PSP’s claim that middle-income S’poreans are overtaxed is ‘outright falsehood’: DPM Wong

Is Singapore’s middle income “overtaxed” as claimed by the Progress Singapore Party? Deputy Prime Minister and Finance Minister Lawrence Wong dropped some figures to illustrate how the middle income among us are paying relatively low tax.

But the important message is that everyone in Singapore, regardless of income level, benefits from the system that we have in place.

Below is an excerpt from DPM Wong’s speech delivered on Feb. 24.

I assure you that the Government remains very focused on advancing the well-being of the broad middle of society.

How do we achieve this?

First, by ensuring that they continue to enjoy real income growth.

In fact, amongst the advanced economies, we are one of the few where people in the middle have enjoyed significant increases in real incomes in the last 20 years.

Median household real income growth in Singapore over the last decade was more than three per cent per annum. It’s higher than what the middle income in the U.S. and most other European societies experienced, and well above other Asian societies like Japan and Hong Kong.

So we will continue to do everything we can to help our broad middle raise their standards of living and support them in meeting their aspirations.

Second, by keeping the tax burden low for this group.

When you look at households in the middle quintile, and the total taxes paid — not just personal income tax, but other indirect taxes as well — the effective tax burden is around 10 per cent of income.

Based on publicly available data, the estimates clearly show that our tax burden is significantly lower than that of the U.S., the UK, and Finland.

Mr Leong Mun Wai (NCMP from the Progress Singapore Party) said that the middle income in Singapore are “already overtaxed relative to their income”.

I think the facts and figures speak for themselves. What Mr Leong said is an outright falsehood.

Middle income in Singapore receive more in benefits

The middle income on the whole receive more in benefits than the taxes they pay, about twice the amount they pay.

This compares favourably with other jurisdictions like the UK and Finland where the middle quintile receive around $1.25 of benefits for every dollar of tax they paid — 1.25 to 1, whereas our ratio is 2 to 1.

Even the upper middle income groups — those in the 65th to 80th percentile receive about the same or slightly more in benefits compared to what they pay in taxes.

They may not get as much in direct cash benefits compared to the lower income groups, but they enjoy access to affordable housing, healthcare, and world class education.

Social compact goes beyond monetary support

This is how we design our system. It reflects our values, and our sense of solidarity as a people.

We encourage and support everyone to excel and be the best that they can be. We create and maximise opportunities for all, but we recognise that outcomes in life will not be equal.

So for those who are fortunate to do well and be in the top 20 per cent, we hope they will feel that sense of commitment and responsibility to contribute their fair share, and help uplift their fellow Singaporeans.

This compact goes beyond monetary support because everyone in Singapore everyone including the higher income, benefit from something very precious here in our society: We are a high trust society stable and harmonious with a strong governance and rule of law.

And this gives all Singaporeans a safety and security to raise our families build our lives and pursue our dreams. This sense of solidarity and trust is what makes Singapore exceptional.

Images via CNA, Galen Crout on Unsplash, Singapore Stock Photos on Unsplash