Taxes must go up within 20 years

Increase is inevitable as social spending climbs, says PM Lee

The Government is already relying on the national reserves to boost social spending without having to raise taxes, said Prime Minister Lee Hsien Loong on Sunday.

In 2011, $8 billion was channelled to the Budget from the Net Investment Returns (NIR) - this accounted for 14 per cent of expenditure, and was more than what the Government collected in personal income tax.

It was also four times what it collected through certificates of entitlement, said Mr Lee.

But as social spending continues to rise significantly, taxes must go up "certainly within 20 years", he said. "Nothing falls from heaven." He emphasised that politicians from many other countries often champion social spending "but pretend it costs taxpayers nothing".

In a dig at a point that politicians, including Workers' Party MP Chen Show Mao, have made, Mr Lee said "even in Singapore, some people will tell you, that's just a social investment. Since it's an investment, it looks after itself".

"But let me tell you the truth: As our spending increases, sooner or later our taxes must go up."

The Government can tap up to 50 per cent of the NIR for expenditure, though it does not reveal whether the contributions have ever hit the limit.

In a sign that it does not intend to channel funds more liberally from the reserves, Mr Lee cautioned that "we have to draw from the reserves in a sustainable way, so that it stays there and you can continue to have money year after year".

"We have a responsibility to future generations. We must husband these reserves so that future generations won't say, 'Ah, my grandparents, they spent it all.'"

He also emphasised that stronger social safety nets must be coupled with self-reliance and resilience in society.

"To survive, we must be resilient: tough as individuals, close as families, cohesive as a society and strong as a nation."

Urging those who have succeeded to have a sense of mutual responsibility for other Singaporeans, he said: "You have succeeded by working hard, but you have also benefited from the system which nurtured you and from the many others who helped you to do well. Without that, you would have been nothing.

"And I think that our successful people have to feel that obligation that, having done well, they (must) make the effort and help others too."

rchang@sph.com.sg