this is after factoring in the tax changes in this year and last year’s Budgets, including the full GST increase.

“In other words, compared to citizens elsewhere, Singaporeans pay much less in taxes and yet are able to enjoy high-quality public services. At the same time, this low tax burden rewards hard work and enterprise, and allows our people and businesses to keep most of what they earn,” he said.

Working Mother’s Child Relief: Situation has changed

MPs had also questioned the Government’s decision to change the Working Mother’s Child Relief (WMCR) from a percentage to a fixed dollar relief, with some like Ms Jessica Tan (East Coast GRC) and Mr Dennis Tan (Hougang) raising concerns about the impact on the middle-income groups.

Responding to them, Mr Wong said that when the scheme was introduced, it was intended to encourage married women, especially the higher-income ones, to have children and continue working. At that time, higher-income married women had fewer children on average.

“And that’s why the incentive was weighted towards this income bracket,” he said.

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“But from our experience over the years, young couples in this income group typically base their decisions to have children on other factors, and not so much on the WMCR incentive.

Furthermore, the situation has now changed. Fertility has been declining across all income segments, and we need to encourage couples in all income groups to have more children.”

This, he added, is why the Government decided to change the basis of the WMCR. “With the fixed dollar relief, we focus instead on providing support for children, regardless of the mother’s income. And effectively, we are tilting the help towards those with greater needs.”

Mr Wong said the WMCR changes should not be seen in isolation, and are part of a package of moves to support marriage and parenthood in this and previous Budgets.

This includes the enhancements to the Baby Bonus Scheme and the increase in parental leave provisions, all of which will benefit young couples, including higher-income couples, as they embark on their parenthood journey.

This article was first published in The Straits Times. Permission required for reproduction.

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