A comment by haveahacks to the post A bird’s-eye view of the budget pointed out that the government gave a 20-percent rebate on personal income tax in several years. As a result, the data pertaining to the trending of personal income tax have to be adjusted to reflect this factor.
While I couldn’t locate the statement about rebates in Years of Assessment 2008, 2009 and 2011 on the Inland Revenue Authority’s website as haveahacks said, I did see a report in the Straits Times that corroborated haveahacks’ comment.
The newspaper reported:
Taxpayers will get a one-off personal income tax rebate of 20 percent this year but the handout will be capped at $2,000.
Taxpayers enjoyed a similar windfall in 2008 and 2009.
— Straits Times, 19 February 2011, Tax rebate to help middle-income earners.
This does not mean that the government had forgone 20 percent of the personal income tax collectible. Only about half of those taxpayers enjoyed the full 20 percent rebate; the other half by my estimate would have income tax assessments exceeding S$10,000, and so their rebate would be capped at $2,000. My back-of-the-envelope calculations indicate that the government forwent about 13 percent of the Personal Income Tax they might otherwise have collected.
Furthermore, I don’t think rebates applied to Withholding Tax, so the government passed up on only about 11.5 percent of the Personal Income Tax + Withholding Tax subtotal.
Thus, I am adjusting the figures for 2008, 2009 and 2011 by increasing the numbers by 13 percent (reciprocal of 11.5 percent):
As haveavacks said, the comparable totals for Personal Income Tax + Withholding Tax now show a dip in one year.
This probably indicates the recession’s effect on middle- and high-income earners. The rebate is a better explanation for the consistently upward trend in the budget collection figures than my earlier suggestion that the rich could make themselves immune to economic cycles.
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Now, here’s another thought, perhaps one that readers will find particularly provocative. My readers are most likely themselves to be from the middle and upper-classes of Singapore society.
Of all the points I made in the post A bird’s-eye view of the budget, they seemed most concerned about just this one: that the mid and high-income group did not suffer the recession. Most of the readers’ comments relate to this speculative point I made. While I was probably wrong — their earnings stagnated or were rolled back too — yet it somehow seemed that they were inordinately eager to prove that Indeed, We Suffered Too!
By contrast, my other, and I think more important, point received not a single comment. It was that we can discern from five or six budgets an inconsistency of fiscal transfers to the worse-off. This is the table (from the earlier post) I am referring to:
It is a criticism I am making of the government’s budgetary philosophy. The very flat Goods and Services Tax is permanent, but the figures show that relief from its regressiveness is ad hoc, more dependent on election cycles than any concern for the less well-off. 2006 and 2011 were election-year budgets, and these were the two budgets with the highest quantum of transfers. As soon as an election is over, transfers plunge, as in 2007, which was also the year when the GST rate was raised by two percentage points.
It is a criticism made by several opposition parties too, and my figures bear them out.
Let me ask now: Is it possible that my middle- and high-income readers are only all too aware that greater budgetary equity for the less well-off can only mean higher taxes, and/or a more progressive overall tax slope, and this background awareness prompts readers to rush forward to say “But we suffered too!” rather than “Yeah, we should do more for the less well-off”?
That self-interest may be at work here?