Four things we can do so that we don’t have to raise taxes

We’ve been warned.

Taxes will have to go up at some point in time. Like most Singaporeans, I’m not happy about it. And I wish there was something that can be done so that taxes don’t need to be raised. Then I read DPM Tharman’s super-long interview with the Straits Times. That gave me an idea. I can easily think of a few things that can be done so that Singapore doesn’t need to raise taxes. Here are four things:

1. Stop KidStart and SkillsFuture

Singapore is still a more fluid society than most Western societies. But it will get harder to ensure that there is social mobility in Singapore. As DPM Tharman pointed out:

“It’s been part of the natural workings of most societies, when they become more settled – class divisions become firm, and starting advantages or disadvantages last through life. It is true in every mature society. “

So if we want to provide a fair chance for everyone to find their strengths, make the most of them, and move up in life, we’ll have to work harder. It means that we have to improve on our education system. Our education system, which has been focussed on on the school years and the tertiary years, is now extending in both directions – starting much earlier and continuing through life. That means pushing ahead with KidStart and SkillsFuture.

KidStart is a major intervention that starts early in the lives of children born in low income family. SkillsFuture invests in people through life. DPM Tharman explained:

“It is about becoming a meritocracy of skills, not one based on grades you earn early in life.”

SkillsFuture Singapore (SSG) chief executive Ng Cher Pong said the take-up of various SkillsFuture programmes is a good sign that Singaporeans are charting their own learning and career paths. A total of 285,000 Singaporeans have used SkillsFuture Credit, with more doing so in 2017
(Source: Straits Times)

But these schemes cost money. If we stop these schemes, we won’t have to spend that much. Then we won’t have to raise taxes.

2. Discontinue Workfare and Special Employment Credit

Workfare and Special Employment Credit (SEC) are significant intervention to temper inequality.

Workfare rewards work and encourages up-skilling by supplementing the incomes and retirement savings of older lower-wage Singaporean workers, and providing funding support for their training.

The Special Employment Credit (SEC) was introduced as a Budget Initiative in 2011 to support employers, and to raise the employability of older Singaporeans. It was enhanced in 2012 to provide employers with continuing support to hire older Singaporean workers and Persons with Disabilities (PWDs).

The SEC has been extended for three years (viz. 2017 to 2019) to provide a wage-offset to employers hiring Singaporean workers aged 55 and above, and earning up to $4,000. (Source: Asianscientist)

Unlike in the early years, when the rising tide rises all boats, not everyone will see their incomes rise as fast, if at all. So it was something that the government had to do something about through public policy. Workfare and Special Employment Credit have been important interventions during the working years.

But these schemes cost money. If we stop these schemes, we won’t have to spend that much. Then we won’t have to raise taxes.

3. Scrap Silver Support Scheme

While Workfare is an important intervention during a person’s working years, the Silver Support Scheme provides social support for people who had low incomes in their retirement. DPM Tharman explained it as:

“Silver Support was the counterpart to Workfare. What we do during your working life to top up your income, we sustain in your retirement years, so we temper inequality through life.”

But the Silver Support Scheme costs money. If we scrap it, we won’t have to spend that much. Then we won’t have to raise taxes.

4. Cut subsidies healthcare

Singapore’s population is ageing. DPM Tharman described the situation:

“Today, about one out of eight Singaporeans is aged 65 and above. By 2030, it’s going to be one out of four Singaporeans. So we are moving from one out of eight to one out of four in less than 15 years. That’s a dramatic shift in the composition of our population”

In countries in western Europe, where one out of five are over the age of 65, the healthcare system has led to high costs for the ordinary citizen. In those countries, healthcare is free or close to free when a person goes to hospital. But that person has actually paid for it through taxes and insurance. DPM Tharman explained:

“If you look at countries in Western Europe, the average citizen pays an income tax of 21 percent of their salaries, and a VAT (which is like our GST) of 22 percent. And on top of this, in France and Germany, employers and employees pay a payroll tax of 15% or more for healthcare. They have also accumulated debts which don’t show in today’s taxes but will show up in tomorrow’s taxes. Instead of raising taxes to fund the extra spending, they postpone the problem by raising debts. So that will be tomorrow’s higher taxes.”

In other words, there is no such thing as free healthcare. In those countries where healthcare is “free”, everyone has paid for it, and they pay for it big time.

DPM Tharman said, “If you look at the subsidised healthcare system, which includes our public hospitals, polyclinics, and aged care providers – if you add up the costs of building the facilities and subsidising patients – the Government is now paying for 70% of the costs.” (Source: Straits Times)

In Singapore, we have a system where we pay some of the healthcare costs out of our pocket, pay some in advance through insurance, and the government pays a portion. DPM Tharman highlighted:

“We have shifted the balance in Singapore. The Government is now paying more. Insurance is also paying for more, with Medishield Life. Individuals are still responsible for part of the payment. But the Government is now paying more. If you look at the subsidised healthcare system, which includes our public hospitals, polyclinics, and aged care providers – if you add up the costs of building the facilities and subsidising patients – the Government is now paying for 70% of the costs.”

If we keep this up, and as our population ages, we will invariably have to spend more on healthcare. So, if we don’t want to pay more taxes, an easy way out is to cut subsidies on healthcare.

But… is that what we really want?

Doing any, or all of the above, will reduce the money we spend. That would, in turn, mean that our government won’t need to raise taxes. But. If we did that, we are essentially leaving people to fend for themselves. That will lead to widening disparities. DPM Tharman emphasized:

“If you leave things to the market or leave it to people to fend for themselves, you get widening disparities. You widen life’s inequalities. And those inequalities will reflect not just differences in abilities and talents, but also the advantages and disadvantages that people start with. So that’s not a fair society.”

So. Unless we want a society where everyone is left to fend for themselves, and the rich gets richer, the poor gets poorer, otherwise, we inevitably would have to increase our social spending. And if we increase our social spending, we will have to raise taxes.

 

Leave a Reply