20160130 Ordinary Singaporeans pay the highest tax rate in the world

Most ordinary citizens don’t seem to have realised we pay the highest taxes in the universe.

We should not accept PAP’s conveniently narrow definition of tax which should include any amount which contributes to government revenue.

I will use the example of an ordinary Singaporean couple with 2 children, each earning $40000 a year and highlight all the different taxes they have to pay. For ease of computation, I have assumed generous personal reliefs of $10,000 and a $8000 CPF deduction each.

1 Direct taxes need no explanation. Their personal income tax is negligible. It looks like a happy situation only because we have yet to take into account all other taxes.

2 Indirect taxes are GST, COE, FDW levy, etc The couple is likely to have a car, employ a maid and has little or no savings in high-cost Singapore. Assuming a $50000 COE, it works out to a $5000 annual indirect tax. Concessionary maid levy at $60 per month works out to $720 annually. Assuming an annual expenditure of $40000, GST at 7% works out to $2800. Total annual indirect taxes = $5000 + $720 + $2800 = $8520

With car and maid (A) Without car and maid (B)

Type of Tax $ Type of Tax $
Income Tax 0 Income Tax 0
Indirect Tax . Indirect Tax .
Coe per year 5000 GST 2800
Maid levy 720 Sub total 2800
GST 2800
Sub total 8520

The effective tax rate (on dual incomes) is 19% and 6% for A and B respectively. Low tax rates??

3 Double tax. Singapore is about the only country that levies GST on water conservation tax. While this may be negligible on an individual basis, the government has profited millions over more than 2 decades from residents and businesses.

4 Housing tax. In a 2009 TOC article, the total construction cost of a 4-room BTO in Punggol was estimated to be about $120,000. Since the average selling price was $293,000, the government made a $173,000 profit from buyers by including the land cost. Divide this by the 99-year lease, it works out to $1747 a year.

HDB buyers also have to pay mortgage interests on this amount which works out to about $73,000 at 3% over a 25-year loan. calculator

(It is unethical of PAP to include a land cost component in pricing HDB flats because the the government remains the owner while HDB ‘owners’ are in fact only tenants. This amount is channeled back into government revenue. which makes it a form of tax.)

(A) (B)

Type of Tax $ Type of Tax $
Income Tax 0 Income Tax 0
Indirect Tax . Indirect Tax .
Coe per year 5000 GST 2800
Maid levy 720 Double Tax 0
GST 2800 Housing Tax 1747
Double Tax 0 Mortgage int. 737
Housing Tax 1747 Sub total 5484
Mortgage int 737
Sub total 11004

Effective tax rates for (A) and (B) are 25% and 12.5%. Low taxes?

5 Unique tax. The PAP creams off, on average, 3% from our CPF returns to supplement the budget. The amount one loses depends on how much CPF one has. Singles staying with parents who have, say, $200,000 in CPF OA are contributing $6000 a year to government revenue.

It’s not possible to list all the different taxes such as road tax, petrol and cigarette duties, etc. In reality our effective tax rates are much higher for ordinary wages. Also, not everyone pays maid levy at a concessionary rate of $60, eg employers who do not have children below 16 years old (previously 12).

According to propaganda, Singaporeans are paying comparatively low taxes. However, if all the different taxes are added up, the tax rate for ordinary citizens could be as high as 30% of wages. You can work out your personal effective tax rate which will convince you the government has been pulling a fast one on us. We should stop deluding ourselves. Time to wake up.

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11 Responses to 20160130 Ordinary Singaporeans pay the highest tax rate in the world

  1. AAAAAAA says:

    No need to calculate so much. If you consider CPF as a “pension tax”, then most Sinkies already paying 37% in tax. PAPies will tell you that CPF is your own money and not tax. Really??? Compare CPF with other countries’ superannuation or pension tax. Your so-called own money is locked up and cannot touch, until you hit 65 (soon to be 67!!!), then PAP will pay you a few hundred dollars each month. In western countries, you receive much higher pensions (thousands of dollars per month) AND will be increased every couple years to take inflation into account.

    PAP will argue that you can use your CPF to buy housing. Haarrr!!!! Thanks to PAP’s foolish move to allow CPF to be used for property in the late 1980s (in order to support their cronies in the banking and property development industries), Sinkies are now burning up their retirement money in order to pay for the most expensive public pigeon holes in the sky. Do you prefer this current situation or a situation more like in other countries??!? i.e. you pay for the actual things that you are getting e.g. $120K for 5-rm public flat instead of $400K BTO (or $550K resale). I bet if new 5-rm flats selling price is $120K, many Sinkies will then have no issue using take-home pay to service the mortgage, while leaving their CPF to accumulate for the actual purpose of retirement funding.

