20150228 Budget 2015 – business costs increased despite uncertainty, another $2 billion into GIC

CPF is increasingly resembling the mother of all scams. Every time (almost) the PAP helps Singaporeans, it channels lots of money into CPF for GIC to ‘invest’.

Budget 2015 is no different. Employer CPF contribution for older workers (aged 50 to 65) will increase by between 0.5% and 1% in Jan 2016 (average 0.8%). This is a step in the right direction because they have been shortchanged for decades but increased business costs will eventually be passed on to consumers.

If the PAP had really wanted to help Singaporeans to save for our retirement, it should have increased CPF interest rates, not business costs. But this is impossible because CPF rates are tied to HDB concessionary loan rates in order for PAP to control public housing.

Using an average pay of $2,500, an estimated 450,000 CPF members within this age group will add $9 million per month ($20 X 450,000) to employers’ wage bill. Including employee contribution (only aged 50 to 55), about $150 million eventually find its way into …. GIC. But that’s not all.

The CPF salary ceiling of $5,000 will be increased to $6,000. For the additional $1,000, employee ($200) and employer ($170) CPFcontributions total $370. There are about 1.95 million CPF members and about 20% or 390,000 members earn more than $5,000.

The increase in total CPF contribution is therefore $144.3 million (390,000 X $370) per month or $1.875 BILLION ($144.3 X 13 months) annually.

Just these 2 budget measures will channel at least $2 billion into GIC. Is the PAP really helping citizens or GIC to raise funds?

The employer contribution of $170 is effectively a salary increase of 3.4% ($170 divide by $5,000) for those earning $5,000 and a lower percentage for higher salaries.

15 years after employer CPF contribution was cut by 10%, PAP has refused total restoration to 20%, claiming this will be too heavy a burden on employers. So why increase employers’ CPF contribution now? Has this become a non issue because a general election is around the corner?

(For a low wage earner with an income of $1,500, current employer CPF is $255. Full restoration of additional 3% is only $45.)

Since the 3.4% ‘salary increase’ is not a burden to employers shouldn’t all CPF members receive the full CPF restoration?

Conclusion

By increasing the salary ceiling for CPF contribution, the middle income and the rich effectively gain $170 per member at the expense of businesses. This would also likely mean restoring the CPF rate is not be a burden to employers but the PAP is unwilling to assist low wage workers.

In his budget speech, DPM Tharman said “the global outlook for 2015 is uncertain… the current global environment is not, however, just a temporary challenge”. Why the increased wage bill (CPF) for businesses if there’s going to be long-term uncertainty?

Every opportunity the PAP has, it will channel billion$ into GIC through our CPF. Budget 2015 is no different – GIC will be getting another $2 billion on top of the $100 billion (pg 111) it has received during the last 5 years.

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