Finance Minister Tharman Shanmugaratnam yesterday produced data to show that the Government's Budget policy provides ample help to low- and lower middle-income households, and supports Singapore's social compact.

'The Singapore system is one that provides targeted help for the needy, while keeping the overall tax burden low so that we reward work and enterprise,' he said as he wrapped up 21/2 days of debate on his Budget speech.

For families whose incomes place them in the 11th to 20th percentile, the net gains from subtracting the taxes they pay from the government benefits they receive this year add up to about 25 per cent of their income.

These benefits include the goods and services tax (GST) offsets, rebates, top-ups, Workfare Income Supplements and other grants.

These families thus receive more in benefits than they pay out in such taxes such as the GST.

They also receive additional subsidies for education, housing and health care, Mr Tharman said.

In contrast, the top 10 per cent of households by income will pay 13 per cent more in taxes this year than they will receive in government benefits

Besides personal income tax, they also pay a range of other taxes, including GST, foreign maid levies and car and property taxes.

Responding to MPs' concerns about whether enough was being done to help the needy in the face of a growing income gap, Mr Tharman stressed that Singapore's fiscal system is in fact 'highly progressive'.

The bulk of government revenue comes from the top 20 per cent of households, he said.

The Government's help package also exceeds the increase in spending that most families will incur due to the higher cost of living.

According to the Finance Ministry's estimates, the benefits that an elderly couple in a two-room flat will receive will be over four times more than their increased spending due to rising costs.

The benefits for a couple with two teenage children, living in a four-room flat, will be close to twice as much as their extra spending due to inflation.

But beyond these handouts, Mr Tharman stressed that the only lasting way to help low-income Singaporeans cope with rising costs is to improve their employment prospects through training.

Pushing up wages is not a solution, he said.

'If we try to remedy the problem caused by inflation by pushing up wages to catch up, or by companies pushing up prices to maintain profits, we will end up chasing our tail.'

During the debate, Mr Inderjit Singh (Ang Mo Kio GRC) and Non-Constituency MP Sylvia Lim called for essential items to be exempted from GST.

Mr Tharman said the argument had emotional appeal but was not a good way to help the poor.

Here again, he released data to show that the bulk of spending by lower-income families is not on essential items.

Essentials such as uncooked food, public transport and utilities account for only about a quarter of the expenditure by the bottom 20 per cent of families by income.

Most of the GST collected on essentials comes from higher-income households and foreigners.

Mr Tharman explained that it was thus far better to give direct and targeted help to lower-income families, who can then decide how best to use the aid they get.

On suggestions to refine the new Workfare Income Supplement (WIS) scheme for low-wage workers, Mr Tharman said a review is due by 2010.

He also pointed out that as the WIS scheme is a permanent one, it will continue to top up the incomes of low-income families after the GST offsets are fully paid out in 2011.

chinlian@sph.com.sg