MORE TAXING THAN TAXES? : THE TAXLIKE EFFECTS OF NONTAX POLICIES IN SINGAPORE

Abstract

Everyone complains about taxes. But nothing is more certain as death and taxes. Incidentally, taxpaying is one of the most ubiquitous activities of modem life. The growth rate of our tax revenue has been positive since 1987. Does this imply a heavy tax burden for you and me? The common basis of examining the tax burden in various countries is to compare the tax collections to Gross Domestic Product or some other measure of national output. However, by omitting both the excess burden of taxes and the entire burden of taxlike nontax policies, these comparisons understate the real burden of taxation. There has been no detailed study on the various tax burdens, including the taxlike effects of the nontax policies. The objective of this academic exercise is to examine the effects of nontax policies in Singapore. The strong reliance of regulatory policies to bring about economic efficiency is a distinctive feature of Singapore fiscal structure. The Vehicle Quota Premium scheme and the Foreign Maids Levy are two of the major nontax policies in Singapore that have direct impact on the households. Are these nontax policies in Singapore equitable? Who is bearing the burden of these implicit taxes? Whether and to what extent are these nontax policies more taxing than taxes? A partial equilibrium analysis was adopted to compare the tax and nontax incidence. Surprisingly, it turns out that nontax policies in Singapore are actually not as taxing as tax policies. In fact, the burden distribution of Certificate of Entitlement is highly progressive. This is in contrast to the burden distribution of the Goods and Services Tax which is found to be regressive. In addition, a cost-benefit analysis on the Singapore fiscal system was carried out. Results indicated that ninety percent of the Singaporeans gain more from government's expenditure benefits than what they pay out in taxes. However, the analysis done here is by no means conclusive. More research is required before we can fully understand the taxlike effects of the nontax policies in Singapore. It is hoped that this study will stimulate further research in this area.