Disclaimer: Unless otherwise stated, any opinions expressed below are solely the author’s. All data taken from the Key Household Income Report 2025, released by Singapore’s Department of Statistics this month.
The topic of taxation in Singapore, especially the GST, which has been increased in recent years, is a hot topic, with many complaining that life is more expensive as a result.
However, the truth is that most Singaporeans have no reason to complain. Furthermore, despite being widely regarded as a low-tax haven (a place for the world’s rich), Singapore’s tax system actually heavily redistributes money from the accounts of the rich to the pockets of the poor.
Of course, many Singaporean families technically “pay” taxes, whether it’s on their income, property or whenever they buy goods and services, but what really matters is what they get in return.
As it turns out, 70% of them get much more than they give.
The rich pay 10 times what they earn…
Every year, Singapore’s Statistics Department provides data on the financial status of residential households (including residents and permanent residents), dividing them into 10 equal parts—deciles—by their income levels.
As part of its analysis, it compares how much each party pays into the national budget on average, and how much it receives from various government transfers, defined as “Unsolicited help/benefits provided by the Government to households or individuals […] for money or for money,” and are divided into three groups:
- General Government contributions: Recurring payments, top-ups or discounts (eg, Working Income Supplement, GST Vouchers, Pioneer Generation MediSave Top-ups).
- Ad-hoc Government Contributions: One-time withdrawals (eg, CDC Vouchers, Post-Secondary Education Account Supplement, One-time Retirement Savings Bonus under the Majulah Package).
- Transfer by type: The value of in-kind benefits for subsidized services or goods (eg, Educational Grants, Infant and Child Care Center-Based Grants).
Simply put: this is the amount of everything you get directly from the government each year.
Apart from other government revenues, such as corporate taxes or withheld returns, these costs are financed by taxes paid by individuals.
But as you can see below, the bulk of the burden is disproportionately borne by the top 10% of society, who pay the national budget an average of ca. S$27,000 for each family member, while you only get S$2,700.
In fact, they pay more than the next four teams combined. Although they make up only 10 percent of all households, they are responsible for 42 percent of tax receipts—income, GST, property and more.
…and the poor get about 10 times what they pay
Meanwhile, the bottom decile receives about S$15,000 in government transfers annually, despite contributing ca. $1,600 in taxes (per family member)—less than 9.2 times.
In fact, if you look closely, you will see that all groups up to the 7th decile pay less into the budget than they receive from it. This means that their overall effective tax rate is incorrect—they pay no tax at all, while receiving additional income or significant benefits.
Actually, if we try to simplify it and measure it, all the personal taxes in Singapore can be eliminated for those 70% households, but still, they will still get a lot of money.
This is important to remember, because the government has other costs that are necessary for the country to function as a whole, such as national defense, administration, judges or infrastructure (public transport, roads, ports, airports, energy, water, etc.).
However, it is able to pay for them all while subsidizing almost 3/4 of the local households, without borrowing money.
In essence, any tax increase, like the GST increase, is a redistributive tool aimed mostly at the wealthiest residents, who earn the most but also spend the most and live in the largest, most expensive homes.
With the money raised, the authorities are able to cover the increased costs for many ordinary Singaporeans while saving more money, so they can provide better social or health services as the country ages and the elderly need more support.
Why doesn’t Singapore remove more taxes from individuals and reduce welfare control?
Given that many people do not pay taxes when they are prepared with all the money back, it may seem reasonable for the authorities to simply eliminate both taxes and many welfare programs in order to simplify the system and avoid administrative costs.
Instead of having to pay first and then get more, people would just keep money in their pockets and get more money as needed.
However, for practical reasons, this is not possible.
You can’t just exempt about 3/4 of the public from GST, while keeping it for everyone else – you’ll need two rates for everything. You should also keep the personal tax scale moving smoothly, so that there is no incentive to hide one’s income to avoid paying any tax if it falls below a certain point.
As long as tax evasion is difficult, then the government can collect all it has to do and ensure that the money goes back to those who need it—usually by refunding more than what they paid—and regulate how it is spent (bundling payments with certain services or providing targeted subsidies, instead of allowing abuse).
The whole system is designed to collect money from the wealthy and use it to direct everyone to the most desirable outcomes. Instead of being a simple gift, the government uses cash transfers to ensure that their basic needs such as housing, health care, pensions, and utilities are taken care of.
- Read other articles we have written on Singapore current affairs here.
Featured Image Credit: TKKurikawa/depositphotos
