While those with greater means will pay more, S’pore can't pass entire tax burden to the wealthy: Lawrence Wong
SINGAPORE — If Singapore expected most or all of the tax burden to fall on top income earners, it would be "grossly unfair" on them, and soon there would be no rich people to tax here, Finance Minister Lawrence Wong said on Tuesday (Feb 22).
- If all or most of Singapore's tax burdens are placed on the wealthy, they will feel that it is "grossly unfair"
- Mr Wong said this during the Ask the Finance Minister television programme that aired on Mediacorp's Channel 5 on Feb 22
- He said that the Government will "look at" more utility vouchers for households to cushion the higher carbon taxes over the coming years
- A guest on the show raised concerns that tighter foreign manpower policies will mean businesses will hire more technology workers overseas to work remotely
- Mr Wong said the tech labour crunch was a worldwide problem but that Singapore's policies did not stop firms from bringing in such workers
SINGAPORE — If Singapore expected most or all of the tax burden to fall on top income earners, it would be "grossly unfair" on them and they would soon be driven away, Finance Minister Lawrence Wong said on Tuesday (Feb 22).
Even though people with greater means will pay more, everyone will have to contribute their fair share of taxes in order to achieve a fair and progressive tax system, he added.
“If we have the attitude that most of the tax burden or everything can be borne by the top 1 per cent or the top 5 per cent, I think they will feel it is grossly unfair and very soon, you won't have the rich to tax in Singapore.”
Mr Wong made these comments at a televised post-Budget forum titled, Ask The Finance Minister, which aired on Mediacorp's Channel 5 on Tuesday night. Mediacorp owns TODAY.
As part of the programme, a number of guests from different backgrounds, including a unionist, a tax expert and an entrepreneur, were invited to ask Mr Wong questions related to the Budget statement that he delivered last Friday.
The programme's producers had conducted a poll of 1,000 Singaporeans aged 18 and above, that was representative of Singapore’s demographics, on what they thought about the Budget.
Asked whether they were worried that taxes on the wealthy could lead to the rich leaving Singapore, 78 per cent of respondents said that they were not worried and 22 per cent said that they were.
In another question, respondents were asked how they felt about the raising of taxes, especially for high-income earners. The majority, 83 per cent, said that it was long overdue and the remaining 17 per cent said that Singapore is over-taxing the wealthy.
“If we have the attitude that most of the tax burden or everything can be borne by the top 1 per cent or the top 5 per cent, I think they will feel it is grossly unfair and very soon, you won't have the rich to tax in Singapore.Finance Minister Lawrence Wong”
Senior research fellow Christopher Gee, who leads the governance and economy department at the Institute of Policy Studies, said that he was surprised by the results. Mr Gee was one of the programme’s guests.
“You know, people generally don't want to be paying more tax…. But 83 per cent are saying that actually, we don't mind paying that additional tax,” Mr Gee said.
He then asked Mr Wong what signal the Budget is going to give to the wealthy and whether they will have to make a greater commitment to building society.
In response, Mr Wong said that officials will always have to calibrate and find a balance, but the Government will ensure a fair and progressive fiscal system when it raises taxes.
He described a progressive tax system as one where everyone, not just a small group of people, contributes their fair share.
“And that’s a system we have in Singapore, if you look at not just contributions but also transfers — what the Government gives back,” he said.
On average, lower-income groups get back S$4 of benefits for every dollar of tax paid, middle-income earners get S$2 and the higher-income get only 30 cents, he said, reiterating a point that the Government has made about how Singapore's overall tax and government transfers system is fair and progressive.
“So, the net contributors are the higher-income groups.”
Mr Wong added that if Singapore is able to have a fair and progressive tax system, that “can strengthen our social compact, our sense of obligation to one another and to our fellow citizens”.
COST OF LIVING
Expressing concern for middle-income earners between the 20th and 50th percentile, unionist Raymond Chin asked whether more can be done to boost the wages of these workers sustainably over the coming years.
