Someone then said, "CPF is not tax.. and CPF account interest higher then bank saving account. And for general population, CPF will be use for paying their house.
The way i see, paying tax is actually a way to make contribution to the public."
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My reply was:
No. CPF is not exactly tax. It is just a scheme set up by the government as a form of forced savings for retirement. Most people simply screw up their financials. Along the way, it can be used to purchase HDB flats, fund your children education and more recently, private properties, insurance and government-approved investment schemes. Although the money will be eventually yours, we got to wait a long long time for it. Even when we hit that age, it's still subject to income tax. That's why Supplementary Retirement Scheme (SRS) was introduced.
The way we can use CPF funds is also limited by the government and any gains shall be put back into CPF... but I think losses cannot be used to offset your taxable income.. I will need to check my tax strategist on this.
My previous post was just illustrating a typical employee and his disposable income. CPF is certainly not "disposable" by my definition. I can't buy a handphone with it.
CPF scheme is also a strategy to lock liquidity for the government to invest. Other ways include issuing bonds and lottery. If everyone of us withdrew our CPFs today, CPF will certainly declare bankrupt. It is through the government's investment that we enjoy a so-called "higher" interest rate than banks now. Back in the late 1990s, this wasn't the case, bank interest pay higher than CPF interest.
Paying tax is a way of life in a civilised society. I have no objections to it. I just don't want to pay more tax than required of me. Since tax laws are written and approved by constitutions for business owners like me to exploit... and the government asks me to exploit them, why not?
Hope that clear some doubts here.. ;-)
~Ramcem