    The 3rd thing that PAPies will argue is that CPF also pays for your own medical (Medisave, Medishield Life etc). That’s CRAP when compared to other 1st world countries. In other words, despite Sinkie ministers being the most damn highest paid in the world by far, healthcare costs are pushed onto the individuals and their families (you die your biz). Other 1st world countries provide free govt healthcare — already covered by the taxes they pay.

    Last but not least, this 37% tax that all working Sinkies pay is gross tax i.e. it is EQUIVALENT TO 60% MARGINAL TAX RATE!!!! Similar to Scandinavian countries if your income is at least $500,000 per year. And the cruel joke is that Sinkies get to pay this rate even if their salary is only $2000/mth.

    So the next time PAP says you want to pay 60% tax like the Scandinavians izit …. you can tell to their faces that Sinkies are ALREADY paying 60% tax rates but getting 3rd world benefits.

    • Phillip Ang says:

      PAP has such a thick skin that it doesn’t matter if you tell them we are receiving fourth world benefits. So long as they get their million-dollar salaries, they are not bothered by every issue affecting ordinary citizens. 😦

  2. Xmen says:

    A few comments –

    CPF indirect tax – Since the government prevents you from withdrawing your CPF savings during your lifetime, you should those ‘untouchable’ savings confiscated or taxed to keep CPF (Ponzi scheme) solvent.

    Healthcare tax – The government is forcing you to use your CPF on government healthcare. Since such cost can be higher than comparable private care, the difference in costs is a tax.

    Wage tax – The government is actively suppressing local wages by importing massive number of cheap FTs to benefit Temasek/GIC at citizens expense. That is another indirect tax. To prove my point, in a recent NY Fed report, bachelor’s degree holders in the US earned a median US$43,000, and the top 25% of young college graduates earn at least US$60,000 a year. The unemployment rate among young college graduates was 4.9% in September. Even in the lowest-paying majors, the median salaries was about US$30,000. I dare anyone to compare the salary survey to that of supposedly world ranked NUS/NTU graduates. See http://www.wsj.com/articles/ny-fed-report-finds-rising-incomes-falling-unemployment-for-young-college-graduates-1454079989.

  3. Sundra says:

    What can ordinary citizens do. We have no speaking “rights”. Most professionals keep their mouths Shut as the are well “fed” and also taken care of. We don’t have people’s representatives in parliament. Very few have the audacity to bring up this issue. The rulers must know that all these assests and accumulation of wealth cannot be brought with yhem into their graved. Most of us have to wait for some “divine” intervrntion

    • Phillip Ang says:

      Ordinary citizens can do lots but most are lazy and simply wait for the next person to make life easier for us. Some still fear the PAP.
      What everyone can do is share whatever you’ve read with others if it makes sense. Discard if doesn’t. We can’t sit and simply wait for divine intervention because that would mean others are carrying a disproportionately higher burden. Everyone has an opinion and different take on an issue. We learn from each other and all can contribute to change instead of waiting…

  4. Putthingsinperspective says:

    Denmark income tax is close to 49% for someone earning annual salary of about sgd60k. They have high salary which pushes cost of living to be high. The tax u mentioned, eg car and maid levy, are items that u only have to pay if u buy. Not everyone has a car and a maid so that % of tax is not force down everyone’s throat like that of a income tax. Denmark VAT is 25%.

    • Phillip Ang says:

      Having a maid is not a luxury for many people and car a necessity for some. Like I mentioned, the tax rates computed are extremely conservative, underestimated. If I had used the example of a couple with an annual income of $30000 each without a car, the taxes levied would come to more than 30%, depending on how much CPF returns have been creamed off into government revenue.
      Many citizens don’t have the time to reflect on what our effective tax rates are.
      Paying a high tax rate is fine but which country has mandated their citizens to set aside a minimum of $49,800 for their healthcare needs (Medisave) on top of high medical insurance (Medishield Life) premiums? Which government tells its people to downgrade to unfamiliar surroundings whey they are old?
      In countries with high tax rates, their citizens need not consider sending themselves or loved ones to another country or state like JB to avoid exorbitant healthcare costs.
      If high tax rates = government taking care of ordinary citizens’ well-being, there would have been no issue. 🙂
      If Denmark’s tax rates are unfair to Danes, would they not have migrated? Obviously they have received proportional benefits to the taxes they pay.

