Top 20% pay 84% of taxes

According to Minister Shanmugam the top 20% income earners, companies, and non-Singaporeans pay 84% of the total taxes in Singapore to finance our $52 billion government budget expenditure. The rest pay only 16% of the total taxes.

– Gintai blog, 16 June 2012, My meeting with Minister K Shanmugam Sc, Link.

I think when Shanmugam flung those numbers out like so many rose petals at a wedding, he was expecting people to appreciate how the government cares for the “common man”. Perhaps the numbers might blunt some of the criticism that there is not enough redistribution?

It didn’t work on me. His numbers floated in a vacuum. I searched high and low for contextual figures, but found none. Without context, what to make of his numbers?

First of all (and assuming the Gintai blog recorded his comments accurately) it’s hard to parse “top 20% income earners, companies, and non-Singaporeans”. Did Shanmugam mean the top fifth of income earners, plus all companies plus all non-Singaporeans? Or did he mean the top fifth of the comprehensive set of income earners, companies and non-Singaporeans?

Whether it is the former or latter, does “84% of the total taxes” represent much progressivity? It depends on what percentage of income is earned by the “top 20%”.  If the “top 20%” earn 95 percent of all income earned, and they contribute only 84% of all taxes collected, that won’t sound very progressive, will it?

It’s not far-fetched to expect that the “top 20%” has such large slice of the pie. For example, just today I came across this graph on Facebook showing that in the US, the top 20 percent of households command about 85% of wealth (note: wealth, not income).


Click to enlarge

I should state however, that the study upon which the above chart is based has been contested, but the precision of the figures is not essential to my argument. I’m just using it to indicate that having the topmost 20 percent of individuals command over 80% of wealth, income or the like, is not that unrealistic, especially as Singapore’s Gini Coefficient of household income is not far from the United States’.

So straight away, saying that the top 20 percent pay 84 percent of all taxes doesn’t sound so impressive.

Furthermore, taxes include excise taxes on cigarettes, alcohol, petrol and diesel, and the 7% Goods and Services Tax. The immediate payer of tax to the government may be companies – and as far as alcohol, petrol and diesel are concerned, almost surely among the largest companies – but in actual fact the taxes are passed directly to the consumer, some of whom are rich, some poor. I doubt if there is any data as to which consumer is within which income bracket. That being the case, how does our government arrive at the simple statistic of 84% of taxes paid by “top 20%”?

* * * * *

Another thing we should be careful about is the notion that the higher the percentage of taxes paid by the top 20%, the better it is. Should we be happier if the top 20% paid 99% of all taxes? Consider, if that were the case, what it might imply of a society:

1. Income inequality is so wide that 80 percent of the people are so poor that they cannot afford to pay any taxes at all, that’s why 20 percent of them shoulder 99 percent of all taxes. Or,

2. Income inequality is not all that wide, but the taxation system is designed to lurch from a no-tax position for the lower and middle income earners to a steeply progressive one for earners above the 80th percentile, thus the top 20% end up paying 99% of taxes.

In other words, without contextual numbers, just saying “the top 20% pay 84% of all taxes” tells us just about nothing. It’s a statement in a total vacuum.

* * * * *

For the ordinary citizen to make sense of such numbers, he must have access to additional information. For example, we’ll need to know

  • Income share by decile or quintile for (a) individual persons and (b) corporate persons;
  • Tax receipts by type of tax;
  • For each type of tax, what fraction is paid by individuals (split by income bands) and by corporations (also split by income bands)
  • and probably some other kinds of information as well

How to get this kind of information?  As things stand, there is no institutionalised way. One can try asking, but the government can simply refuse to provide an answer.

And here is where I reiterate: We need to have a Freedom of Information Act, under which the government shall be obliged to provide such information when requested.

One final observation:  For a government that likes to advertise itself as highly rational and pragmatic, making decisions based on objective criteria, it is remarkably guarded about sharing information. It keeps on saying “trust us, we act according to the facts” yet consistently choose to keep facts under wraps. From time to time, they dangle a shiny bauble of data such as the above (top 20% pay 84% of taxes), and hope that people will nod and accept them as evidence that theirs is a rational, compassionate, fact-based approach to governance.

I say: if you’re so sure that you’re making the best decisions based on the facts, why are you so afraid to reveal the facts?

41 Responses to “Top 20% pay 84% of taxes”


  1. 1 Jane 19 June 2012 at 23:55

    Maybe Shanmugam will talk to you next.
    OK maybe not.

