S’pore must maintain disciplined approach to public finances, protect the middle-income group

SINGAPORE - Singapore must maintain a disciplined approach to public finances, and if additional revenue is required to support vulnerable segments of society, the country should continue to give this support using a fair and progressive fiscal system, said Deputy Prime Minister Lawrence Wong on Monday.

He clarified that Singapore’s fiscal philosophy is

not quite a “Robin Hood” approach

where it takes from the rich to help the poor, a term some commentators have used to describe Budget 2023.

“Our philosophy is that we want everyone to do their part in nation-building. Rich or poor, everyone contributes,” said Mr Wong, who is also Finance Minister, at The Straits Times-The Business Times Budget 2023 Roundtable sponsored by UOB.

He added that while those who have greater means will contribute more in taxes, everyone benefits from government spending.

He cited as examples the

goods and services tax (GST),

to which everyone contributes, and Central Provident Fund (CPF) accounts and public healthcare, from which all Singaporeans benefit.

“The ones who are more vulnerable, the ones who are in greater need, will benefit more from government spending. So that’s, I think, a more accurate description of our philosophy – one that we believe is fair, progressive and inclusive,” he said.

The roundtable was moderated by ST associate editor Vikram Khanna and also comprised UOB senior economist Alvin Liew and vice-president of National Trades Union Congress (NTUC) K. Thanaletchimi.

When asked if Singapore can continue to have low taxes and a good quality of public service in the light of an ageing society and slowing growth, DPM Wong said the Government must be judicious in putting in place new programmes, to make sure it gets the best value for money from the additional expenditure.

He referenced a comment made by former United States president Ronald Reagan that the closest thing to eternal life on earth is a government bureaucracy, and cautioned: “Once you’ve put something in place, it’s very hard to close it down. So be very careful before you introduce any new programme.”

On what options Singapore has to bridge the gap between spending needs and revenue, Mr Liew noted that revenue streams have been tapped in the form of the increase in GST,

the luxury tax on high-end property and cars,

as well as increased personal income tax, with the highest earners being taxed more in Budget 2022.

Mr Liew predicted that the GST could increase by another percentage point by 2030, and personal income tax by a few percentage points.

DPM Wong had noted in his round-up speech for Budget 2023 that for the middle 20 per cent of income earners, the amount of

benefits they received was about twice the amount they paid

in taxes. He compared this to other jurisdictions like Britain and Finland, where the middle quintile received around $1.25 of benefits for every dollar of tax they paid.

Asked if Singapore can still rely so heavily on taxing the top 20 per cent for its fiscal needs, while under-taxing the middle tier compared with other advanced economies, DPM Wong said that the Government would have to.

“The well-being of the broad middle, I think, is very vital in holding our social compact together,” he added.

“That’s how we’ve been able to progress as a society, where the broad middle sees continued improvements in their life but, at the same time, we pay attention to uplifting the lower income groups and creating a more equal society.

“That has been our journey so far, and we will do everything we can to continue delivering on this in the coming years,” he added.