Commentary: Greater social spending and redistribution rest on economic growth and government prudence

Notwithstanding these efforts, the economic pie is unlikely to expand as fast as in previous decades. Now that Singapore is a high-income economy that is closer to the frontier of technology and productivity, the scope for catch-up growth is lower.

When Singapore was a young nation, a rising tide lifted all boats. Today, as a maturing society with wealth and socioeconomic advantages accumulated over several generations, fiscal redistribution will play a larger part in tempering inequality and sustaining social mobility through education and other social investments.  

HOW THE TAX SYSTEM IS EVOLVING TO SUPPORT REDISTRIBUTION

Some ask if our tax system can be reviewed to give more to those in need. Indeed, Singapore’s tax system has evolved over the years to support redistribution while keeping the overall tax burden low. Everyone contributes something in taxes, with the better-off contributing more.

The latest tax changes are part of this evolution. Though Budget 2022 stands out as one that has made a further, significant shift towards greater progressivity in both income and asset taxes, past Budgets – particularly those in 2010, 2013 and 2015 – have seen moves to enhance progressivity in income and asset taxes and tax reliefs.

With GST set to increase, there was much pre-Budget speculation on what new forms of wealth taxes might be on the cards and whether estate duty, abolished in 2008, would return.

The Government opted instead to work within the existing framework of taxes on residential properties and luxury cars, given the practical difficulty of fairly assessing a person’s net wealth, as well as the mobility of other forms of wealth across borders.

It also raised the top marginal personal income tax rate for those earning over S$500,000. This increase in personal income taxes for the top 1.2 per cent of wage earners is expected to raise about S$170 million in additional revenues each year. This builds on the personal income tax hike announced in Budget 2015, which affected the top 5 per cent of wage earners with a projected gain of S$400 million.