  2. 2 Anonymous 20 June 2012 at 01:49

    Heh, “top 20% pay 84% of taxes” — only in Singapore could a politician get away with such a brazen, bald-faced lie without being frogmarched out of the country in sackcloth and ashes.

    Perhaps our politicians could write this tagline into law, making it compulsory advertising for all private banking branches of banks in Singapore? I’m sure there are many large-hearted, civic-minded plutocrats hiding around the world who simply can’t wait to subscribe to Shanmugam’s noble cause.

    Why waste time dignifying his tripe with analysis? It is simply farcical to anyone with any inkling of the wider context of the workings of financial capitalism. (http://treasureislands.org/)

    • 3 yawningbread 20 June 2012 at 09:29

      We can’t say it’s a “brazen bald-faced lie”, because I don’t think anyone outside the Finance Ministry knows what the true figure is. Moreover, as I have pointed out, much depends on how one classifies excise taxes and GST.

      • 4 Anonymous 21 June 2012 at 17:43

        Alex, you’re still not getting the big picture — of course you’re never going to get the “true figure” or the intricacies of Shanmugam’s classificatory lore! Secrecy IS the central feature of financial capitalism, and it’s fundamentally opposed to public and democratic scrutiny.

        You also paint an utterly misleading picture by saying “that the better-off contribute a big portion of government revenue is a no-brainer.” That statement tells us nothing. Big portion relative to what? To what the average working Singaporean is paying? Bigger than the past? Than what it should be? — The problems of tax revenue drain and the concomitant privatization of public services facing us is the direct result of the neoliberal restructuring of the global economy that effects the direct transfer of wealth from taxxpayers to offshore accounts and corporations.

        I recommend you read,

        http://treasureislands.org/the-arguments/

        http://www.guardian.co.uk/commentisfree/2011/mar/15/tax-corporations-treasury-large-companies

        It’ll help u discern the forest from the trees.

  3. 5 Francis 20 June 2012 at 05:45

    We wonder why the law minister choose to tell Gintai about this “fact” not the state media since the PAP loves to show that they care in every opportunity.
    Is this minister calling a spade a spade or is it “Caveat Emptor. Reader beware.” . I more inclined to believe it is the latter judging from the typical characteristic of PAP stooges.

    Is it not baffling that this law minister did nothing to address the gerrymandering, vote-buying through upgrading and boundary redrawn of PAP ? Is it not illegal ? As a law minister, why didn’t he address that, and why didn’t Gintai follow up on that with the minister ?

  4. 6 Tom Li 20 June 2012 at 07:30

    whatever the figures are, i must now feel so lucky to be included in the tax paying bracket.where i used to envy those who don’t have to pay any

  5. 7 Ziggy 20 June 2012 at 07:59

    Here is another rose petal from Dear Leader:

    ” Over a lifetime, a low-income household will receive more than S$500,000 from the government.”

  6. 8 Alan Wong 20 June 2012 at 10:01

    As they say, the devil is in the details. As if we all are simpletons, it’s strange that they can come up with such simplistic statements that can only raise more questions as whether they are merely calling their bluff ? In other words are they lying ?

    What is the use of these statistics if only a few exceptional cases can be true only with manipulated results ? Like how one Minister insisted that a family can still afford a HDB flat based on S1,000 monthly salary coupled with some statements from another Minister that free meals will be delivered to their homes IF they are starving ?

    For example to borrow what you have correctly pointed out, if they are so sure that they are giving us a generous subsidy in new HDB flats or even in a polyclinic consultation fee, why are they so afraid to give us the actual facts what are the real susbidies ?

    Statistics cannot lie but politicians can, if they are cunning enough.

    • 9 KC 23 June 2012 at 07:45

      Totally agree with you, if Top 20% pay 84% of taxes then GST can be remove straightaway. Blatant lies.

      • 10 CH 27 June 2012 at 10:47

        Hi KC, it might help to know that GST is included in the tax picture. The rationale is that higher earning individuals are more likely to purchase luxury goods (branded products, luxury cars, dine in high-end restaurants) compared to the average Singaporean and will thus contribute more to the total tax collected.

        Contrary to popular belief, removing GST might be counter-effective to what you think it would do. GST was initially implemented in Singapore to shift our reliance on direct taxes (income tax; tax on earnings/effort) to indirect taxes (GST; tax on expenditure/consumption) in order to sustain our low income tax rates (especially for the lower brackets). In doing so, the rationale was also to encourage Singaporeans to save and invest.

