SINGAPORE: Income inequality in Singapore fell to an all-time low in 2020 due to “massive transfers” and programs to support low-income groups, Deputy Prime Minister Heng Swee Keat said on Sunday (February 21st) .
Speaking on AIIC’s Ask The Finance Minister program, Heng said Singapore’s Gini coefficient was 0.375 in 2020 after government transfers, up from 0.398 in 2019. This is the best performance. Singapore since the government started tracking data in 2000, he added.
“When we measured inequality last year, it is at an all time low. This is the result of massive transfers, as our programs were geared towards supporting our low income group, ”Heng said in the post-budget forum, where he answered questions from Singaporeans.
On February 8, the Singapore Department of Statistics said resident households received an average of S $ 6,308 per household member from various government programs in 2020, which was higher than the S $ 4,684 received the previous year.
Responding to a question on Sunday about how he plans to cushion the ripple effects of the impending Goods and Services Tax (GST) hike, Heng, who is also finance minister, said the S $ 6 billion insurance package, which was introduced in the 2021 budget, will provide “very important support” to households.
“For our bottom 20 percent of households, that equates to not paying the increased GST for 10 years, and for the average (household) it’s five years,” he added.
The government initially announced in Budget 2018 that it planned to reduce the GST from 7% to 9%.
However, Heng said in last year’s budget that the GST rate would not take place in 2021, in light of the impact of COVID-19 on the economy.
READ: Emerging stronger from COVID-19 crisis at center of 2021 budget
READ: What you need to know about the 2021 budget
In this year’s budget speech, Heng said the increase would occur between 2022 and 2025, “sooner or later” depending on the economic outlook.
“The GST is often seen as a regressive tax. But in fact, if we look at the overall balance between what people pay and what people receive, we have made it a very progressive system, ”Heng said at the forum.
In Singapore, the richest 20 percent of households pay 56 percent of taxes but recoup 11 percent of the benefits. On the other hand, the lowest 20 percent of households pay 9 percent in taxes but get 27 percent of the benefits, he added.
READ: Budget 2021: GST hike between 2022 and 2025
“You can see how tilted it is that the better-off pay a lot more tax and get less benefit. Those who are less well off pay much less in taxes, but get a lot of benefits. And in fact, a lot of our workers don’t even pay income tax, ”Heng said.
“Our system has been designed over the years to guide our support to provide better support to those with greater needs.
HOPE OF BALANCING THE BUDGET OVER THE NEXT FOUR TO FIVE YEARS: DPM HENG
In his February 16 budget speech, Heng announced that all eligible households will receive a one-time special payment of between S $ 120 and S $ 200 this year, as part of a S $ 900 million household support program. Singaporean dollars.
The package includes the extension of a discount on service and conservation fees, an additional S $ 200 in the relevant education account for each child under the age of 21 and vouchers from the Community Development Council (CDC) d ‘worth 100 Singaporean dollars for all Singaporean households.
READ: Budget 2021: S $ 900 million household support program to help families meet their expenses
Low- and middle-income Singaporeans will also receive an additional S $ 200 cash payment under the GST voucher program.
Heng also said the government would build on past reserves for a second year in a row, with a projected S $ 11 billion deficit for that budget.
Responding to questions about the deficit, Heng said on Sunday that it was a “very, very stressful time” as the world is in a deep recession and the path to recovery depends on the trajectory of the pandemic. COVID-19.
“But I still think that with the vaccination and with the progress that we are making, I think there is hope that we can recover, hopefully in 2021, but beyond. Even so, it will take time for us to fully recover. Having said that, what we hope over the next four or five years is that we will still be able to balance our budget during this term, ”he added.
READ: Budget 2021: Projected deficit of S $ 11 billion; Government to dip into reserves for second year in a row
“If the recovery is as planned, then I think we have a good chance of balancing our budget. I would like to come back to a balanced budget because not only have we drawn on the reserves of the past two years in a row, but there has also been a huge draw on the reserves of the past. So we need to think seriously about how we maintain our reserves. “
SINGAPORE MUST PREPARE FOR THE UNEXPECTED
The main goal of this budget is to stimulate the growth of workers and jobs, Heng said.
He was responding to comments that the budget announcements will help Singaporean workers stay employed amid this crisis.
“We fully understand that if the breadwinner or the sole breadwinner in a family loses a job, it is not just him or her (who) will be affected. But the whole family will be affected, ”he added.
Noting the S $ 5.4 billion allocated to incentivize job growth, Heng said, “In the months and years to come, the economic environment will be different, jobs will change. Trends have accelerated, digitization is a good example.
“So how do we help our workers get jobs or get into companies that are still hiring is a big part of this budget. And that, together with all training programs, will help our workers acquire new skills to access new jobs.
READ: Budget 2021: S $ 5.4 billion increase to SGUnited to support hiring of 200,000 people
READ: Budget 2021: Expansion of employment support program for worst affected sectors as part of S $ 11 billion program
Over the next five to 15 years, the pace of change will accelerate further and Singapore needs to prepare for the unexpected, Heng said in conclusion.
“I think one of the things we need to be prepared for as individuals and as a country is that we always need to be prepared for change and we need to always be prepared to face surprises. Because if we can anticipate the great crisis that will occur, we will be able to prevent it, ”he added.
“But until now, I think humans haven’t had the ability to predict the future with such precision. We must therefore prepare for the future. “
Watch Ask the Finance Minister 2021 here: