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Lawrence Wong Deliberately Misleads Singaporeans But Provides Confirmation That I Am Correct About Size of Reserves

In his Budget closing speech on Friday, reported in government propoaganda tool CNA, Lawrence Wong made a number of disingenuous assertions about tax.

He said Singaporeans pay much less in tax compared to citizens elsewhere but still “enjoy high quality public services”. He used as an example the fact that the ratio of tax to GDP was “considerably lower” than other countries. However as usual LW is misleading Singaporeans by deliberately leaving out key information. Our tax to GDP ratio may be low but so is our consumption to GDP ratio at well under 40%, compared with most advanced countries which have a consumption to GDP ratio of between 60 and 70%. The US, which has a relatively low tax to GDP ratio of 26, consumes nearly 70% of its GDP. Despite Singapore’s relatively high GDP per capita (though not so high, in fact fairly mediocre, when you look at GDP per hour worked to correct for Singapore’s extraordinarily long working hours and low dependency ratio and compare Singapore to global cities not large countries) its citizens’ purchasing power on an hour worked basis is much lower than countries which have much lower GDP per capita (see here and here)

When LW says that Singaporeans pay much less in tax he should qualify his sentence with the word “rich”. As I have pointed out many times, Singapore is well qualified for its tax haven status as it has one of the lowest top income tax rates among advanced countries at 22%. Top rates in the UK are 45% and in the US in the mid-40s because Americans usually pay both federal and state income taxes. There are no taxes on unearned income, dividends, capital gains, interest or remittances from abroad. This is the reason why people like Eduardo Savarin and so many PRC billionaires have chosen to make Singapore their tax domicile. Corporate taxes are relatively low, though not as low as they are in Ireland. However the standard rate is meaningless as most MNCs are able to negotiate advantageous tax breaks and subsidies so that they end up paying very little tax. It is not clear yet if the Base Erosion and Profit Shifting Tax Initiative will change this much but in any case LW said that Singapore would have to find other ways to subsidise MNCs. He also said he would have to find other ways to subsidise MNCs but left unspoken the inevitable corollary that this would be at the expense of lower to middle income Singaporeans. Singapore might have a low tax to GDP ratio but a disproportionate share of that tax burden rests on middle and lower income Singaporeans while even high income working Singaporeans are heavily taxed compared with those living off income from investments. This is accentuated by LHL’s and LW’s determination to shift more of the tax burden to indirect taxes like GST. The PAP claims that Singapore’s rate of 9% is much less than the rates of VAT in other advanced countries but they omit to mention that in those countries items like food, medicines, utilities, children’s clothing, and books are often exempted meaning that the average rate on a basket of goods consumed by lower to middle income groups in those countries may be less than Singapore’s. In the US there is no national GST or VAT and while individual states impose sales taxes these are generally much less than Singapore’s.

In addition Singaporean men have to serve nearly two years of NS at well below market remuneration for their labour. This counts as a tax of two years peak earnings which workers in other advanced countries do not have to pay and works as a regressive tax since as we know highly paid PAP connected individuals from LHL downwards bag for their children the lion’s share of Government scholarships while shouting their critics down with cries of meritocracy while FTs, who are fast tracked to become new citizens and usually earn considerably more than Singaporeans are exempted. This is yet another example of the way the PAP Government shifts the burden of taxation on to lower and middle income Singaporeans, in a surreptitious and dishonest manner.

Also CPF is another of the disguised taxes imposed on lower income Singaporeans. Even the Employers contribution is probably borne in large part by employees since employers can turn to foreign workers, and in particular EP holders who compete with Singaporeans for jobs at every level, who do not have to pay CPF. It is true that CPF can be used for housing and medical expenses. However workers in most highly developed countries receive medical treatment free and a host of other welfare benefits, including much more generous income maintenance measures, unemployment and disability benefits, which Singaporeans do not receive or are made extremely difficult to access on the grounds that this would encourage a welfare mentality among Singaporeans. Again the PAP’s self-serving social Darwinism comes into play in which LHL and his circle of Ministers and cronies define themselves as worthy of being subsidised with enormously above market salaries for roles for which their qualifications apart from being related to one another are dubious.

Of course CPF can and is mainly used to pay for Government monopoly-provided housing and the PAP say they provide large subsidies to keep housing “affordable” for Singaporeans but I have exposed this as another scam. The Government controls the supply of housing and uses this to drive up the price of land, helped by the accumulation of CPF balances which can only be spent on housing. It then “subsidises” Singaporeans to buy overpriced and increasingly smaller size flats through the Budget which money is then diverted away from spending on Singaporeans’ welfare to the reserves from which it never emerges (see here, here and here). The Net Investment Returns Contribution (NIRC), which LW cited as the main way in which the reserves contribute to budgetary resources, are largely a smoke and mirror exercise in which money moves from one long term investment silo to another with no money coming out. I have likened this to a shell game (see here and here).

However LW’s mendacious barrage of propaganda and disinformation in Parliament did serve at least one useful purpose. Amid his attempts to show that land sales revenue benefits the Budget through the NIRC he said more than1% could be spent each year because “the reserves are prudently invested and generate long term returns”. This validates my contention that the reserves are as large as $3 trilllion and may be more since the NIRC was $23 billion last year. Using the 1% benchmark that would make the unencumbered reserves (not pledged to any fund) at least $2.3 trillion to which must be added the net assets shown in the Statement of Assets and Liabilities of about $600 billion. In addition the Government is undoubtedly able to earn significantly more than the cost of debt service on the $900 billion in the Govenment Securities Fund.

Singaporeans should not be fooled by LW’s lies. Considerably more of the tax burden is borne by lower and middle income Singaporeans than workers in other rich countries while rich Singaporeans, disproportionately new citizens, and FTs pay considerably less as a proportion of disposable income. Once CPF and NS are properly treated as a tax the regressive nature of the PAP’s tax regime is even more glaring. For this Singaporeans receive considerably less in terms of services and benefits than citizens of other advanced countries. But we can be certain of one thing. The disconnect between reserves of $3 trillion, confirmed by LW in Parliament, and his and LHL’s claim that fiscal resources are extremely limited is hugely worrying. The fact that the PAP Government maintains a defeaning silence in the face of my increasingly confident assertions when they have so many tools at their disposal to deal with what they term falsehoods should tell you all you need to know. We will never find out what is going on till we change this Government.

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