        Would you rather the government tax you more on your effort and hard work (income tax), or on your consumption (GST)?

    • 11 AV 26 June 2012 at 09:23

      Statistics can be manipulated easily by those involved. A case cited in another forum – are low unemployment figures realistic?

      We are told the government help agencies reclassify people who can’t find a job in 6 months as ‘RETIRED’.

      How is that for window dressing? Hope some news people can look into this.

      • 12 CH 27 June 2012 at 10:50

        It would help all of us here to understand better if you could tell us who was it that “told” you about this before anyone can look into it, because it is highly unlikely that that’s the case.

  7. 13 Feedback 20 June 2012 at 10:15

    I do hope that Minister Shanmugam can find time to see you for feedback,that would be a blessing,you missed the wonderful feedback chat wwith candidate Tony Tan.

  8. 14 nick 20 June 2012 at 10:22

    I don’t think his meeting with K Shanmugam yielded anything useful. Same old PAP type response. Perhaps Gintai should just focus on one issue instead of trying to cover so many issues and end up with nothing. You are the sharpest amongst all bloggers, I doubt K Shanmuggam would DARE meet you one on one for such interview.

  9. 15 blacktryst 20 June 2012 at 13:04

    Its not just the Ministry of Finance. Its the entire culture at government of refusing to reveal facts to the public backed up with empirical evidence. I’m amazed that the government is always crowing about how transparent Singapore is in those rankings yet somehow the public is never the intended audience for the transparency, rather its always the corporate boardroom.

  10. 16 Leecher 20 June 2012 at 13:28

    The amount of revenue that the government collects from low and middle income Singaporeans through overcharging of HDB homes is ridiculous. Billions upon billions are in the Reserves from such contemptible practice of overcharging low and middle income earners for a necessity.

    Tharman and this guy are fakes to argue that the poor pay very little in taxes.

    • 17 yawningbread 20 June 2012 at 14:20

      I think they will argue that the monies that go for land costs, and HDB profits, aren’t “taxes” and aren’t part of general govt revenue. They go instead to the national reserves which are then managed by our sovereign wealth funds . . . which then leads us to a wholly separate topic: Christopher Balding’s blogs.

      • 18 Poker Player 20 June 2012 at 15:01

        Ah…our reserves. The people who run things understand one thing very well. You don’t have to have money to be rich. You just have to control it – from there you have to be a cretin not to know how to benefit yourself from that. That’s one way to see who our reserves enrich.

      • 19 nick 20 June 2012 at 15:01

        Hahaa.. talking about that.. wonder who hacked his blog to stop him from revealing too much.. I hope you can do some write up on this too :)

  11. 20 DT anon 20 June 2012 at 13:32

    Every time I read or hera statements about access to information or when the government drops some nuggets of information to us I always hear Jack Nicholson’s character in A Few Good Men thunder that eternal phrase: “You want the truth? You can’t handle the truth!”

    • 21 Pat Pat 20 June 2012 at 15:50

      With the use of social media and the electorate increasing pressure on the government for disclosure, eventually the outcome may just be like how the cross examination ended in the movie:

      Tom Cruise: “Did you order the Code Red?”
      Jack Nicholson: “Godamnit, I did!”
      (Judge then ordered the guards to arrest the Colonel)

  12. 22 passerby 20 June 2012 at 15:16

    Hi Alex,

    Actually, there are public statistics on the amount of tax paid by different income brackets.

    See page 11 of this: http://www.singstat.gov.sg/pubn/reference/yos11/statsT-publicfinance.pdf

    I believe you can also find the breakdown of tax receipts in that document.

    Of course, you’re right that we don’t have an easy breakdown that includes all forms of tax paid. And freedom of information would definitely help. But there *are* some figures out there, and we can work with them, for a start.

  13. 23 Gaba 20 June 2012 at 15:18

    I think in 2016 some opposition party should run on a call for transparency. They’re hiding the numbers and obviously, there’s something to hide.
    1) How much does it cost to build a flat?
    2) Our national reserves?

    That’s just the tip of the iceberg, of course. It’s amazing how the Men in White are just continuing with the status quo, even though they’ve seen their support erode in the past election.

  14. 24 lannister 20 June 2012 at 16:06

    i just think that Shanmugam’s words, instead of allaying fears, contrarily just make it more clear that there is too much that the government is not telling us.

  15. 25 Anonymous 20 June 2012 at 18:38

    The govt has put out numbers, but it is quite difficult to arrive at any conclusion.