Median or 50th percentile income refers to the income level at the middle of the income distribution that divides the bottom half of income earners from the upper half and the 20th percentile income refers to the income level that divides the bottom 20 per cent of income earners from the rest.
Mr Wong said that beyond deciding to stagger the Goods and Service Tax (GST) hike over two years, these middle-income workers would benefit from the S$6.6 billion Assurance Package to offset the impact of the GST hike and the S$560 million Household Support Package.
“That's why the Budget doesn't just deal with immediate concerns. It also sets out several major major moves, bold moves to better prepare Singapore for new post-pandemic future.”
And if inflation becomes more persistent or turns out to be higher than expected, the Government can take tackle it on the monetary front and can also provide more to Singaporeans to cope with rising prices, he added.
Higher carbon taxes, to be raised five-fold in 2024 and progressively more by 2030, is also expected to lead to an increase in household utility bills.
Mr Wong said that when the carbon taxes are raised, the Government will “look at” having more utility vouchers for households.
The poll for the TV programme had also asked respondents whether they thought companies will pass the burden of carbon tax onto their customers. A majority — 80 per cent — said "yes" and 20 per cent said "no".
Asked by the programme’s host Diana Ser whether the Government should limit how much companies may pass on the carbon tax burden to customers, Mr Wong gave no indication that the Government had plans to do so.
“The reality, Diana, is that all of us have to do our part to move into a net zero economy,” he replied. “The only way to tackle climate change is to have the right carbon price that is felt by everyone in the economy.”
That includes businesses, consumers and households having to reduce their energy consumption, Mr Wong said.
The carbon taxes collected by the Government go in part towards offsetting electricity bills for household, and a large part of it will be used to advance Singapore’s investments into low carbon solutions, he added.
The programme’s guests also had questions for Mr Wong about the further tightening of foreign manpower policy.
Ms Kuah Ling Ling, a nurse who also runs an online healthcare platform, asked how Singapore can ensure healthcare remains affordable despite the tightening manpower policies affecting the recruitment of foreign nurses, who make up a significant portion of the workforce.
Mr Wong replied that the manpower crunch also applies to many other sectors of the economy, especially as Singapore faces an ageing workforce.
That is why the country must always be open to welcoming foreign workers and professionals to complement the domestic workforce.
Mr Wong also said that the tightening of foreign manpower policy is a "calibration” to ensure that foreign workers coming here must be “of the right calibre” and entering sectors facing severe shortages.
The Government, too, will continue to push for automation and productivity, as well as redesign jobs in order to do more with a lean workforce.
Entrepreneur Veerappan Swaminathan spoke up about the technology talent crunch driving up prices for business owners.
Faced with difficulty filling positions, he said that he has resorted to hiring tech talent directly in Indonesia and India without them having to come to Singapore.
“My concern as a Singaporean... we're not deriving the benefit of society from that because they are working overseas in their own countries, doing the jobs over there,” he added. “We are effectively hollowing out, I will say, our technology sector by doing these things.”
In response, Mr Wong noted that the shortage of tech talent is a worldwide problem but said that the manpower policy adjustment does not stop businesses from bringing in tech talent to Singapore.
“You can still hire an employment pass (holder). In fact, we encourage you (to do so), go out and hire an employment pass (holder), bring the best from around the world into Singapore,” Mr Wong said.
The employment pass is a work visa designed for skilled foreign professionals, managers and executives. The latest changes will raise the minimum qualifying monthly salary to S$5,000, up from S$4,500.
Some lower-wage job roles, however, may not be viable in Singapore anymore and it may indeed be better for them to be done overseas, Mr Wong said.
“Remember, costs and wages are again two sides of the same coin. We all talk about one thing: Wages for Singaporeans to go up. But if we depress costs in Singapore, how do the wages of Singaporeans rise?”
The key, Mr Wong added, is to focus on the capabilities of the Singaporean workforce.
“Make sure that we can command that premium in wages, continue to create value, to be innovative, to be productive. And that's how we can do well in this new economy.”