Government without Tax?

The libertarian ideal is to have a limited government, constrained by legislation and low taxes, responsible only for law and order, defense, and some essential public services. For libertarians, and especially the more... uhm, extreme ones, the best tax rate is no tax at all! However, the need for governments to operate the aforementioned services makes it impossible to abolish taxes.

Or is it?

The Singapore government, since the founding of the country, has emphasized prudent spending, and the payoff was often in the form of government budget surpluses. These budget surpluses are handled by specific government agencies(MAS, GIC), and used for investment to generate additional income, which may be included in the government's budget as Net Investment Income, or NII for short. 50% of the NII for one financial year may be used as operating revenue for the government, while the other 50% is protected as part of the reserves.

Right now, the size of Singapore's accumulated surplus is about USD 128 billion. According to certain sources, the NII earned from investing that reserve is often about USD 2-3 billion annually, which means that the total income from the reserves is probably at least USD 4 billion, representing a 3% return on investment. Keep these figures in mind.
http://en.wikipedia.org/wiki/Foreign_exchange_reserves
http://www.ey.com/global/download.nsf/Singapore/Budget_Seminar_2006_Dr_Tan_Khee_Giap/$file/6_Dr%20Tan%20Khee%20Giap2006%20Budget%20analysis%20280206.pdf

As a point of comparison, Singapore's GDP in 2005 is about USD 115 billion, and government expenditure in the fiscal year 2005/2006 is about 16% of that, or USD 18.5 billion.
https://www.cia.gov/cia/publications/factbook/geos/sn.html#Econ

So where am I going with this data? The idea is to cut taxes down to zero, while enabling the Singapore government to function normally. Which means that the government's entire operating revenue would have to come from the NII, which means the NII must be about 20 billion. Applying first the 50% rule, and then the 3% investment return, this means that the reserves must be a ridiculous USD 1333 billion, which even China does not have. If we ignore the 50% NII rule, to generate goverment operating revenues by NII alone would require a reserve base of about USD 650 billion.

The government took 30-40 years to accumulate that USD 128 billion. To get from there to USD 650 billion? Impossible.

But there's still some hope. My 3% return estimate could be too conservative. In fact, a recent piece of news suggests that the return rate over the past 20 years was actually 9.5% in USD! Good work, LHL!
http://www.bloomberg.com/apps/news?pid=20601080&sid=aXXGpMAunVoY&refer=asia

If we take a slightly lower figure of 8% return, without any protected sum, the entire return on investment could be used to operate the government, and this would require only USD 250 billion in reserves. After that, any taxes remaining, for example on gambling and motor vehicles, may be used to increase the size of the reserves, or used to further the government's social agendas(gee, I make it sound so sinister). After all, I always felt these were meant more for social purposes than for any actual financial budgeting.

So how about it? Another 30 years of such fiscal conservatism, and perhaps we might not have to pay any income tax at all!