    For 2011, the total tax revenue was 46.17 billion. Income tax accounted for 21 billion, with corporate income tax contributing 12.22 billion and personal income tax 6.67 billion–so 60% of income tax comes from companies and of the other 40%, it’s possible that a good chunk comes from people earning more than 100K a year (does that qualify as rich in Singapore, the world capital of millionaires?). Aside: There are about 1.2 million individual taxpayers in SIngapore.

    GST contributed 8.91 billion, but this includes everything from Prada bags to Pokka tea, so we are all in it.

    Taxes on motor vehicles amounted to 1.86 billion.

    Customs & excise duties, betting taxes and stamp duty together accounted for 7.7 billion.

    Development charges brought in a whopping 4.47 billion. These charges are a tax on enhancement in land value resulting from the State approving a higher value development proposal.

    I am inclined to believe Minister Shanmugam when he says the richie rich contribute a major chunk of our tax revenues,

    • 26 yawningbread 20 June 2012 at 22:33

      That the better-off contribute a big portion of government revenue is a no-brainer. It is not the point in contention. It is the subtle attempt to present it as such a big indication of progressivity (and a big credit to this government) when it is questionable (and unsubstantiated with additional information) that is the issue.

  16. 27 Anonymous 20 June 2012 at 19:11

    good post. I am wondering how should ordinary citizen go about effecting a freedom of information act in Singapore? problem is majority of people probably cannot appreciate the importance of such an act, so there is never enough political will power to effect it. blogging about it will likely only be marginally useful, but probably insufficient …

  17. 29 Chanel 20 June 2012 at 21:16

    Actually, our law minister Shamugam is pretty bad at numbers. Check out his past comments involving numbers and you will agree with me

  18. 30 fact-free fat 20 June 2012 at 21:44

    So when these people were in school, did their maths teachers not tell them to “SHOW THEIR TUCKING WORKINGS”?

    No?

    Oh I see. In that case, how about every single time they appear in public we call them out on these opaque statements, that float across the surface of public discourse like gas-filled turds (just read that one on another blog)?

  19. 31 Josiah 20 June 2012 at 23:22

    Some of the data that you seek might be found at singstat.gov.sg. Although I’m not an accountant, the figures given by the government don’t seem to be as opaque (or lacking) as what I believe you had implied.
    A quick search and browse turns up http://www.singstat.gov.sg/pubn/catalogue.html

    Key Household Characteristics and Household Income Trends, 2011
    (http://www.singstat.gov.sg/pubn/papers/people/pp-s18.pdf
    Relevant data from table 10 onwards (Pg 11 onwards))

    Data I graphed from spreadsheet available separately from singstat. Data is identical to that in PDF, just that it is easier to handle.

    Taken from “Table 13. Average Monthly Household Income from Work including Employer CPF Contributions ”

    [Simple plot of data over time](http://i.imgur.com/9LlEmh.png)

    [Distribution of household income in bar chart for 2011](http://i.imgur.com/xfM3H.png)
    Note that this is household level data, and not individual, also, importantly, only employed households are counted.

    Now taken from “Table 15. Average Monthly Household Income from Work Per Household Member including Employer CPF Contributions Among Resident Employed Households by Deciles, 2000 – 2011″

    I’ll summarize for the year 2011 again, but with income per individual.
    [Distribution of household income per member in bar chart for 2011](http://i.imgur.com/8HJSP.png)

    I haven’t familiarized myself with the study you cited, and as such, the charts I posted might not measure exactly the same things, but these charts are very much more relevant, and show that the data is very much available.

    Moving on to “Monthly Digest of Statistics Singapore, May 2012″

    http://www.singstat.gov.sg/pubn/reference/mdsmay12.pdf

    14.3 Government Operating Revenue 78

    To get a feel of the figures, I dumped it into a pie chart. Figures are in millions.

    [Year 2011, pie chart](http://i.imgur.com/TdPd6.png)

    As we can see, corporate income tax and GST are major components, taking up quite a bit more than personal. Lots more data is available inside.

    To grab a feel for how corporate income is distributed, I’ll close in on the services industry

    Economic Surveys Series, The Services Sector, Reference Year 2010

    http://www.singstat.gov.sg/pubn/business/esssvc2010.pdf

    Don’t really understand very much here, since I don’t have any experience in all this stuff at all, but I’ll go for operating surplus (Defined on pg 16 as “This refers to the amount of operating receipts less operating expenditure
    (current and development) plus depreciation of fixed assets”).
    Page 8 and 9 indicates the rough spread of operating surplus vs firm size and industry.

