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SINGAPORE: Second Finance Minister Tharman Shanmugaratnam says the GST increase, when coupled with the Workfare scheme, is not regressive.
He was addressing concerns that the lower income group would be harder hit by the rise in the consumption tax.
In fact, Mr Tharman said, the lower income group would be better off with Workfare and the GST offset package.
Under Singapore's current tax system, the top 20 per cent of households will contribute more than half of the taxes collected by the government.
At 54 per cent of total taxes, this amount is also about four times as much as what the bottom 40 per cent of Singaporeans are paying in taxes.
When Workfare and the GST are factored into the equation, the lowest 20 per cent of Singaporeans will end up getting more incentives from the government than they are taxed.
But a concern among many is the sandwiched middle-income Singaporean.
Is there anything in this year's Budget for this group?
"I think they are referring especially to those who pay income tax and also own a car and have a maid and therefore pay significant indirect taxes as well. They are, in fact, the group mainly between the 60th and 80th percentiles. Their overall tax burden is typically about nine to eleven per cent of their annual income," said Mr Tharman.
He said the government has taken steps to reduce taxing this group of middle-income Singaporeans, such as reducing the foreign domestic worker levy and car ownership taxes.
And compared to other countries, few cities have lower tax rates than Singapore does.
The top personal income tax rate is currently at 20 per cent. - CNA/yy
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