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http://www.tremeritus.com/2015/08/18/tharman-sgs-level-of-inequality-not-particularly-high/
[h=2]Tharman: SG’s level of inequality not specially high[/h]
August 18th, 2015 |
Author: Editorial
Last
Friday (14 Aug), DPM and Finance Minister Tharman gave a SG50 lecture at a
gathering of the Economic Society.
He said that the unique Singapore story has been that of broad-based social
upliftment:
In particular, he touched on the topic of inequality in Singapore and said
that it’s not that high.
He said that beginning in the mid-1990s, there was a significant increase in
inequality in Singapore, following a trend that had started a decade earlier “in
virtually every advanced economy”.
Singapore’s level of inequality based on incomes (before taxes and government
transfers) is not particularly high by international standards, he said.
“There are some countries that, in fact, achieve a very large reduction in
their Gini coefficients, through taxes and transfers,” he noted.
(ST Graphics)
He cited the example of Scandinavian economies and several other European
economies. But he said that a great reduction in their Gini coefficients was
achieved by imposing a “very heavy burden of taxation on their populations”:
Denmark collects about 49% of GDP in taxes, and Finland about 44%. As shown
in Chart 3, in our case, it’s about 16%. We get some investment income from our
reserves, but our tax revenues total just about 16% of GDP.
It’s not just about taxing the rich, it’s the broad middle class in these
societies that pay very high consumption and income taxes, to generate the tax
revenues which the state uses for redistribution.
The average worker in Denmark pays an income tax of about 36 per cent, and
consumption taxes of about 25 per cent. In Finland, there is a somewhat similar
consumption tax, about 24 per cent. Even if we look at their discounted VAT
tiers – for instance, in Finland, it’s about 14 per cent for food – the average
worker pays a lot of taxes.
He said that the PAP government’s approach is to keep the overall tax burden
low but ensure that tax revenue is used “in a fair and progressive way by
targeting support for the low- and middle-income groups where it helps them
most”.
“We keep income taxes for the middle-income and their overall burden of taxes
low. Our middle-income households get a fair deal in Singapore,” he
emphasized.
“With the enhancements in Budget 2015, they get $2 in government benefits for
every $1 of total taxes they pay (including income tax, goods and services tax,
property tax and all other taxes) – not bad. In the United Kingdom, it is $1.40
of benefits, and it is slightly lower in Finland. The middle class in these
other places get significant benefits, but they pay high taxes.”
Few countries have succeeded in sustaining income growth, tempering
inequality and keeping social mobility alive over a long period, he said.
“We must also keep our focus on what matters most to people: having a real
chance to develop themselves and move up in life. Focus on maximising
opportunities for everyone to do well, and especially for those who start with
less. Focus on raising standards of living for all, even as we temper
inequalities through redistributing. And we must do so with confidence in
ourselves, not thinking there’s only one model to follow,” he added.
“Stay with strategies that are working well, learn from mistakes, keep
improving and keep making a better Singapore.”
[h=2]Tharman: SG’s level of inequality not specially high[/h]
August 18th, 2015 |
Author: Editorial
Friday (14 Aug), DPM and Finance Minister Tharman gave a SG50 lecture at a
gathering of the Economic Society.
He said that the unique Singapore story has been that of broad-based social
upliftment:
- jobs for all
- rising incomes for all
- homes for all
- quality schools for all
- public healthcare for all
- neighbourhoods and parks shared by all
In particular, he touched on the topic of inequality in Singapore and said
that it’s not that high.
He said that beginning in the mid-1990s, there was a significant increase in
inequality in Singapore, following a trend that had started a decade earlier “in
virtually every advanced economy”.
Singapore’s level of inequality based on incomes (before taxes and government
transfers) is not particularly high by international standards, he said.
“There are some countries that, in fact, achieve a very large reduction in
their Gini coefficients, through taxes and transfers,” he noted.
(ST Graphics)
He cited the example of Scandinavian economies and several other European
economies. But he said that a great reduction in their Gini coefficients was
achieved by imposing a “very heavy burden of taxation on their populations”:
Denmark collects about 49% of GDP in taxes, and Finland about 44%. As shown
in Chart 3, in our case, it’s about 16%. We get some investment income from our
reserves, but our tax revenues total just about 16% of GDP.
It’s not just about taxing the rich, it’s the broad middle class in these
societies that pay very high consumption and income taxes, to generate the tax
revenues which the state uses for redistribution.
The average worker in Denmark pays an income tax of about 36 per cent, and
consumption taxes of about 25 per cent. In Finland, there is a somewhat similar
consumption tax, about 24 per cent. Even if we look at their discounted VAT
tiers – for instance, in Finland, it’s about 14 per cent for food – the average
worker pays a lot of taxes.
low but ensure that tax revenue is used “in a fair and progressive way by
targeting support for the low- and middle-income groups where it helps them
most”.
“We keep income taxes for the middle-income and their overall burden of taxes
low. Our middle-income households get a fair deal in Singapore,” he
emphasized.
“With the enhancements in Budget 2015, they get $2 in government benefits for
every $1 of total taxes they pay (including income tax, goods and services tax,
property tax and all other taxes) – not bad. In the United Kingdom, it is $1.40
of benefits, and it is slightly lower in Finland. The middle class in these
other places get significant benefits, but they pay high taxes.”
Few countries have succeeded in sustaining income growth, tempering
inequality and keeping social mobility alive over a long period, he said.
“We must also keep our focus on what matters most to people: having a real
chance to develop themselves and move up in life. Focus on maximising
opportunities for everyone to do well, and especially for those who start with
less. Focus on raising standards of living for all, even as we temper
inequalities through redistributing. And we must do so with confidence in
ourselves, not thinking there’s only one model to follow,” he added.
“Stay with strategies that are working well, learn from mistakes, keep
improving and keep making a better Singapore.”
