More benefits for lower-, mid-income now than a decade ago

LOWER- and middle-income Singaporeans receive significantly more benefits today than 10 years ago, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.

The deliberate tilt in favour of these income groups is the result of an ongoing push to make Singapore a fairer society, he added as he wrapped up the three-day Budget debate yesterday.

In his 90-minute speech, he set out how the Government has played an active role in redistributing resources between the haves and have-nots, with major schemes rolled out for Singaporeans at every stage of life.

As a result, Singapore has become more progressive, with higher-income households contributing most of the taxes and lower-income households getting the bulk of the benefits, he said.

Citing new data from the Finance Ministry, he said that as of last year, the top 20 per cent of households here pay 55 per cent of all taxes and receive 12 per cent of all benefits.

These taxes include taxes on income, property and cars, as well as the goods and services tax, he added.

The situation is flipped for the lowest 20 per cent of households, who pay 9 per cent of all taxes and get 27 per cent of all benefits.

As for the middle 20 per cent of households, they also receive more than they fork out: They pay 11 per cent of all taxes and get 20 per cent of all benefits.

Moreover, the mechanisms that help to redistribute this wealth are built into the system and here to stay, Mr Tharman said.

About 90 per cent of the Government's transfers to Singaporeans come from permanent schemes, with the rest from temporary schemes that Singapore can afford when the Budget is in good shape, he explained.

But the system does not just redistribute income from the rich to the poor. It also aims to give the middle-income group a leg up, said Mr Tharman.

For every dollar of tax middle- income Singaporeans paid last year, they received $1.73 in benefits, he said, citing Finance Ministry data.

This was up from benefits of $1.63 in 2009 and $1.38 in 2004 for every dollar of tax paid.

It works out to a much better deal than in other developed countries such as Finland, the United States and Britain, Mr Tharman noted.

While the middle-income groups in those countries may receive more overall benefits, they also have to pay much higher taxes than in Singapore.

"Some of them have free health care, free tertiary education, free many things. But they are paying for it. It's not free. It is never free," said Mr Tharman.

He also pointed out that the tax systems in these other countries - where "everyone is paying for the 'free' benefits that they're getting" - are less progressive than in Singapore.

Middle-income Americans pay income taxes of about 17 per cent, while the tax rate for middle-income Singaporeans is "close to zero" taxes, he said.

Dollars and cents aside, Mr Tharman emphasised that building a stronger society is not just about how much redistribution takes place. Instead, the key lies in how to strengthen the values that bolster and sustain a fair and inclusive society.

"At the heart of it all, we're seeking to build a stronger social compact for the future, a compact where personal and collective responsibility go hand in hand," he said.

charyong@sph.com.sg

This article was first published on March 06, 2015.
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