Sunday, July 29, 2018

Compulsory insurance and payroll tax

The people in charge in the government is quite short sighted. They only want to reduce the cost to the government without considering the cost to the country.

I wish to quote the example of compulsory worker's insurance. The government mandated that all workers should be covered for this compulsory insurance and the employer must buy the insurance from the private market.

When a contractor quote for a project, they have to add the cost of insurance to be paid by the owner. This is part of the cost of the contract. The contractor has to buy the insurance separately for this contract. This adds to the cost of negotiating the insurance, which is part of the cost of doing business.

A better approach is for the insurance cost to be covered automatically from payroll tax, say at 0.5% of the wages. This approach can be adopted for all forms of compulsory insurance, including health insurance. Most countries adopt this approach.

The approach adopted in Singapore is inefficient and increase the cost of doing business. Due to five decades of neglect, our cost of doing business is now among the highest in the world. This is probably reflected by the very cost of living in Singapore.

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