#Mersal (whatever language that is), is a Tamil movie in which ‘sound’ economic principles have been mouthed. A newbie revolutionary – read an ageing actor – has found it fit to compare the GST rates in India and Singapore. He has also found, in his profound wisdom, that the hospitals provide free service in Singapore (Father, forgive them, for they know not what they say).
A nation’s income is through taxes. Salaried classes in India can’t cheat on their taxes as the tax component is deducted from their salaries. However, the entrepreneurs, consultants and independent workers, who are in the tax bracket, don’t have a standard tax deduction mechanism. This class tends to cheat, the main culprits being the real estate operators, rich farmers, independent professionals such as Lawyers , Chartered Accountants, Doctors, movie producers, movie actors and financiers. It is normal practice for this group to demand payment by cash for services delivered.
Now that we are in comparison mode, let us do it in full.
Comparison with OECD Countries:(ref: thehansindia.com)
- India’s tax to GDP increased from 10.4% in 1965 to 16.6% in 2015-16, the corresponding tax-to-GDP ratio of OECD countries increased from 21% in 1965 to 33% in 2015.
- Even compared to OECD nations with lower GDP (Korea, Turkey, Mexico, Chile, Portugal, Greece, Slovenia and Poland) India’s is still lower at 16.6% versus average of 24% of these nations.
- Among the G-20 Countries, India had the third lowest tax-base, just above Mexico and Indonesia.
- A high tax-to-GDP ratio is also a common feature of countries with high level of social security measures such as Belgium, Denmark etc.
- The level of tax compliance in most advanced countries is very high, as high as 90%.
The advanced countries ( in this case Singapore, Denmark) have severe penalties for tax avoidance and evasion. It is not possible to evade tax, especially personal income tax, in Singapore. But, if personal income tax increases, then there would be lesser incentive to earn more. This could cause productivity loss and income generation by individuals and corporates. Hence the Singapore government reduced the personal income tax from 40% to 15%. However, to make good the loss, the govt introduced the GST – Goods and Service Tax. This was a tax at the point of consumption and not at the point of earning.
India’s income tax contribution to GDP is very less. This, coupled with an increased fiscal deficit (the difference between country’s revenues and expenditure) makes the government spend less on, say, health care or education.
On 25-July-2017, Deccan Chronicle published a report that the number of India’s tax payers has increased – from 4 crore to 6.26 crore. Total population is 120 crores. Just 5.2% pay income tax.
So, people either pay taxes and enjoy benefits in, say, Singapore, or don’t pay taxes yet complain about lack of services – like movie actor Vijay – in India.
Now that this ‘intellectual’ has sought to compare, let us start with other parameters based on which comparison can be made. I have compiled most of these from from world bank data. Hence the data would not be fudged – like the income tax returns of movie actors.
Tax revenue as % of GDP
Income Tax in Singapore
Property Tax in Singapore
GST in Singapore
For a population of around 5 million and a GDP of USD 221 Bn, GST alone constitutes S$ 11.1 Bn. The revenue, not realized as income tax, is realized as a consumption tax. As there cannot be any evasion at the point of consumption, the GST in Singapore is serving its purpose and contributing towards nation building.
Health Expenditure ( % of GDP)
Percapita Health Expenditure (USD)
Let us take this case. GST collection is S$ 11.1 Bn which is approximately US$ 8.2 Bn. Let us extrapolate Singapore’s per capita health care spending as US$ 3000. For her 3.5 million citizens, Singapore would have spent US$ 10.5 Bn only. Thus GST alone would have helped offset the health expenditure for her citizens ( assuming health care is free, while it is not). The remaining 1.5 million people in Singapore are either Permanent Residents or foreigners. There is a differential medical cost for these two categories.
So, when a country introduces a tax regime, it is for a purpose – to serve its citizens.
Military Expenditure as % of GDP
A casual look at the percentage spend on military would reveal many facts. Considering the land areas of the two countries, doesn’t this spend disparity strike the eye? Why does India need to spend less or Singapore spend more? Yes, it is true that both the democracies are surrounded by not-so-friendly neighbours. But does that justify Singapore’s spend?
Well, it does. Military spend, however high it might be, is one of technology acquisition. And that translates directly into military superiority. And Singapore needs this military superiority. Not that there is going to be an invasion in the near future, but that a nation should be confident of its military prowess. With a minuscule population, as a nation, Singapore needs to maintain its technical superiority. And that is financed by her taxes, GST being one.
When that is applied to India, ‘intellectuals’ begin their boil. Why?
