CPF interest for 2016

[OngHuatHuat]

Here's the basic math.

Before: The tax rate is 10%, except for 0% on CPF contributions. If CPF takes in $10 billion (tax advantaged) then the cost of that lost tax revenue is $1 billion (10%). That's called a tax expenditure in fiscal parlance.

After: The tax rate is 20%, except for 0% on CPF contributions. If CPF takes in $10 billion then the cost of that lost tax revenue is now $2 billion (20%). The higher the general tax rate, the greater the cost of tax expenditures. (Tax expenditures of this basic form, anyway.)

And this is exactly what just happened in Singapore, starting in 2016 (Year of Assessment 2017). The general personal income tax rates went up (although by much less than a factor of two), so the value/cost of the CPF tax exclusions also went up. General tax revenues also went up, but that doesn't mean that the cost of CPF tax exclusions didn't increase. They did, and it's just basic math.

As another example, let's suppose DBS has a $20/month account fee but waives it for DBS Aluminum status customers. DBS raises the fee to $30 but keeps the same waiver. Has fee revenue to the bank increased? Yes, probably. ("Probably" here because customers could leave. That's less true with sovereigns.) Has the cost to the bank of the fee waiver increased? Yes, definitely. This is also basic math.

I think you should just ignore him.
I already ignore him quite long ago.
His reply won't undermine your effort to do proper explanation. Just ignore him and focus on your sharing. If you keep replying him, he will just get more triggered happy and quarrel with you.

 

[BBCWatcher]

You must be a high income earner.

I'm just making a statement about basic, general accounting. Yes, it is indeed true that tax rates increased only for those with chargeable income over $160,000. But that obviously includes some CPF contributors, those with relatively high and higher chargeable (taxable) incomes. Also, Singapore has not adjusted the tax brackets recently to account for income inflation. On average, then, Singaporeans have been creeping up into higher tax brackets.

Those CPF contributors with over $20,000 of chargeable income get at least some tax savings with (at least some of) their CPF contributions. That's a lot of people but not everyone.

 

[dork32]

I think you should just ignore him.
I already ignore him quite long ago.
His reply won't undermine your effort to do proper explanation. Just ignore him and focus on your sharing. If you keep replying him, he will just get more triggered happy and quarrel with you.

you ignored me by checking on my calculations. Thanks anyway

 

[dork32]

Here's the basic math.

Before: The tax rate is 10%, except for 0% on CPF contributions. If CPF takes in $10 billion (tax advantaged) then the cost of that lost tax revenue is $1 billion (10%). That's called a tax expenditure in fiscal parlance.

After: The tax rate is 20%, except for 0% on CPF contributions. If CPF takes in $10 billion then the cost of that lost tax revenue is now $2 billion (20%). The higher the general tax rate, the greater the cost of tax expenditures. (Tax expenditures of this basic form, anyway.)

And this is exactly what just happened in Singapore, starting in 2016 (Year of Assessment 2017). The general personal income tax rates went up (although by much less than a factor of two), so the value/cost of the CPF tax exclusions also went up. General tax revenues also went up, but that doesn't mean that the cost of CPF tax exclusions didn't increase. They did, and it's just basic math.

As another example, let's suppose DBS has a $20/month account fee but waives it for DBS Aluminum status customers. DBS raises the fee to $30 but keeps the same waiver. Has fee revenue to the bank increased? Yes, probably. ("Probably" here because customers could leave. That's less true with sovereigns.) Has the cost to the bank of the fee waiver increased? Yes, definitely. This is also basic math.

if tax rate is 10%, cpf contribution is $10 billion, total tax revenue is $5 billion, losses thru' cpf is $1 billion. net taxes is $4 billion

if tax rate is 20%, cpf contribution is $10 billion, total tax revenue is $10 billion, losses thru cpf is $2 billion. net taxes is $8 billion.

by increasing taxes, though the loses thru cpf is increased by 1 bil, the net increase in taxes is 4 bil. the increase in tax revenue is more than able to cover the losses thru cpf.

this is not basic maths. this is just showing one side of the story as you always do. you must show both sides to be fair.

