FEBRUARY 11 — Tax policies often serve two purposes: To raise revenue and influence taxpayer behaviour.

However, while taxes or tax relief can influence behaviour, the extent may vary from one individual to another, depending on their needs and desires. Economists call this the price elasticity of demand.

For years, governments around the world, including here in Singapore, have used tax policies to encourage a healthy population growth rate without an excessive reliance on net migration. For example, a baby bonus scheme has been a popular fiscal tool to encourage people to have more babies. These tax policies have had varying degrees of success — and some unintended side effects.

In Australia, which introduced the scheme in 1912 and then again in the early 2000s, it was widely blamed for creating a teen motherhood problem, prompting changes in how it was paid out from 2009. Despite these issues, Australia’s birth rate has remained stable at between 12 and 13 births per 1,000 since 2000.

In Singapore, the Government has done much over the years to try to increase birth rates. The evolving Marriage and Parenthood package, introduced in 2001, is arguably one of the most comprehensive and generous in the world. There are increased benefits for working parents including additional maternity leave provisions, introduction of paternity leave and childcare leave, reduction in foreign domestic worker levies and childcare subsidies. In recent years, many employers have also become more supportive of working parents, providing nursing rooms, flexible hours and other flexible working arrangements.

Earlier this month, it was announced that close to 33,800 Singaporean babies were born last year — the highest annual number of citizen births in more than 10 years.

Yet, Singapore’s birth rate has remained below 10 per 1,000 population for more than a decade. This is among the lowest in the world, sitting well below most other developed and highly educated nations.

Despite the generous tax advantages and other incentives available, parents and would-be parents often lament about the high cost of living, dual career challenges and societal issues as factors discouraging them from having more children.

What more can be done?

Considering the principles of price elasticity of demand, it is important to identify and address the factors at play in evaluating the effectiveness of tax policies to encourage childbirth.

The various cash incentives and tax rebates available now all focus on abating the cost of living. The question remains: How much is enough? While these may help offset the increased cash outflows required to raise children, there are other opportunity costs that working parents may experience that remain unaddressed.

There are also several other socio-cultural factors at play. Working parents who live with their parents may enjoy some help with childcare; however, this also could mean a greater financial burden on the household, thus possibly reducing their willingness or ability to raise more children.

Policies that support inter-generational bonding within families are helpful in relieving the financial and spatial burden that comes with accommodating additional dependents at home. Such policies include the CPF Family Housing Grant; priority for parents and married children buying new HDB flats to live with or near each other; as well as tax incentives for children looking after parents and for working mothers who engage their parents or grandparents to look after their children.

More can be done in the form of cash grants and reduction of transaction costs to support parents that are financially dependent on their adult children. Such programmes can help elderly parents buy bigger homes for the extended family or enable three-generation families to live together in a larger home or in close proximity to one another.

These measures will be more effective than tax incentives as those who need such financial assistance are probably not in a taxable position to begin with to enjoy higher tax reliefs.

More can also be done to encourage employers to set up childcare centres at work, which could be particularly beneficial for those without childcare support at home.

Currently, the Workplace Childcare Centre Scheme only provides a one-off furnishing and equipment grant to employers to outfit a childcare centre. How about introducing a higher tax deduction for employers who incur expenses operating a workplace childcare centre? Also, the grant, which currently applies to only the setting up of childcare centres, could be extended to include after-school student care for lower primary students.

The competitive psyche of many Singaporeans affects birth rates in complex ways. Most parents naturally want the best for their children. Very often, this means a lifestyle better than they had enjoyed as a child.

Take education, for example. For many, enrolment in the right school is of utmost importance, and along with that comes investment in enrichment activities and tuition. This may impose a great financial burden on the family, which may compel parents to decide to have fewer children.

Another challenge is an evolving culture where the notion of family life satisfaction is more diverse and there is greater emphasis on self-actualisation. In that pursuit, having children may take a back seat.

In the upcoming 2016 Singapore Budget, we can expect some policy adjustments for businesses and families. The Government has indicated it will continue to provide support for active fathering, affordable quality childcare and improved workplace and community support for young parents.

Tweaks are likely to be made to the current system to influence birth rates and the creation of families in Singapore. It will be interesting to see how innovative any such tweaks may be and how far policy-backed fiscal intervention can go in swaying decisions on this highly personal subject. — TODAY

*Grahame Wright and Kerrie Chang are partners for People Advisory Services — Mobility at Ernst & Young Solutions LLP.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online.