    Concentrating on pg 9, firms with operating receipts of $5,000,000 or more employ more than half of all categories, while forming the large bulk (>90%) of the operating surplus (for this sector).

    Profile of Enterprises in Singapore

    http://www.singstat.gov.sg/pubn/business/sme2007.pdf

    “Small and Medium Enterprises (SMEs) are defined as follows:
    In the manufacturing sector, SMEs are enterprises with net fixed assets investment less than $15 million.
    For non-manufacturing sectors, SMEs are enterprises with employment size less than 200 workers.”

    “Non-SMEs, though making up less than 1% of all enterprises in the economy, provided jobs for the remaining 40% of total enterprises’ workforce and contributed slightly more than half of total enterprises’ valueadded.”

    After wading through all this, I really doubt there is a paucity of data. Although being able to request more specific information would be useful, and transparency as to how the figures quoted by ministers come about is certainly necessary, there is a ton of existing data to look at, if one so desires.

  20. 36 ricardo 21 June 2012 at 19:26

    Mr. Shanmugam elaborates slightly on his Facebook page under “Why Elites Fail”. The most important fact he presents is not that the rich pay 84% of the total tax bill but that 59% of Singaporeans are too poor to pay income tax.

    He also regards Singapore’s top tax rate of 20% as high, quoting Hong Kong’s 17%. Australia’s LOWEST tax rate starts at 20% and Australians certainly don’t see Oz as a high tax country.

    The importance of all these numbers is that Singapore has a high and rising GINI (which measures the gap between rich & poor) to go with its high GDP. Guess who benefits.

    • 37 Chow 22 June 2012 at 17:52

      Like you, I was horrified with the inference to be made from that statement. I am not entirely sure if I am correct but when I looked at the statistics last year I figured that Mr Shanmugam meant all Singaporeans (i.e the entire population of PRs/citizens) rather than meaning only 40% of the PR/citizen workforce pay (income) taxes. If the latter meaning were to be true, it’s a very, very alarming thing.

  21. 38 Lye Khuen Way 21 June 2012 at 20:04

    Great dissectation of one glowing claim!
    Whenever there is a statistic from any Govt body or any minister or his MOs, I am pretty sure either Alex Au or Leong SH or Lucky Tan will tear it apart and so it must be, as what they, the statistic tried to convey can only fool the 60+% all the time,

    Thanks, Alex. You sure put the DPM on the spot.

    Come to think of it, who among the Govt had not been on the spot lately?

    Just heard on the radio -21/6/2012 Lim SS, saying that there is no job that cannot be improved!
    How immensely correct. He can start with PAP politicians, whether as Minister or MOS or plain MP. No?

  22. 39 fpc 24 June 2012 at 06:29

    totally agree with your analysis.

    If we are happy with the current status, it means, the employers and govt have a lot of incentives to keep salaries low so as to justify the 20% pay 80% of the taxes rule.

    Besides, how the hell did the law minister come up with this number? totally not credible.

  23. 40 Rt 29 June 2012 at 19:49

    Taxes to him are incomes earned from COE, ERP, levies from maids, work permit holders, casinos n gambling taxes, liquors, fines collected,

  24. 41 Young Franco 2 July 2012 at 22:14

    unlike what your article claims, i did get a clear picture of the context of KS’ statement. he had made it in his reference to the gst policy. he thought the tax strategy designed in singapore’s manner is better than the referent countries gintai had mentioned. As a result, 20% pays for 80+% of taxes. clearly, the govt feels this is a good thing. i guess you are re-contextualizing it for your purpose by suggesting that tax should be proportional to % of wealth. Sure that can work too.

    however, if a person’s wealth is derived from the sweat of his own effort, risk of his own capital, and exercise of his own intellect, is it fair that he is grossly disproportionately taxed in comparison to others who are not as succesful? By doing so, arent we punishing the talented? certainly you’d agree this is unviable as well; unless in some twist of logic, we feel that profit is shameful, and thus should be punished by taxing them away.

    another system is to tax everyone the same rate, yes including the poor people. well, that doesnt seem fair on poor people either.

    we will all have different ratios we feel comfortable about. the keyword is comfortable…and we all look for the stats that justifies our beliefs.
    i think 80% of the middle-poor class people pay 20% of taxes is a good deal. now lets go and figure out how to help the poor people move up the ladder. and thats not going to happen by fine tuning tax rates.


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