Hri Kumar Nair has proposed levying an additional
income and property tax on Permanent Residents (PRs) and foreigners
living in Singapore.
In a Facebook posting on Wednesday, Mr Hri Kumar said the objective
of the National Defence Duty is to create sharper distinctions
between Singaporeans and others who live or do business here.
He noted that PRs and foreigners cannot contribute manpower to the
Singapore Armed Forces and Home Team.
Thus, they should make a financial contribution for the protection
and preservation of their lives, families, jobs, investments and
properties.
Mr Hri Kumar added that those who have sons who are liable for
National Service (NS) will be exempted.
However, those who send their sons away before enlistment will have
to pay back-taxes and penalties, over and above the bond which is
forfeited.
This would be the same for those who give up their PR status.
Mr Hri Kumar further proposed that the revenue earned be placed in
a National Service Trust to directly benefit National
Servicemen.
The trust fund can be used to supplement the allowance of full-time
National Servicemen (NSFs) from poor families.
In addition, it could be used to compensate NS men who have been
injured in the line of duty. It could even provide an income for a
period of time to families of NS men who have been killed.
Mr Hri Kumar believes the proposal will not cause PRs and
foreigners to flee from Singapore.
He said that even with the tax increase for foreigners, it will
still be among the lowest of developed countries, and Singapore
will still be one of the more attractive places to live and work
in.
Time For A National Defence Duty
In my speech in the White Paper debate, I said that one of the
things we need to do going forward is to create sharper
distinctions between Singaporeans and others who live or do
business here. I had not mentioned any specific proposals as I did
not want them lost in the wider debate. I offer one now.
The National Defence Duty
I propose levying a National Defence Duty on PRs and
foreigners living in Singapore. I should make clear that it is not
my intention to add to any xenophobic hysteria. As I will explain,
my proposal addresses a current imbalance.
We know the sacrifice all Singaporean males make, spending two
years of their lives doing National Service, and doing reservist
training for several years after that. It is a sacrifice not just
of blood, sweat and tears. There is also a significant economic
cost we pay - two years of our lives, at the time when we are about
the join the work-force or enter university; perpetually two years
behind our female peers in terms of pay, experience and job
opportunities; two years behind in the property ladder and
therefore having to pay higher prices; less attractive to employers
because of reservist commitments. This has more pronounced
disadvantages for poorer families. At the time when their sons
reach a working age and ready to contribute to the families'
finances, they spend two years earning a modest allowance. They
cannot even work part-time to supplement the family income.
I believe the majority of us accept this as something we must do
for the good of Singapore. And having a strong armed forces, with a
significant reserve force, has no doubt contributed to the security
and growth of Singapore. The same is true of having strong police
and civil defence forces.
The thing is everyone living in Singapore benefits from this
sacrifice - including PRs and foreigners. We cannot expect equal
treatment as it is unrealistic and unworkable to have foreigners do
National Service. And while we can impose National Service
obligations on PRs, there is practically little we can do if they
leave Singapore before enlistment, never to return.
My proposal is therefore a simple one. All PRs and foreigners must
pay additional income and property tax to be called a National
Defence Duty. In short, we do duty, they pay a duty.
The rationale is simple - since PRs and foreigners cannot
contribute manpower to our SAF and Home Team, they make a financial
contribution to the protection and preservation of their lives,
families, jobs, investments and properties.
Those who have sons who are liable for NS will be exempted. Those
who send their sons away before enlistment will have to pay back-
taxes and penalties, over and above the bond which is forfeited.
Likewise, those who give up their PR status. This should take care
of what I think is a current anomaly. When PR parents send their
sons away before enlistment, it is the son who is penalized in
terms of not being able to return. I think this is too small a
price to pay. More importantly, the decision would have been made
by the parents. They should pay a cost for that decision. Paying
back-taxes and penalties is a fair solution. The PR parents may of
course decide to leave Singapore for good without paying. But such
a move would be a real cost to them as well as that would mean
ending their careers or businesses here. They are not likely to
take that decision lightly.