      • realitycheck says:

        You claim that ordinary Singaporeans pay the highest tax rate in the world, no in the universe!
        Boy, you have no idea, go abroad for some years and you would never make such a claim. You already got a hint that income tax alone in other countries may be higher than anything you could fantasize to be a tax. Which country asks their citizens to keep money in a MediSave account? Well great news, not Germany! Just with a mere contribution of 15% of your salary to the 2nd class public health insurance system you are all set, and take a ticket in the queue behind all private health insurance members for a doctor appointment. CPF provides only limited access to the money before retirement age, and inheritance to children is not full automatic but needs some formalities? More good news for you, in Germany it is much easier. 19% of your salary goes to retirement funds, and it’s a really simple system. Zero access before retirement age of 67. Zero inheritance. You die at 66? No formalities involved, all the money is just lost, plain and easy. And no the government will not tell you to downgrade when you are old. They will just pay you 40% of your last salary in retirement money, of course provided you worked for a minimum of 45 years – else it will be less. And retirement money is an income, so I let you figure out alone which kind if tax you pay on it. Nobody needs to tell you about downgrading, you simply will figure it out on your own.
        A maid is not a luxury? Yes, it would make things easier to have one, but I don’t know a single family in Germany who has one, including many households with children and both parents working full-time. Sure can a car be a necessity, for example when you live in a 2000 people village with no shop, the next supermarket 5km away, winter temperatures down to -20C, and a public bus driving once per hour, which is not an uncommon constellation in Germany. But in Singapore, an international metropolis, with year round summer temperatures, an MRT every 3 minutes and a bus every 5-10 minutes? You confuse necessity with convenience.
        And people have not migrated from other countries because they receive proportional benefits to the taxes they pay? So I conclude since you are obviously unhappy with the benefits you have migrated already, haven’t you? More news for you, people have families, relatives, friends, belongings, history, traditions, and of the ones who still want to migrate not all have the means to do so.
        Don’t misunderstand me, you have all rights to have your own expectations and complain about your government. But don’t start to compare Singapore with the rest of the world, when you have obviously never lived outside Singapore and have not the slightest idea how things really are in all those great countries you heard of.

      • Phillip Ang says:

        You prefer a government which micromanages every aspect of our lives. I don’t.
        In democratic countries, like Germany, workers have rights and work-life balance. In Singapore, we have a pseudo workers’ union, NTUC, and work-life imbalance. That’s why we have laws which allow the exploitation of maids which the government is keenly aware maids have increasingly become a need. Singaporeans are merely cogs in PAP’s GDP wheel.
        I don’t have the means to migrate and will need to rely on public healthcare, transport and housing for the remaining couple of decades? of my life.
        Do you not think these can be improved? Why is a supposedly wealthy country having the highest ratio of elderly cleaners and security guards in the world?
        PAP runs an economy based on increasing headcount and that’s the reason why it has been fleecing its citizens through collecting taxes in the most inconspicuous way that people either don’t question or find it hard to believe. But it’s a fact.
        In my post, I did not compare Singapore to Germany or mentioned any country. My 3 siblings have been residing overseas in different countries, not Germany, for decades. All prefer not to return. But if you are so unhappy in Germany, there are greener pastures. Maybe even return to this metropolis with all the guaranteed conveniences. And train breakdowns. 😦
        Thank you for your interest.

    • AAAAAAAAAAAAAA says:

      Denmark’s 49% is MARGINAL tax rate. The actual GROSS tax is much lower. Danes also get to enjoy A LOT of social services without having to pay anything out of pocket e.g. education all the way to Uni, healthcare (GPs & hospitals & childbirth) from baby to old age, generous pension, jobless benefits, disability benefits (for those handicapped from birth or due to accidents). You also get to enjoy very high salaries (bus driver can earn $4000/mth), cheap housing, cheap cars.

      Why don’t want to migrate to Denmark??? Actually MANY people want to migrate there, but Demark damn strict about immigration. Fluency in Danish & adopting a Danish lifestyle is just the tip of the iceberg for consideration for even PR.

      Singapore’s CPF is GROSS tax of 37%. This translates to 60% MARGINAL tax rate. Sinkies are paying MORE than the Danes in taxes. And this is just for CPF.

  5. Pingback: 2016 INDIRECT TAX RATES

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