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Budget debate: PSP proposes $1,200 monthly levy on EP holders to even out 'wage disadvantage' of locals

SINGAPORE – A monthly levy of $1,200 should be imposed on all Employment Pass holders immediately to level the playing field between Singaporeans and foreigners, said Non-Constituency MP Leong Mun Wai.

This will even out what he called the wage disadvantage against local workers, as foreigners are not required to contribute to the Central Provident Fund (CPF) system, said the Progress Singapore Party (PSP) NCMP on Thursday (Feb 25).

“While this disadvantage has been slightly reduced in the case of the work permit holders and the S Pass holders through the levy system, it is not the case for EP holders,” said Mr Leong, who was speaking during the second day of the Budget debate in Parliament.

“It has often been highlighted that this is a loophole for employers to exploit, to the disadvantage of our Singaporean workers,” said Mr Leong, who reasoned that this made hiring foreigners more attractive.

The $1,200 monthly levy on EP holders is based on an employer’s 17 per cent contribution to CPF and part of the employee’s contribution, using the minimum salary of $4,500 for an Employment Pass holder, he said.

If implemented, the opposition party estimates the policy will generate an estimated $2.7 billion in additional revenue per year, he said, adding: “If the Government needs more revenue, this is a good option to consider.”

PSP’s proposal will “differentiate the true foreign talents, who are high salaried and less affected by the $1,200 levy, from the foreign talents who are simply cheap labour that compete unfairly with Singaporeans and whom our economy has become overly dependent on”.

The proposed levy is one of three long-term policy recommendations Mr Leong made in his speech to “nudge the Budget in the correction direction”.

The other suggestions included introducing a minimum living wage of $1,500 in take-home pay for all local workers, which would translate into $2,055 in gross wages.

To allow employers to adjust, the Government could pay the “main portion of the increase” from 2021 to 2023, which could cost about $1.6 billion each year, said Mr Leong.

This would also increase the wage share of Singapore’s gross domestic product (GDP), a point raised by fellow PSP NCMP Hazel Poa on Wednesday.

Ms Poa had noted that wages formed about 43.6 per cent of Singapore’s GDP, while the operating surplus of corporates and other organisations formed about 56.2 per cent. She suggested that the Government set a target for the wages as a proportion of the annual GDP, “to ensure that the fruits of economic development are enjoyed by its people”.

A living wage would be the best way to support low-wage workers, rather than through “those usual ad-hoc, short-term, and unpredictable schemes offered by the Government”, said Mr Leong.

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PSP’s third recommendation is for the Government to pay for all MediShield and CareShield insurance premiums going forward, which Mr Leong asserted that most middle-class Singaporeans would not be able to afford in their old age.

He said an average family of four would have to pay $110,000 in MediShield and CareShield premiums from the parents’ CPF accounts, up until they turn 65 years old, and their two children, up until they turn 25 years old, based on PSP’s projections.

When accounting for estimated premium increases of 10 per cent every five years, the total amount would come to $246,000, said Mr Leong, adding that the schemes are “a big drag on the retirement resources of Singaporeans”.

In all, PSP’s three policy recommendations would incur a net additional spending of $1.5 billion, he said.

“The Government can decide whether it wants to reallocate existing resources to these recommendations or allow the additional spending to provide more stimulus for the recovering economy,” he said.

“We believe that our recommendations will go a long way helping to secure a foundation of financial stability and social dignity for Singaporeans.”

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