The National Service Trust
However, the revenue earned should not simply go the general state
coffers. There should be a real and direct benefit to National
Servicemen.
I therefore propose that the revenue earned be placed in a National
Service Trust. The trust funds can be used to supplement the
allowance of NSFs from poor families. It should compensate NS men
who have been injured in the line of duty. It can even provide an
income for a period of time to families of NS men who have been
killed. That will never compensate for their loss, but it may make
a real and tangible difference to families who have been deprived
of their father's or son's contributions. It will also give
confidence to our NS men that should anything happen to them in
their training, their families will be taken care of. If there are
sufficient funds, we can even offer a grant to NS men towards their
first homes, and address the inequity I spoke of earlier of NS men
entering the market later than their peers.
Will this proposal cause PRs and foreigners to flee our shores? I
doubt it. Even with an increase, our tax rates will still be among
the lowest of developed countries, and we will still be one of the
more attractive places to live and work in.
Taxation is not a fool-proof way of addressing this thorny issue,
but at the very least, it ensures that everyone contributes to the
defence and security of Singapore. Beside, I believe that if
foreigners and PRs see that their financial contributions directly
benefit NS men, they will view the duty as less of a penalty, and
more of an opportunity to make a meaningful contribution towards
the security they enjoy thanks to our NS men. A chance to do their
duty, as it were.
I intend to raise this proposal in the coming Budget debates. I
would be grateful for your views, and any suggestions you may have
to improve it.
There were two main criticisms of my proposal: it is
xenophobic, and it “cheapens” National Service placing a monetary
value to its performance. Let me briefly deal with them.
Xenophobia
Some label the proposal xenophobic because it is “populist” and
“pandering”, and pits Singaporeans against others. The problem with
this argument is that it makes the fundamental assumption that the
situation we have now is already equitable and therefore any change
can only be for populist reasons.
I think many will disagree with that. Indeed, the responses that
have been posted debunk any suggestion of xenophobia – see my post
“National Defence Duty – A Consolidation”. Most
want a re-balancing, but in a principled way that will enable
better integration and that those who come to Singapore simply for
economic reasons should acknowledge that they are able to do so
because of others who do National Service. I do not see that as
being xenophobic.
The question is therefore simple: is the current situation
equitable? If yes, we leave things be. If not, how can we make it
fairer? And to answer this question, we need to have practical and
effective solutions, otherwise the issue will not be resolved.
Money
Having spent 2.5 active and many reservist years in the infantry
myself, the last thing I want to do is to “cheapen” National
Service.
Taxing foreigners to make up for their ineligibility to serve NS
does not equate to putting a value on NS. Neither does giving
monetary rewards. But we do that anyway, such as giving reservists
a modest tax break every year. We all know it is symbolic and no
one argues that it puts a value to, or cheapens, reservist
duties.
Indeed, placing an economic value on National Service is not a
new concept. As one commenter pointed out, in Switzerland, any
person who does not fulfil his military service obligation must pay
an exemption tax of 3% on his taxable income each year. It is not
about valuing the service or buying your way out. It is about
giving recognition to those who do their duty, and tax breaks,
benefits and penalties are often used as a tool to facilitate that.
We also do it for other causes too, like parent relief for our
income tax. No one argues that values or cheapens the obligation of
looking after loved ones.
I had in my first post talked about the real and significant
economic cost which Singaporean men pay when they perform National
Service. Most of us served because we believed in the cause, and we
do not begrudge that cost. That is however, a separate issue from
getting those who do not perform National Service, but benefit from
it, to contribute like the rest of us, albeit in a different
way.
As I said in my first post, it is not a perfect solution. But it
will be difficult to find a practical and effective solution with
universal appeal, as the many different views I have received amply
demonstrate.