Tuesday, February 26, 2013

Defence Tax Proposal Needs Modifications To Avoid Sending Wrong Signals

SINCE Mr. Hri Kumar Nair introduced his Defence Tax proposal, there has been much debate on the implications of it. The retort of many is that the proposal will “cheapen” National Service and that it is xenophobic in nature. Mr. Nair has countered this arguments in his blog post- National Defence Duty- A Brief Rebuttal- (http://hri-kumar.blogspot.sg/2013/02/national-defence-duty-brief-rebuttal.html) . I find Mr.Nair's arguments weak and I contend that his proposal in its current form does in fact dilute the value of NS and deepens the divide between Singaporeans and others.

The core thrust of the proposal is to tax foreigners and PRs because it is only equitable that they contribute back to the defence of the nation too given that they are the beneficiaries of the sacrifices of numerous Singaporeans, past and present. This aspect of the proposal doesn't “cheapen” National Service. While no amount of tax paid can make up for the sacrifices made by our Singaporeans in defending the country, it is only fair that new arrivals contribute as well.

However, it is the suggestion that PRs with sons liable for National Service be excluded from the tax and be imposed the unpaid tax on top of penalties if their sons skip their NS obligations which actually dilutes National Service. Because of the financial penalty, a price is placed on the erstwhile sacrosanct- priceless -duty of National Service.

As Michael Sandel,a Harvard Professor, noted in his book “ What Money Can't Buy: The Moral Limits of the Market” : “... markets don't only allocate goods; they also express & promote certain attitudes towards the goods being exchanged.” By allowing PRs to skip their NS commitment through monetary payment, the moral obligation of NS is weakened.

Mr. Nair's argument that it is inconsistent to label this defence tax as cheapening NS but not the $9000 grant to national servicemen is completely flawed. The grant doesn't offer any escape out of serving NS. It is merely a unsought reward for those served their part. But with his proposal, PRs can legally skip their obligations through pecuniary means.

Also, we must note that if this defence tax is indeed imposed on PRs and foreigners, it would possibly be the first tax to be exclusively levied on them. While PRs and foreigners do pay a higher rate than Singaporeans for stamp duties and property taxes presently, the differences between the taxes they pay and what Singaporeans pay is in degree not kind. Hence entrenching this tax, would significantly accentuate the divide between Singaporeans and new comers. While distinctions need to made between Singaporeans and 'others', we ought not to overdo it for it might then hinder integration of PRs and foreigners into our society.

In its current form, I do believe the defence tax proposal sends the wrong signals. But it can avoided with if it instead imposes a flat tax on all PRs, regardless of the NS liabilities, and foreigners for a definite period of time. This way, there will be no price tag placed on National Service. Also because it will only be imposed on newcomers for a limited period of time- say 5 years of PRs and 10 years of foreigners, it will not create a significant and permanent wedge in the how people are treated in Singapore.

With these modifications, the defence tax would result in fairer compact between newcomers and our society by addressing the imbalance between what these newcomers enjoy and give back. However, these modifications would also render the proposal moot in deterring NS liable PRs from skipping their NS obligations. Hence, new solutions need to be crafted to mitigate this problem.

Overall the defence tax proposal put forth by Mr. Nair is well intentioned. While in its current form it dilutes NS and has the potential to add to xenophobic resentment, with some modifications, these problems can be avoided.