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Let’s not be greedy for more, and kill the golden geese that help keep our tax burden lower than most countries: Ho Ching

sgmatters.com lets not be greedy for more and kill the golden geese that help keep our tax burden lower than most countries ho ching lets not be greedy for more and kill the golden geese that help kee 5

In a Facebook post, Mdm Ho Ching explains how the NIRC has helped to keep our tax burden lower than most countries.

“Let’s not be greedy for more, and kill the golden geese that help us keep our tax burden lower than most countries, other than those who can benefit from oil reserves or other natural resources,” she said.

Here’s Mdm Ho Ching’s post reproduced in full:

The ups and downs of investing.

Suppose conservatively, the long term real rate of returns net of inflation for Temasek is 4%.

Since the NIRC allows Singov to spend 50% of the expected long term rate of real return, this means up to 2% may used to supplement Singov budget (and shelter the population from even higher GST).

So 2% of Temasek’s net portfolio value of about S$400 billion would be S$8 billion.

But even if we use a more conservative valuation of Temasek, say based on retained earnings, that is less volatile, we could still be talking about 2% of say S$300 billion, or S$6 billion.

Currently, 7% of GST adds about S$12 billion to our Singov coffers in 2021.

So each 1% of GST adds about S$1.7 billion to our Singov revenue.

So S$6-8 billion of NIRC contribution from Temasek would translate to 3-5% more in GST.

The current 7% GST or S$12 billion revenue is behind corporate income tax revenues of over S$17.5 billion, and personal income tax revenue of S$13.8 billion.

All 3 sources of tax revenue are each less than the NIRC contribution of about S$20 billion.

[Side note: NIRC contribution for FY2021 was estimated to be S$19.56 billion, and projected to be S$21.6 billion for FY2022.]

Without reserves saved, invested and grown over generations, Sg GST would need to climb to 12% more of GST to make up for the S$20 billion of spending capacity that the NIRC framework has given. [emphasis added]

Wow!

And don’t forget!

50% of the GST is paid by tourists and foreign residents of Sg. This is net of refunds for tourists too!

And the top 20% of households by income paid another 20% of the GST revenue. This is kind of proportionately carrying their share of GST, with some support from the foreign households and tourists too.

And 80% of the Singaporean households pay 30% of the GST collection.

This works out to be about S$3.6 billion, or slightly over 2% of GST, with the balance paid for by foreign households in Sg, and the tourists.

Hence, despite the tourist GST refund scheme for goods that they take out of the country, the bulk of their spending on food, hotels and other services are not refundable.

Hence, all Singapore households, local or foreign, benefit from GST paid by tourists.

Without NIRC contributions from GIC, MAS and Temasek, we would be missing S$20 billion of spending capacity, which must come from corporate income, personal income, or goods & services taxes.

Already, by taking 50% for spending, this means 50% less for reinvestment for more future income.

Let’s not be greedy for more, and kill the golden geese that help us keep our tax burden lower than most countries, other than those who can benefit from oil reserves or other natural resources.

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