CPF

(16-06-2014, 12:24 AM)piggo Wrote: We are effectively paying a minimum tax of 36% on top of our income tax... but our social benefits pale in comparison to other countries with similar level of taxes.

I have never heard of people discussing interest return on the tax they paid to the State. What kind of tax pays you back the principal with interest?

I think there is a huge misconception that people view CPF money is something Gov want to hide away from you "Forever" and therefore is viewed as Tax. The reality is people who retired or met the condition did get the money back. Talk to your seniors more.

The people who needed CPF most are actually the weak and old. The scheme helps them to save, prevent scams, protection from bankruptcy, controlled investment losses, buy their first property and provide some growths which could have been parked in saving banks.

People within this group who do not have money now and want to draw them, will also have no money tomorrow. The more the money has to be locked up. They need to be accountable for their own financial conditions and not fight the system to get into the reserve for solution.

(16-06-2014, 12:24 AM)piggo Wrote: We are effectively paying a minimum tax of 36% on top of our income tax... but our social benefits pale in comparison to other countries with similar level of taxes.

It's also funny that contribution is capped at 5,000. So the people below averaged are effectively "taxed" more than the one above the average income bracket... So much for income redistribution.

Going by the logic of self sufficiency, CPF contribution should not have a cap. Living expectations varies pretty much according to income level... so 1.2k/mth may be sufficient to a typical singaporean worker. Same may not be sufficient to someone who have been earning 10k/mth or in the case of our leaders, 8k/day

I heard CPF was taken as bank fixed deposit, withdrawal should be allowed as wishes, now I heard CPF was taken as tax? What a diverse views on CPF?

Let me add more confusion by one more view, I am taking CPF as an compulsory endowment policy.

It has a current Projected Investment Rate of Return (PIRR) of 3-4%. I can borrow for property, share, child education and etc, but need to pay interest. It is fair enough since most, if not all endowment policies did the same, and with higher interest.

Although not advisable, I can liquidate endowment policy with its cash value, and release insurance company from all liabilities. Can I liquidate my CPF? I checked, yes, when gov liabilities are released, when you have left Singapore and West Malaysia permanently with no intention of returning to either country for employment or residence. In addition you should have renounced your Singapore Citizenship.

Fair enough for me as an endowment plan.

(15-06-2014, 06:38 PM)level13 Wrote: To mr ng and those asking for cpf back:

Assuming the government give back all the money. Naturally some will use it to fund their retirement and some will spend it all. For those who do not have much left when they are old and sick, do they then expect the government to take care and foot their bills?

If your answer is yes, then most people will never want to save up for retirement because they know the government will step in to help. And where does the money come from? Its from the tax-payer. As a tax-payer, do you want your contribution to be spent in this manner?

I think we have to be clear of one thing. Our retirement is our own responsibility. CPF is just a savings scheme that is designed to help our retirement. Therefore CPF goal posts should not be shifted to make it hard for people to get back their own money. The problem lies in the fact that CPF has changed so much over time from being a savings scheme that many people now leaves the responsibility of retirement to the govt because they see CPF as a tax and many think it is no longer their money. If the govt wants to be a nanny state when it comes to CPF, naturally the people will expect the nanny to behave like a nanny and take care of their retirement needs.

(16-06-2014, 12:24 AM)piggo Wrote: We are effectively paying a minimum tax of 36% on top of our income tax... but our social benefits pale in comparison to other countries with similar level of taxes.

It's also funny that contribution is capped at 5,000. So the people below averaged are effectively "taxed" more than the one above the average income bracket... So much for income redistribution.

Going by the logic of self sufficiency, CPF contribution should not have a cap. Living expectations varies pretty much according to income level... so 1.2k/mth may be sufficient to a typical singaporean worker. Same may not be sufficient to someone who have been earning 10k/mth or in the case of our leaders, 8k/day

I would agree with piggo.

Consider this. The low returns of the cpf and stagnating wages of low income groups, in addition to the emphasis on self sufficiency (i.e. lack of social safety net), pushes up the savings rate of singaporeans significantly. The savings are then channeled to feed investments.

However, this is also a huge implicit tax on the masses because effectively wealth is transferred from the savers to the investors. Through this implicit tax, the masses have contributed to nation building but enjoyed a less than proportionate share of increase in wealth. In the past the rising tide lifted all boats and everybody was happy. Now that the cost of living has caught up, isn't it right to give something back?

Apart from reforms in the CPF, I like to see more wealth taxes. The reestablishment of estate tax would be a nice start (not likely since theres so much vested interests. can already see a lot of people shivering in their pants.)

(16-06-2014, 10:27 AM)grubb Wrote:

(16-06-2014, 12:24 AM)piggo Wrote: We are effectively paying a minimum tax of 36% on top of our income tax... but our social benefits pale in comparison to other countries with similar level of taxes.

It's also funny that contribution is capped at 5,000. So the people below averaged are effectively "taxed" more than the one above the average income bracket... So much for income redistribution.

Going by the logic of self sufficiency, CPF contribution should not have a cap. Living expectations varies pretty much according to income level... so 1.2k/mth may be sufficient to a typical singaporean worker. Same may not be sufficient to someone who have been earning 10k/mth or in the case of our leaders, 8k/day

I would agree with piggo.

Consider this. The low returns of the cpf and stagnating wages of low income groups, in addition to the emphasis on self sufficiency (i.e. lack of social safety net), pushes up the savings rate of singaporeans significantly. The savings are then channeled to feed investments. This is all part of the asian growth model.

