Speaking at an economic forum, Singapore University of Social Science economist Walter Theseira criticised the Singapore CPF system for benefiting the rich and ripping off the average salaryman. A rich man earning more than S$27,000 a month receives S$22 in tax relief for every S$100 voluntary contribution to his retirement CPF account, whereas an employee earning S$3,000 a month who has his CPF automatically deducted will only get S$2 in tax relief.
Calling the CPF tax relief system “regressive”, the economist pointed out that the rich get 3 times more tax relief than the poor:
“So for every dollar they earn above S$320,000, at the end of the year, they are taxed at 22 cents each. But if they can use their CPF tax relief, they get to save basically 22 cents for each dollar that they have contributed to CPF. The bottom half of Singapore’s households gets 14 per cent of all CPF tax relief subsidies, while the top 10 per cent of households gets 31 per cent in subsidies…CPF contribution tax relief policy should be reformed to troubleshoot the regressive nature of CPF contributions, where those who earn less contribute a greater fraction of their income to society than high earners.”
The economist also said that the tax relief for the rich totalled about S$1 billion a year, and could have been channelled to help the poor.
“Altogether, these subsidies cost the Government approximately S$1 billion annually in tax revenue, which is a substantial amount when compared with the Silver Support scheme’s estimated cost of about S$350 million. If the subsidies are removed, what other retirement policies could the S$1 billion support?”