I refer to a recent post, “Ordinary Singaporeans pay the highest tax rate in the world”, which has generated some interest and confusion.
It would have been more convincing if I had used the example of a couple, each earning $30,000, or lower, instead of $40,000 a year. (with 2 children, living in a 4-room HDB flat, expenses and reliefs split equally)
Any amount, even though not classified as tax, contributing to government revenue is a form of tax. The PAP has cleverly collected billions from Singaporeans without many being aware of this fact.
In countries with high tax rates, citizens are taken care of by their government. In Singapore, it’s “you die your own business” or “go JB for your healthcare needs”. The government is more concerned with channeling billions into failed investments, taking care of foreigners’ education costs, etc..
Back to the couple earning a combined $60,000:
1) 20% CPF contribution and, say, equal reliefs of $8000 each would result in ZERO taxes paid. But of course this happy situation is an impossibility under PAP.
Chargeable income = $30000 – ($6000 CPF + $8000 relief) = $16000
2) Let’s conservatively assume each spends $20,000, attracting GST of 7%.
$20000 X 7% = $1400.
At this point, the effective tax rate is $1400 divide by chargeable income of $16000 = 8%
3) HDB flat price = Land cost + Construction cost
Land cost paid by the buyer is channeled into government revenue and is therefore a nameless tax on the buyer. If you are disputing this, then there’s no need to read further.
As was mentioned in the earlier post, land cost was calculated to be about $173000 for a 4-room HDB flat by statistics guru, Leong Sze Hian.
Over a period of the 99-year lease = $1747 per year.
But we shouldn’t forget the additional interest on the $173000 land cost which is about $737 yearly. Add these 2 figures and halve it to get individual share of cost, ie ($1747 + $737) / 2 = $1242
A couple who buys a 4-room HDB flat from the government is effectively contributing $1242 each to government revenue every year.
Total tax at this stage = $1400 + $1242 = $2642
Effective tax rate = $2642 / chargeable income = 16%
4) Prudence dictates the need to have a balance in CPF OA for a rainy day, ie in case job replaced by cheaper foreigners with a lousy or fake degree. Assuming a $20000 CPF OA balance with 3% of CPF returns creamed off by the government = $600 (3% of $20000) goes into government revenue.
Total tax at this stage = $2642 + $600 = $3242
Effective tax rate = 20% ($3242 / $16000)
This is excluding returns from CPF MA and SA confiscated by the government.
The lower the salary, the higher the tax rate.
Government transfers, such as GST rebates amounting to a couple of hundred dollars, are insignificant.
Ordinary Singaporeans who own private vehicles are much worse off than a couple of decades ago before our incompetent leadershipt insisted on the need for an additional 1 million plus foreigners.
The reason why most ordinary Singaporeans are not able to retire is because we have been paying all these nameless taxes. Do ordinary citizens in other countries pay such high tax rates while having to worry about retirement and escalating/unaffordable healthcare costs?
Singaporeans should not continue to dig our own graves by stupidly parroting PAP’s propaganda “we have one of the lowest taxes in the world”.