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Table of Contents
A FAIR DEAL FOR THE MIDDLE-INCOME
91. Let me move on to the middle income group - a very important group. Many MPs spoke about this as I mentioned.
92. What is our basic strategy to help the middle income group? First and foremost, it is to raise real incomes. That is our most important strategy for helping the middle income group to cope with the cost of living.
93. We have not done too badly in raising the incomes of our middle income group. It is not very well known, but our middle income households have seen the most significant growth in real terms over the past five years –3.2% per annum.
[Refer to Chart at Annex C]
94. Income growth is slightly lower for lower-income households, but the median household has done well compared to the higher end households. This is on a per capita basis, which is the most meaningful indication of income growth.
95. These rates of growth are rare when looked at internationally over the last five years. In Hong Kong and Taiwan, the median income growth in real terms was negative over the same period. Median income growth in Korea was positive, although lower than ours. And most developed countries have had either lower or negative income growth over the last five years.
Keeping the Tax Burden Low
96. Our second strategy is to keep the tax burden low for the middle income group. This is an important feature of our tax system, which is not widely recognised. Our taxes for middle income group are much lower than in most countries. The middle income group has to pay GST and very limited income taxes, since the income tax schedule starts from the 60th percentile of incomes – and even then, at very low rates. Some pay maid levies or expenditures for their cars. But overall, the tax burden on the middle income group is relatively low by international standards.
97. For the lower income group, they get more than $4 back for every dollar paid. For the middle income family that owns a car – and a car is extremely expensive in Singapore – they get back about 80 cents for every dollar in taxes paid. Without car ownership, they could get back $1.50 in benefits for every dollar in taxes paid.
[Refer to Charts at Annex D]
98. There are very few systems that provide this. Even for those who want to have a car, for convenience or because they have a large family or elderly family members who need to be ferried around, it is still a very fair system. There are very few systems that would give the average household 80 cents back for every dollar of tax paid.
99. In short, that is our strategy - keeping taxes low and making sure that the system is as neutral as possible for the middle income group, while providing the lower income group with substantially more benefits than the taxes they pay.