Armed forces personnel
Armed forces need to be paid. From where does a nation get to pay them, if not for the taxes that she imposes on her citizens? India’s border with Pakistan alone is 2900 KM. To stop infiltration by terrorists, India has built 150,000 flood lights mounted on 50,000 poles. What could be the cost incurred for just the maintenance of these lights? How about the border with China, Myanmar, Nepal and Bangladesh? Any guesses ?
Banks NPA to Total Gross Loans (%)
Banks, predominantly state owned in India, have a higher NPA. Various factors such as mismanagement, interference by political forces, subsidy culture, frequent directions to waive loans off for political gains and the like have contributed to this NPA. Not that Singapore banks don’t have NPA. They do. But the banks are professionally managed, and with little political interference, they run as corporate companies that work for a profit while at the same time acting as an extended arm of the state in financing national growth. (Before I forget – How many movie producers and actors are yet to service their loans from state owned banks in India?)
Labour Participation Rate
The proportion of the population ages 15 and older that is economically active: all people who supply labor for the production of goods and services.
44% of Singapore residents are economically active while, with such a huge population, less than 25% in India is so.
GDP per Person Employed
The contribution to GDP of each employed person in both Singapore and India paints a clear picture on the disparity of the situation. On the one hand the non-tax paying groups, hoarders, anti-nationals, foreign funded NGOs that seek to create disturbance combine together to pull the nation down, while on the other, the tax paying salaried class has to bear the burden of thefts, freebies and dole-outs in India. In this situation, how would the government get the resources necessary to ‘build hospitals instead of temples’ as the actor says?
Share of women employed in non-agricultural sector
Who stopped the Indian governments of the past from utilizing the women work force from contributing to nation building? Who was in power for around 60 years after independence? ‘Intellectuals’ should ask this question before questioning GST and advising on Hospitals.
Proportion of seats held by women in Parliament
For all tall talk for the last 70 years, dynastic rule, prejudices and discrimination have ensured that women don’t have adequate representation in parliament. Only when women take to politics in large numbers would some balance prevail in the skewed Indian political scheme. And no additional marks for guessing who didn’t promote more women in politics (Clue: Who ruled the country for 60 years?)
Coming to wealth generation for the country: Singapore has two Sovereign Wealth Funds (Temasek Holdings and GIC). These companies invest Singapore citizen’s surplus CPF contribution and other surplus in overseas markets. Eg: Temasek has holdings in SingTel while the latter has a major stake in India’s Air Tel. When Air Tel needs money to expand in, say Africa, DBS Bank, another Singapore bank with connections to Temasek, could lend money. When Air Tel makes money, SingTel smiles its way to the bank while DBS Bank also smiles, which in turn benefits Temasek and in turn, Singapore. And she spends the money on her citizens -health care, road, rail, airport modernization et al. (Recently Temasek has sold its stake in Air Tel to SingTel).
Temasek to contribute to Singapore’s kitty.
It is the combination of state capitalism, better tax realization, professional management of government companies and a corruption free government that has resulted in better facilities for Singapore citizens. Anything else would have resulted in disaster.
India cannot have a sovereign wealth fund, for there is no surplus and there is always a deficit in her budget. And the reasons are as above. Leave alone overseas investments. A mere mention of LIC money getting invested in the domestic stock market leads to so much hue and cry in the Indian media. So forget sovereign wealth funds and overseas investments.
Note to Actor Vijay & his dialogue writer(s):
Before I close, a point to ponder. I hear you have mentioned about building temples instead of hospitals. Well, in Tamil Nadu, the government doesn’t build temples. It destroys them under a new name – HR & CE. Again, you can’t compare with what happens in Singapore. The Hindu Endowments Board, constituted by the Singapore government, owns properties, takes rent and administers temples in Singapore from the funds accrued. And it maintains the temples. Underline the word ‘maintains’. Here is a pointer from a government gazette notification.
Singapore is a country run like a company for the genuine betterment of her citizens. India has been run as a charity for 70 years, for the betterment of the different dynasties and their sycophants. Now, when a person tries to correct this anomaly, it would definitely be a pain for the history-sheeters, rent seekers, vagabonds, money launderers and communists. Teething pain, you see.
So, Actor Vijay – Before you sign up for the next Coca-Cola ad (after fighting for ‘water conservation’) or begin to mouth dialogues against taxation, read. Or am I asking for the moon?
For more on Singapore, its founding and development, visit these:
- Sage of Singapore 1
- Sage of Singapore 2
- Sage of Singapore 3