 

[dork32]

I think you should just ignore him.
I already ignore him quite long ago.
His reply won't undermine your effort to do proper explanation. Just ignore him and focus on your sharing. If you keep replying him, he will just get more triggered happy and quarrel with you.

you are a quite a smart guy. but like all smart guys, you do make mistakes once in a while. but you always refused to admit that you are wrong.

so i did a wrong calculation. i admit it loh. we are all humans

 

[dork32]

garmen take $5 in taxes from you. reduce give you back $1. and you feel so good about it.

 

[icyflame]

Guys, my SA reaching ceiling now. Can I top up now before the interest is credited so that I can enjoy the 7k tax relief for this new year?

 

[Mecisteus]

if tax rate is 10%, cpf contribution is $10 billion, total tax revenue is $5 billion, losses thru' cpf is $1 billion. net taxes is $4 billion

if tax rate is 20%, cpf contribution is $10 billion, total tax revenue is $10 billion, losses thru cpf is $2 billion. net taxes is $8 billion.

by increasing taxes, though the loses thru cpf is increased by 1 bil, the net increase in taxes is 4 bil. the increase in tax revenue is more than able to cover the losses thru cpf.

this is not basic maths. this is just showing one side of the story as you always do. you must show both sides to be fair.

I am quite puzzled that government loses when tax rate goes up. This is totally opposite of economics in fiscal policies.

Actually, it all started when I mentioned that it will cost more to government if monthly compounding is used instead of annually.

From an individual perspective, everyone agrees the difference is not significant.

From government's POV, the savings is huge in order of millions.

Net net, government should benefit more if tax rates go up.

 

[dork32]

I am quite puzzled that government loses when tax rate goes up. This is totally opposite of economics in fiscal policies.

Actually, it all started when I mentioned that it will cost more to government if monthly compounding is used instead of annually.

From an individual perspective, everyone agrees the difference is not significant.

From government's POV, the savings is huge in order of millions.

Net net, government should benefit more if tax rates go up.

you are right in the interest compounding . that is why i did not bomb you. just go around and bombing everyone for fun meh.

last time we also argue quite a lot, right?

 

[dork32]

Net net, government should benefit more if tax rates go up.

this is common sense. only a pure pure garmen supporter will say the opposite and blow it up big big.

 

[elnewbie]

Yes you gotta quickly top up now. Today is already 3rd Jan and it takes 5 working days for the credit.

If I were you, I will call them on T+2 to expedite on the topup.

Guys, my SA reaching ceiling now. Can I top up now before the interest is credited so that I can enjoy the 7k tax relief for this new year?

 

[Mecisteus]

last time we also argue quite a lot, right?

Yes we did. But it is just a slight disagreement on opinions.

you are a quite a smart guy. but like all smart guys, you do make mistakes once in a while. but you always refused to admit that you are wrong.

You are right about yyhwin. I argued with him before.

It is alright to disagree on opinions. But concepts and numbers? Not easy to dispute. Like you can't say a trend is increasing if the graph shows it is decreasing. Only yyhwin can say that.

 

[kael1n83]

if tax rate is 10%, cpf contribution is $10 billion, total tax revenue is $5 billion, losses thru' cpf is $1 billion. net taxes is $4 billion

if tax rate is 20%, cpf contribution is $10 billion, total tax revenue is $10 billion, losses thru cpf is $2 billion. net taxes is $8 billion.

by increasing taxes, though the loses thru cpf is increased by 1 bil, the net increase in taxes is 4 bil. the increase in tax revenue is more than able to cover the losses thru cpf.

this is not basic maths. this is just showing one side of the story as you always do. you must show both sides to be fair.

I think what BBCWatcher is saying is he finds CPF attractive for two reasons (1) high interest rates and (2) tax shield. I am on the same page here considering CPF is as close to risk free in a Singapore context

It is somewhat apples to oranges though, since CPF liquidity is also unique. It is very little liquidity and in fact almost zero liquidity for SA amounts.

