Who pays for changes on housing, health care and social spending?

Who pays for changes on housing, health care and social spending?

Changes on housing, health care and social spending. Who pays?

You

Your income tax may help pay the bill for greater health-care coverage, like the revamped MediShield Life health insurance scheme, housing subsidies and infrastructure projects announced by Prime Minister Lee Hsien Loong in his National Day Rally speech last Sunday.

Bank of America Merrill Lynch economist Chua Hak Bin said that higher taxes are likely at some point to fund additional social spending, especially health care.

He said: "The additional tax burden may have to fall on the more well-off, the group that has benefited disproportionately from Singapore's boom over the last decade.

"Such a realignment will also help build a fairer society," Dr Chua added.

Personal tax rate stands at 20 per cent and the corporate rate at 17 per cent.

In contrast, Dutch tax rates vary from 35 per cent to 52 per cent - so high partly because they have to fund the national insurance plan.

A 21 per cent sales tax also shrinks the Dutch disposable income a lot, The Straits Times forum writer said yesterday, though essentials like food and medicine are taxed a flat six per cent.

In Singapore, the well-off paid higher taxes in the past - for example, top earners were taxed at 55 per cent in 1980. The top 11 per cent earners contribute almost 80 per cent of tax share in Singapore versus 45.1 per cent average for the US.

With less than a quarter of Singaporeans currently paying income tax, KPMG tax partner Chiu Wu Hong felt the effectiveness of raising such rates to fund more spending could be limited.

Can

"I accept that higher taxes are necessary to fund more social spending and I'm willing to pay more if the changes benefit me as well." - Lawyer Joyce Lim, 35,who paid about $5,000 for income earned last year

Cannot

"I don't like the idea of being compelled to pay higher taxes since I don't earn a lot." - Administrator Shirley Ang, 32, who paid about $500 for income earned last year

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