Are we rich or are we bankrupt? Part 2
Are we rich or are we bankrupt? Part 2 WEDNESDAY, 13 JULY 2011 Singapore Democrats
In Part 1 of this series, we explained how the PAP Government borrowed against our CPF savings to conduct commercial activities both in and outside Singapore. In the process, it has ratcheted up our public debt which has become larger than our Gross National Income.
This puts us in a rather discomfiting fiscal position. According to some analysts, a redeeming feature – if one can call it that – in this arrangement is the fact that we have a structural budget surplus. This guarantees our ability to pay off the debt that the Government has incurred on our behalf.
In order to maintain the surplus at a viable level for it to counter-balance the debt, the Government would have to collect revenue from us at the present high rate. That is, the more the Government borrows, the more it has to tax us.
In other words, we are dependent on maintaining a budget surplus on a consistent basis to ward off a situation similar to the one now taking place in Greece.
Revenue, glorious revenue
To this end, the PAP has devised a myriad of ways to collect revenue from us. The Singapore Democrats have repeatedly pointed out the more evident ones such as the GST, COE, and ERP. Other means include PUB tariffs (electricity rates increased 6.5 percent in April this year), bus and MRT fares (which are going to increase later this year), the road tax and so on.
A less obvious, but nevertheless huge, cash cow for the PAP is land. By jacking up the cost of land in Singapore, the PAP raises HDB prices. With the vast majority of Singaporeans living in such public housing, the revenue is vast. Mr Wong Pak Shong, a former top official of the Monetary Authority of Singapore, remarked that when it comes to the compulsory acquisition of land, the Government "is a terrific moneymaking machine."
Huge amounts of money can also be made by allowing cash-rich foreigners and permanent residents to purchase property in Singapore.
Raising land prices also increases rental prices. Ask entrepreneurs and they will tell you that most businesses operate just to help their landlords collect rent. After paying off the rent, little is left. And who is the biggest and ultimate landlord in Singapore?
Padding up the budget surplus is done not only through the imposition of taxes and fees. It is also carried out by reducing Government expenditure. Take healthcare, for example. Through the years the PAP has been scaling back the Government's share of paying for the nation's healthcare. In the 1960s, the Government's share of the national healthcare expenditure was 50 percent. Today it has been reduced to around 25 percent.
In fact, from the figure below one can see that compared to other countries such as Canada, Germany, Japan, the Netherlands, Switzerland, and Taiwan, the Singapore Government spends the least when it comes to taking care of the country's healthcare expenses.
When the Government spends less, the people have to spend more. And when the people spend more, the Government collects more through the GST. It is a diabolical double whammy.
(The SDP Healthcare Advisory Panel is presently studying ways on how we can reform our healthcare system and its financing to make it affordable for Singaporeans.)
One more way that the PAP keeps the revenue vacuum operating with maximum efficiency is by changing our immigration policy. By flooding the country with foreign workers, it enlarges its tax base. How such a policy affects the average Singapore worker is another matter.
Even PAP Town Councils are running their estates like mini-Governments. Readers will recall that the Pasir Ris-Punggol and the Holland-Bukit Panjang Town Councils collected so much in conservancy charges that they had in excess of $12 million in 2008. The money was invested in Lehman Brothers, DBS, and Merrill Lynch financial products which turned toxic. As a result all the residents' money was lost.
It is of course superfluous to say that taxes are necessary for a government to run the country. In Singapore, however, the PAP does not collect taxes from the people just to perform its duties as Government. It doesn't need that much money to run the country efficiently. Rather it collects revenue to further amass financial, and therefore political, power for itself.
And it is doing this because it can. The PAP has ensured that the opposition has been domesticated, civil society neutered, and the media house-broken. With all institutions that can keep it in check destroyed, the PAP does as it pleases.
What can we do to you...I mean for you?
Such an approach, needless to say, makes Singaporeans' lives highly stressful. The pumping up of taxes and fares makes this island a very expensive place to live in. A UBS study released last year showed that Singapore is the 11th most expensive city in the world (out of 73).
On the other hand, keeping our wages low through the mass importation of cheap foreign labour reduces our purchasing power. The same UBS study revealed that our domestic purchasing power (DPP) is ranked a lowly 49th position. The DPP is a measure of how much we can buy in exchange for the salary that we earn in a given period of time. At 49th position the average Singaporean's purchasing power (38.8) trails behind other Asian Tigers (Taipei 60, Hong Kong 55, and Seoul 52.9).
Caught living in an expensive city with low domestic purchasing power – that's the price that Singaporeans have to pay for a Government knee-deep in public debt.
Analyst Dan Fineman underscores this point in an essay Fiscal Predator published in 2004:
The high-surplus strategy lowers Singapore's standard of living. Deprived of disposable income by numerous taxes, Singaporeans consistently consume a share of GDP 10-20 percentage points below Hong Kong levels, while Hong Kong maintains a higher per capita income. Their high-revenue, low-expenditure government leaves Singaporeans a smaller slice of a more modest pie.
The SDP continues to urge Singaporeans to pay attention the nexus between the public debt, our reserves and our CPF savings because the large debt-to-GDP ratio has a tremendous and direct impact on our daily financial concerns.
We need to change course and the first step to doing this is to understand the how the current PAP-administered system not only hurts our livelihoods but that it also endangers the economic future of this country.
Are our reserves still intact? Part 3 will explore this question.
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