Singapore to use 'sin taxes' to pay for health care for elderly

PUBLISHED : Sunday, 23 February, 2014, 5:48am
UPDATED : Sunday, 23 February, 2014, 5:48am


Singapore announced steep increases in alcohol, gambling and tobacco taxes as it pledged billions of dollars in health care subsidies for its growing ranks of elderly citizens.

Alcohol taxes will rise 25 per cent, while duties on tobacco will jump 10 per cent. Betting duties from the state-linked betting firm Singapore Pools will rise to 30 per cent from 25 per cent of gross bets from July.

In his budget speech on Friday, Finance Minister Tharman Shanmugaratnam also unveiled a S$9 billion (HK$55 billion) package to provide life-long health care for the elderly.

Under the plan, about 450,000 senior citizens who are part of what the government terms the "pioneer generation" - those over 65 - will benefit from a host of medical benefits including for outpatient specialist care and medical insurance.

Affluent Singapore has one of the world's most rapidly ageing populations due to falling birth rates and longer lifespans. Officials say 20 per cent of Singaporeans will be 65 or older by 2030.

"These special benefits that we are providing the pioneer generation will not be differentiated by income because our objective is to honour the contributions of this whole generation," Tharman said.

Eugene Tan, an associate law professor at the Singapore Management University, said raising revenue through "sin" taxes would be seen by Singaporeans as a better alternative to increases in personal or corporate tax rates.

"I think it will be welcomed. Raising sin taxes is one of the few ways you can raise revenue to increase social spending without incurring too much of a political cost," Tan said.

"This is a mid-term budget, with the government still holding back its firepower as it looks ahead to the polls in a year or two."

General elections are due in mid-2016.

"The health care package for the elderly is the right thing to do. But the older generation are also seen as an important vote bank for the People's Action Party," Tan said.

"If the government does reap a political pay-off from the policy, no one is going to begrudge them for that."

The ruling People's Action Party, which has been in power for more than half a century, has faced an increasingly vocal electorate frustrated with a surging foreign population and the rising cost of living.

Tharman also unveiled a host of measures to help small and medium-sized businesses to improve productivity and reduce their heavy reliance on foreign labour.

The large presence of foreign workers and professionals in the city-state has been a hot-button issue in past elections, with Singaporeans complaining about overcrowding and increasing competition for jobs.