Real World Economics Applied – A Taxing Issue of Taxes

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This is what I wrote to the Straits Times in 2018 and an edited version of it was published in the Forum page. I can’t find it online…

[ I would like to second Mr Ravi Menon’s call for Singaporeans to be willing to pay more taxes. In the last few years, my family and I have benefitted from visits to numerous parks and Public Feature Pools. It has made me acutely aware and more appreciative of what the government has done to make Singapore a highly liveable place.

We need the Government to continue delivering such benefits to Singaporeans and that requires support from Singaporeans through paying taxes. Those who pay more taxes should feel proud to do so. It is a privilege to contribute to nation building and we should all reflect on how we must have benefitted from all that the Singapore Government has done all these years that have allowed us to earn higher incomes and enjoy a highly liveable environment.

We will all also be aged one day. Hence, we are ultimately the beneficiaries of greater government spending to cater to an ageing population. We are also ultimately the beneficiaries of a stable society that results from inclusiveness.

That said, I am hoping that the Government will not be raising GST as it is regressive in nature –  it will hurt the lower income households more. Ideally, we can increase the progressivity of our tax structure as well as consider luxury taxes. 

I am also hoping the Government will step up efforts to trim bureaucracy and in so doing further trim spending on Government. Can we have high quality but also a budget government? A value for money Government? This must also be an exercise the Government needs to seriously undertake in light of budget constraints given the aging population and slower economic growth. Conscious and determined efforts backed by strong political will are needed. The ageing Singapore will need an even fitter Government and not a bloated one. We all know how a smaller player can be more agile on the court. Key priorities will need to be determined and good-to-have but non-critical functions and regulations should be aggressively dispensed away. This could also provide more room for civic involvement to grow, including Social Enterprises.
 
May all Singaporeans take pride in paying their taxes and seeing that we are ultimately the beneficiaries. May the Government also take pride in becoming lean and muscular. ]

Today, there is talk about implementing more wealth taxes. Not a bad idea but I do wonder if it is easy to enforce. It is likely that there are many ways to avoid/evade and it is open secret that a key pillar of wealth management industry is to help the very wealthy “optimise” their taxes.

On the other hand, I thought my idea of a Luxury tax is similar to a wealth tax since it would be the wealthy who are more likely to be consuming luxury items – think Ferraris, Hermes etc. In fact, there could be an ostentatious effect, meaning that demand for these goods could not=w even be higher as the wealthy seek to flaunt their wealth by proving that luxury taxes will not deter them from purchasing such items -to the benefit of the State’s coffers. Arguably there will also be some avoidance issue as some items could be purchased overseas instead but this is already true with or without the tax and the problem is likely to be much smaller compared to the case of wealth taxes – where wealth could be quite easily gifted to family members, or parked under corporations and held by related persons – many creative ways in the real world of finance.

I am an expert on this topic, so just some sharing to hopefully spark more thinking and discussion. Students should learn to see the BIG relevance of learning economics. One of the many benefits of learning economics. One day, all these tax policies will affect you. 🙂

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