Home » Blog » Singapore’s personal income tax rates going up?
Early last week, accounting firm KPMG released an interesting report called the Individual Income Tax and Social Security Rate Survey 2009. The firm revealed that: (a) Governments world over are facing budget deficits due to the economic meltdown; (b) In a bid to replenish their reserves, governments may stop lowering personal income tax rates and instead charge a higher rate for high income earners; and (c) Britain and Ireland have already taken the lead and it’s only a matter of time before other countries begin doing the same.
In the Asia-Pacific region, Singapore is said to have the second lowest rates of personal income tax(varying between 0% – 20%) after Hong Kong (starting at 2% and capped at 15%). In fact, most investment and immigration decisions that favour both these countries is due to their low taxes. So the question is, can Singapore afford to increase its personal income tax rates? Given the race with Hong Kong to emerge as ‘the best place to do business in Asia” and the heavy dependency on foreign talent, increasing the rates would only disadvantage Singapore.
Besides, the need for Singapore to lower it’s income tax rates, whether it’s direct or indirect taxes, may not arise at all. Here’s why. The corporate income tax receipts for the year ending 31 March 2009 has seen a significant 14% rise. This has certainly contributed in replenishing the deficit created due to the economic stimulus package announced by the Government earlier this year. Secondly, individual income tax collection has increased by 19.4% this year, thanks to more higher income earners. Additionally, property transactions are on the rise since the second quarter of this year and this would mean higher tax collections as compared to the previous year.
Bottom line: Investors and foreign talent should be able to continue to bank on Singapore as a tax friendly jurisdiction. The increase in Singapore tax rates is highly unlikely; instead the opposite is more likely the case.
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