A tax-friendly environment remains in Singapore, but a KPMG study conducted globally has discovered that the decline in the highest personal income based on tax rates throughout the past seven years may reach its final stage, as governments worldwide look for new references of spending sources.
Based on the most recent Individual Income Tax and Social Security Rate Survey, the highest rate of taxable income level based on personal income tax in Singapore stood at US$217,317, which is the third highest within the countries surveyed, excluding Switzerland.
This means that the residents in Singapore would have the highest personal tax rate based on the current exchange rates, only if the personal taxable income level surpasses S$320,000. The highest tax rate at 20 percent also stays relatively low.
Ooi Boon Jin, head of KPMG’s international executive services, said that their study showed a general reduction throughout the past seven years based on top personal income rates, but seeing reversal indications for 2010.
“It is becoming clear that some governments are turning to those in the highest income brackets amongst their current tax bases to increase revenue,” he added.
Citizens from the European Union still pay the highest rates of personal income taxes worldwide. Denmark holds the highest rate of income tax at 62.3 percent based on personal incomes which also include a social security component.
However, the average rate has fallen in 2003 from 41.1 percent to 36 percent in 2009 for Europe, due to the commencement of flat-rate taxes in selected Eastern European countries.
The next highest tax payments are paid by the citizens in the Asia Pacific region, where Japan holds the highest rate at 50 percent.
Asia Pacific region declined 36.1 percent in 2003, with 0.7 percent drop to 33.9 percent in 2009, as driven by some smaller countries. During the past seven years, the larger countries like India, Japan and China did not experience rate changes.
Indonesia and Vietnam each dropped by about 5 percent on their top rate to 30 percent and 35 percent respectively, while the top rate of Malaysia fell from 28 percent to 27 percent.
Singapore and Hong Kong continue to lead in the Asia Pacific region’s rate competition. Last fiscal year, Hong Kong dropped 15 percent on its top rate and held the position of having the lowest tax rate in the region.
The shift in the pattern of income tax has entailments for future worldwide workforce mobility and international assignment plans, as HR professionals reassess the costs affiliated with postings abroad and the like.