And that's why I like Economics

There is an excellent article written by Willie Cheng who is the director of The Lien Foundation. The Lien Foundation Centre for Social Innovation is under the foundation and the article was first published in the Jul/Aug 2007 issue of SALT, a publication of the National Volunteer & Philanthropy Centre. The founder, is Dr Lien Ying Chow, founder of OUB. Margaret Lien, widow of the late Dr Lien is head of the foundation. She is #23 on the Forbes Singapore 40 Richest 2007 with $330million.

You pay income tax?
If you pay taxes in Singapore, congratulations! You are one of three in the working population with enough chargeable income to pay taxes. I remember I was first told of this figure by fleet commander when I was his staff officer to a trip to sattahip. Kinda just popped into the conversation.

Anyway, a few excerpts from the article:

Charity is meant to help rebalance this uneven status between rich and poor. Yet even in the charity world, there are similar forces that favour the better-heeled over those less so. This applies to both the supply (donors) and demand (charities and their beneficiaries) side of the equation.

Why is this so?

Most tax systems favour the rich when it comes to charity. In Singapore, there is a generous double income tax deduction for charitable donations. The wealthier the individual, the bigger the benefit. Take the example of a taxpayer in the top income bracket of 20 per cent. For every $100 donation he makes, he actually pays only $60.

What about the poorest at the bottom 20 percent?

However, more than two- thirds of Singapore's working population are wage-earners who do not make enough to have any chargeable income, so they would have to fork out the full $100 donation. So a $100 donation actually sets the person back by $100.

So why is this so?

The same situation is repeated in most countries where income tax systems are progressive in nature and donations are tax-deductible. The difference in Singapore is that our income tax rates are generally lower, but then the tax deduction is doubled.

And this difference is not fully returned to the poorest 20 percent.

According to the NVPC study, the social service sector in Singapore gets about 25 per cent of tax-exempt donations, education gets 39 per cent and health care gets 20 per cent. For non-tax exempt giving from individuals, the bulk goes to religious causes.

So, the majority of charitable giving does not go towards benefiting the poor but to other community causes. Which kinda makes me want to ask why is education enjoying such huge slice of the pie. Primarily because education is "generic" in scope? Because education is seen to be a social-equaliser? Because people can name libraries after themselves?

Of course this is repeated in countries all over the world. Our Gini coefficient is getting worse with out widening income gap. We just increased our GST which, the government decided that it will be across the board and no provisions will be made for healthcare, public transport, education, essential foods (rice, oil, etc) and we all know a consumption tax like GST is regressive. Why? Because a person with a $100 weekly income is likely to use more of his disposable income for consumption but not a person with a $1000 weekly income. Sure, in absolute terms the latter consumes more but as a percentage, the skew is obvious and disadvantageous to the former.

P.S. Talking about regressive, I was highlighting to somebody that road accidents are regressive in nature. Because in a most countries, Singapore included (Singapore Police Force Annual Traffic Statistics), deaths that occur within road accidents are most likely to be 1) motorcyclists and pillion riders 2) pedestrians and 3) pedal cyclists.

I am sure many will be able to cite the rich friend who rides a Harley Davidson, the wealthy neighbour who refuses to buy a car and the rich angmohs that ride in their carbon fibre and magnesium alloy bikes around Thomson area. But your initial impression that the people who die in a road accident are more likely to be poor is not at all far from the truth.