 

[dork32]

I think what BBCWatcher is saying is he finds CPF attractive for two reasons (1) high interest rates and (2) tax shield. I am on the same page here considering CPF is as close to risk free in a Singapore context

It is somewhat apples to oranges though, since CPF liquidity is also unique. It is very little liquidity and in fact almost zero liquidity for SA amounts.

i am not arguing with him for fun. i do agree with your analysis.

there is good (1st para) and bad (2nd para). it is balance.

you then decide what is best for yourself. there is no right or wrong answer.

 

[dork32]

It is alright to disagree on opinions. But concepts and numbers? Not easy to dispute. Like you can't say a trend is increasing if the graph shows it is decreasing. Only yyhwin can say that.

this guy just wants to win. he has a stake in malaysia. he is doing whatever to justify his stake.
to me down means down, loses means loses. i too have a stake in malaysia. i will not bluff myself into saying that the investment is doing well during last few months.
you too made some bad calls on some bonds as well.
we are all humans. we do make mistakes.

 

[BBCWatcher]

I am quite puzzled that government loses when tax rate goes up.

Who claimed that? Not I. (Although, as a separate matter, it could happen, but not in Singapore and not at these tax rates.) Please go back and reread exactly what I wrote. It is correct.

 

[hygge island]

I was about to top-up 7k into my SA today to ride on the SA interest rate rather than to wait till Dec'17, and I just realized the Full Retirement Sum (FRS) has been increased to 166k from the previous 161k.

Curious, I did quick calculation to find out the growth rate of the FRS. From 2003-2015, it was 6%. I tried another period from 2010-2015, it was 5.5%. This figure seems much higher than inflation in SG.

Now I hesitate if I should top up 7k annually (did it first time last yr)?! I am now 38y.o, at the rate of 5.5%, the FRS would be 412k when I am 55y.o.
My initial target was to hit FRS, enjoy the interest rates, and withdraw amt excess of FRS when I am 55.

I worked couple of years overseas and hence have less CPF than others to start with. Even if I topup7k yearly, and employer's contribution to SA max up monthly, I don't think I can hit the projected FRS of 412k when I am 55y.o.

Did I calculate wrongly? Some wrong assumptions?
Any advice?

 

[koja6049]

I was about to top-up 7k into my SA today to ride on the SA interest rate rather than to wait till Dec'17, and I just realized the Full Retirement Sum (FRS) has been increased to 166k from the previous 161k.

Curious, I did quick calculation to find out the growth rate of the FRS. From 2003-2015, it was 6%. I tried another period from 2010-2015, it was 5.5%. This figure seems much higher than inflation in SG.

Now I hesitate if I should top up 7k annually (did it first time last yr)?! I am now 38y.o, at the rate of 5.5%, the FRS would be 412k when I am 55y.o.
My initial target was to hit FRS, enjoy the interest rates, and withdraw amt excess of FRS when I am 55.

I worked couple of years overseas and hence have less CPF than others to start with. Even if I topup7k yearly, and employer's contribution to SA max up monthly, I don't think I can hit the projected FRS of 412k when I am 55y.o.

Did I calculate wrongly? Some wrong assumptions?
Any advice?

It is 3% this year, not 5.5%. The reason is because the FRS is playing catch up with the real needed retirement money, because government cannot put in an initial sum too high to prevent shock. It will still be 3% rise until 2020, and if heaven allows sg inflation to be stable, the increase may drop beyond 2020

 

[hygge island]

It is 3% this year, not 5.5%. The reason is because the FRS is playing catch up with the real needed retirement money, because government cannot put in an initial sum too high to prevent shock. It will still be 3% rise until 2020, and if heaven allows sg inflation to be stable, the increase may drop beyond 2020

Did a quick spreadsheet, the rate of increase is between 6.5% to 5.1% for each individual year from 2003-2014. A special >10% increase in 2008/09. Seems to decelerated recently in 2014 and 2015 to below 5%. Last increase is 3.1% (or 2.06% if u considered the period is 1.5 yrs instead of 1yr).

But I guess nobody can tell the future rate of increase of FRS.

 

[iMac]

Anyone know when will the CPF 2016 Statement...can be view from CPF website?

Last check this morning still showing the 2015 Statement.