Thursday, 21 August 2014

In response to Mr Shanmugam's FB post.

Singapore's Minister for Law, Mr Shanmugam, has shared a cartoon by SGAG about the slippery slope of the ageing population on his Facebook page.

While I agree with him that the ageing population is a challenge for Singapore and providing more welfare for the elderly puts more pressure on the workforce, we are not alone in this. Countries such as Korea and Taiwan, and most famously Japan, are all having their struggles with the issue. In all of these countries, reforms have been implemented to meet the challenges. While not every reform has been a resounding success, the governments in these countries seem to have shown more initiative in addressing the issue than the Singapore government, making reforms that are more far-reaching than the tweaks to the CPF Minimum Sum that the Singapore government seems contented with. 

It almost seems as though the government here is trying to avoid making reforms and keep to the status quo for as long as possible. 

Frequent arguments against reforming the welfare system here include the one about how people should be allowed to keep the money they earn, the one about how the poor are undeserving of welfare as they are lazy, the one about how we should not increase income tax to fund people who are lazy and selfish, and so on. Yet the focus on welfare and income tax is only part of the issue. 

What's not mentioned in this equation is that Singapore has one of the lowest corporate tax rates in the worldThese tax incentives may not add up to much for a small company, but the savings for an MNC is likely to be in the millions of dollars.

Some have argued that the low corporate taxes are key to attracting investments to Singapore. Underpinning this argument is the belief that ultimately, Singapore needs to prosper. We need to have a high GDP, and somehow, some way, the prosperity will trickle down to help the poor.

However, there are several problems with this. Firstly, the trickle-down effect is unrealistic. A profit-minded MNC is more likely to use the tax savings to organise a large gala dinner for government officials than use the money to help the poor or needy elderly who can't help them in any way.

Secondly, the Minister's post shows a one-sided view of the issue. I feel that we ought to put things in their proper perspective. At the moment, we are underspending on social services because we have prioritised spending in other areas. It's not like we already have high social spending and people are asking for more.

Let's be fair, Minister: There are two more digits in our defence budget compared to our
budget for social and family development. (Credit: SG Budget 2014)

Before we like or share cartoons about the negative impact of providing more welfare for the poor or needy elderly, I hope we can be more socially responsible and think about this other side of the story.

Of course, there are no easy answers. For those who argue that nobody owes us a living and those who have profited should be allowed to keep their hard-earned money without having to give to the poor, I would like to clarify that I am not talking about the average rich person in Singapore or the owner of an SME. These people already pay their income taxes. This is not a case of "tax the rich to help the poor". I am talking about massive companies - some of them foreign - that make an annual profit of more than a billion dollars.

Some have pointed to the fact that Hong Kong has a low corporate tax too. Well, in Hong Kong, some elderly people live in cages. Do we want to resort to that?

Credit: Pop Up City
I agree that we need to offer attractive tax rates to attract investors. But the profit the country has earned from investments has to be given back to the workforce, which is the bedrock of our economy. The so-called "trickle-down effect" goes against the prevalent individualistic beliefs of the people in Singapore. People and profit-driven companies in capitalist societies aren't motivated to let wealth trickle down.

They think that it's their money and there's no reason why they have to contribute it to others who did not earn it. Therefore, the wealth has not trickled down. And that's why our Gini Co-Efficient went up. No doubt there was a drop in 2013, but whether it's a once-off decrease or a change in trend, we'll have to wait till next year to find out. Now, besides waiting for wealth to trickle down, shouldn't the government take more action?

A team is only as strong as its weakest link. When we don't provide more assistance to those at the bottom of the social ladder, they will become the weakest link economically. What is the impact of poverty on a country's social fabric? Will it make us more susceptible to negative influences from beyond our shores? These are some potential consequences we have to think about. 

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