Taxes to go up as social spending increases: PM Lee

SINGAPORE - Taxes in Singapore will inevitably increase within the next 20 years as the government steps up social spending to build an inclusive society, said Prime Minister Lee Hsien Loong as he cautioned in his National Day Rally speech that inclusiveness is not just about receiving goodies from the government.

"Inclusiveness doesn't just mean more good things from the state or falling from heaven," Mr Lee said, adding that all benefits will have to be paid for.

"In many countries, politicians champion social spending, but they pretend that it doesn't cost the taxpayers anything," he pointed out. More spending on social services going forward will raise the question of how these benefits can be funded.

"Let me tell you the truth: As spending increases significantly, sooner or later our taxes must go up - not immediately, but certainly within the next 20 years," he said. "Whoever is the government will at some point have to raise taxes because the spending will have to be done and the spending will have to be paid for."

Increased social spending is inevitable, according to Mr Lee, as the state will have to at least partially meet the increasing demands of an ageing society.

Drawing on Singapore's reserves is one possibility, but this is already being done, he pointed out.

He noted that Singapore currently spends part of the returns gained from investing reserves, known as the Net Investment Returns Contributions (NIRC), which helps it to help fund new programmes and balance the budget without having to push taxes up sharply.

In 2011, for instance, the NIRC amounted to $8 billion, exceeding what the state collected in personal income taxes. Mr Lee said that the NIRC helps pay for one-seventh, or close to 14 per cent, of the government's expenditure every year.

Moreover, the Prime Minister cautioned, Singapore must draw on its reserves in a "sustainable way" because "we cannot just spend everything on ourselves, (as) we have a responsibility to the future, to the next generation, and we have to husband these reserves".

It is also important, therefore, to not just spend more but also to set a new strategic direction for Singapore and lay the basis for stronger social safety nets, which will stand the test for the next couple of decades.

The Prime Minister stressed that it was also important that stronger social safety nets be coupled with self-reliance and resilience.

He added that people must be motivated to do their best, for while the state will help where it can, it cannot replace what individuals and families can do for themselves.

"To survive we must be resilient - tough as individuals, close as families, cohesive as a society, and strong as a nation," he said. "And we have to be prepared to compete and to hold our own - the competition is there (and) there is no place to hide. The government can help to enable you to meet the competition. When we encounter setbacks, we must have the spunk to pick ourselves up, and press on."

Mr Lee also urged Singaporeans - especially those more successful - to develop a sense of mutual responsibility. "You have succeeded by working hard, through your own efforts, but you have also benefited from our system which nurtured you, from the many others who helped you do well."

It was only right for this group of Singaporeans to help others too, he said.

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