However, this is also a huge implicit tax on the masses because effectively wealth is transferred from the savers to the investors. Through this implicit tax, the masses have contributed to nation building but enjoyed a less than proportionate share of increase in wealth. In the past the rising tide lifted all boats and everybody was happy. Now that the cost of living has caught up, isn't it right to give something back?

Apart from reforms in the CPF, I like to see more wealth taxes. The reestablishment of estate tax would be a nice start (not likely since theres so much vested interests. can already see a lot of people shivering in their pants.)

I wouldn't dismiss immediate on the comment of fairer wealth distribution, but we need a sustainable solution, rather a populist policy

As for the "Wealth tax", I would like to share one small story I heard recently below. Although the story is for US, and should be applicable to Singapore, with a little twist.

--------
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

‘I only got a dollar out of the $20,’declared the sixth man. He pointed to the tenth man,’ but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

(I heard about a case which a man was having difficulties to pay for his son's tertiary education. In the end he committed suicide so that they can withdraw the money.....maybe it is just a hearsay so take it with a pinch of salt)


58 YEAR OLD MAN SHARES HOW CPF RESTRICTIONS HAVE RUINED HIS LIFE
http://www.therealsingapore.com/content/...d-his-life

(16-06-2014, 10:45 AM)CityFarmer Wrote:

(16-06-2014, 10:27 AM)grubb Wrote:

(16-06-2014, 12:24 AM)piggo Wrote: We are effectively paying a minimum tax of 36% on top of our income tax... but our social benefits pale in comparison to other countries with similar level of taxes.

It's also funny that contribution is capped at 5,000. So the people below averaged are effectively "taxed" more than the one above the average income bracket... So much for income redistribution.

Going by the logic of self sufficiency, CPF contribution should not have a cap. Living expectations varies pretty much according to income level... so 1.2k/mth may be sufficient to a typical singaporean worker. Same may not be sufficient to someone who have been earning 10k/mth or in the case of our leaders, 8k/day

I would agree with piggo.

Consider this. The low returns of the cpf and stagnating wages of low income groups, in addition to the emphasis on self sufficiency (i.e. lack of social safety net), pushes up the savings rate of singaporeans significantly. The savings are then channeled to feed investments. This is all part of the asian growth model.

However, this is also a huge implicit tax on the masses because effectively wealth is transferred from the savers to the investors. Through this implicit tax, the masses have contributed to nation building but enjoyed a less than proportionate share of increase in wealth. In the past the rising tide lifted all boats and everybody was happy. Now that the cost of living has caught up, isn't it right to give something back?

Apart from reforms in the CPF, I like to see more wealth taxes. The reestablishment of estate tax would be a nice start (not likely since theres so much vested interests. can already see a lot of people shivering in their pants.)

I wouldn't dismiss immediate on the comment of fairer wealth distribution, but we need a sustainable solution, rather a populist policy

As for the "Wealth tax", I would like to share one small story I heard recently below. Although the story is for US, and should be applicable to Singapore, with a little twist.

--------
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

‘I only got a dollar out of the $20,’declared the sixth man. He pointed to the tenth man,’ but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

Academics and economists in the US or in general are split into two camps - the right leaning ones who tend to be Republicans, and the left leaning ones who tend to be Democrats. The Republican types call for less taxes for the rich and support trickle-down economics. This has largely been the dominant model since 80s Reagan and responsible for the state of the rich-poor divide and inequality today.

(16-06-2014, 10:58 AM)kichialo Wrote: Academics and economists in the US or in general are split into two camps - the right leaning ones who tend to be Republicans, and the left leaning ones who tend to be Democrats. The Republican types call for less taxes for the rich and support trickle-down economics. This has largely been the dominant model since 80s Reagan and responsible for the state of the rich-poor divide and inequality today.

I read the article, the same way as I read analyst reports. I focus on facts presented, rather than the opinion of author.

What your opinion after digested the facts (in this case the numbers) presented? Let's forget the author opinion.

tanjm Wrote:A fallacious argument.

You have it the other way around. A tax is money taken from you to fund government expenditure, which may or may not benefit you. CPF is your own money, albeit released to you in carefully staggered intervals.

CPF contributions are exempt from tax. So the $5000 cap actually prevents richer people from escaping from their tax obligations. It is a tax revenue conserving measure from the government.

If you look carefully at the design of CPF, it is designed to benefit low to middle income people more than upper income people.

A tax (and a very high one) can always be imposed on withdrawals to prevent the rich from escaping.

To me, it's starting to look like the assumption behind CPF's design is that people who are earning $5,000 and below do not know how to manage their income. Meanwhile, those $5,000 and above are more financially savvy and will not need to save as much of their income. Using such sweeping assumptions to design policies that affects everyone is a bit lazy I think.

egghead Wrote:I have never heard of people discussing interest return on the tax they paid to the State. What kind of tax pays you back the principal with interest?

To be honest, I've only looked at the scheme for my age group. We are only allowed to withdraw anything above the minimum sum. If we don't meet the minimum sum, our houses will be pledged to reach the minimum sum i.e we can be evicted if we live too long. However, thanks to the minimum sum, we'll be automatically enrolled to CPF Life that will give us an approximate 1.2k/mth in living allowances.

So after locking up our savings in a negative real interest rate account... They are only willing to pay us back a insignificant amount after every month. Those who are not blessed with long life, loses... those survivors runs the risk of losing the roof over their heads.

That's why I'm looking at it as a form of tax, with the eventual benefit of "pension" with a tiny pot of gold and some medical benefits that is far from universal healthcare. Deposit money with me, I can pay you good interest rates too so long as it's below inflation, you can't withdraw it, and me paying u back based on your lifespan, which (because I like eggs) I will assume is very long!