Opinion

The Highest Income Tax Rates in the World and Where Singapore Stands

income tax rate

Peter Lin

0 Comments

9
Shares

In Singapore, there are three types of taxes: progressive, regressive and the aggressive. Okay, I made up that last one. That’s what I’ve named the GST hikes after the way Singaporeans use it to threaten one another. Naturally, with Election season on us again, the question of tax has returned.

Whenever a new policy is being proposed by a political party, the most obvious criticism in response is “Where are you going to get the money to do it?” There will be strong (and sometimes direct!) hints that such policy changes can only be funded through higher taxes – because no one likes to hear about high taxes. There even appears to be somewhat of an avoidance in talking about taxes when it comes to policy implementation, as if a further increase in taxes will send Singapore’s income tax rate through the roof.

But are Singapore’s taxes really high? And how do we compare to the rest of the world?

 

I’ve not had to really think about my taxes for some time… what’s Singapore’s tax rate now?

Singapore uses what is known as a progressive income tax rate. That means that those who earn more, get taxed a higher percentage of their income. In Singapore, this means those who earn more than $320,000 a year will be taxed the most, as a percentage of their income, almost 20%. This year’s Budget announced that the tax rate is set to increase in 2017. Only those earning more than $160,000 a year will be affected by this hike.

Of course, income tax alone doesn’t show a complete picture of tax in Singapore – we do have the earlier-mentioned Goods and Services Tax, or GST, which is currently at 7%. We also have other “taxes”, like CPF, which is also set aside from your income.

But for the purposes of simplicity, let’s just look at Singapore’s income tax rate on its own.

 

How is Singapore’s tax rate calculated?

At this point in time, this is how income tax works in Singapore. These rates are applicable to Residents only – non-residents have a different set of tax rules which sees them currently paying between 15% and 20% of their income.

Who qualifies as a resident? Singapore Citizens and PRs who spend most of the year in Singapore and Foreigners who have stayed in Singapore for 183 days or more in the previous year.

Chargeable Income Income Tax Rate (%) Gross Tax Payable ($)
First $20,000
Next $10,000
0
2
0
200
First $30,000
Next $10,000

3.50
200
350
First $40,000
Next $40,000

7
550
2,800
First $80,000
Next $40,000

11.5
3,350
4,600
First $120,000
Next $ 40,000

15
7,950
6,000
First $160,000
Next $ 40,000

17
13,950
6,800
First $200,000
Next $120,000

18
20,750
21,600
First $320,000
Above $320,000

20
42,350

 

Is this table confusing? Let’s take three simplified examples to illustrate.

 

Case Study A: Annual income of $32,500

Mr Lee earns $2,500 each month, with a 13-month bonus at the end of the financial year. That’s an annual income of $32,500.

Based on the above table, he pays no tax on the first $20,000 of his income, 2% on the next $10,000, and 3.5% on the last $2,500. That comes up to a total of $200 + $87.50 = $287.50. In other words, Mr Lee’s income tax rate is 0.88%.

 

Case Study B: Annual income of $50,000

Ms Hazirah earns $4,000 each month, with a variable bonus of $2,000 for an annual income of $50,000.

Based on the above table, she pays no tax on the first $20,000 of her income, 2% on the next $10,000, and 3.5% on next $10,000 and 7% for the last $10,000. That comes up to a total of $200 + $350 + $700 = $1,250. In other words, Ms Hazirah’s income tax rate is 2.5%.

 

Case Study C: Annual income of $120,000

Ms Kaur doesn’t earn a steady monthly income, but reports an annual income of $120,000.

Based on the above table, she’ll pay a total of $7,950 in taxes. Her income tax rate is 6.6%.

 

So as you can see, the higher your income is, the higher the percentage you pay in tax. But even earning an average of $10,000 a month, your tax rate is no more than 6.6%. In fact, it could even be less.

 

But wait, there are tax rebates as well!

From year to year, the government may offer personal income tax rebates. The percentage amount and maximum rebate differs in each year. In 2011, it was 20% of taxable income, up to a maximum of $2,000. In 2013, it was either 30% or 50% (depending on your age), up to a maximum of $1,500. This year, being SG50, it’s 50% for everyone, up to a maximum of $1,000.

In addition to tax rebates, which are determined by the government, there are several ways to lower your taxable income too. Many of these are within your power.

 

How does Singapore’s tax rates compare to the rest of the world?

With the highest tax rate on income earners in Singapore capped at 20%, we actually rank pretty low compared to other countries across the globe. Some of the highest rates can be found in Belgium, which sets a maximum tax rate of 50% for those who earn more than 37,750 Euros each year, or Australia, which sets a maximum tax of 45% for those who earn more than 180,000 Australian dollars each year.

In fact, even closer to home, our tax rate is far below that of countries like Thailand, Taiwan, South Korea, Japan, India and the Philippines. Just take a look at this table from EY’s analysis of the 2015 Budget.

tax rate singapore

But just in case you think it only happens in countries which are known for their democratic practices and welfare systems, China also sets a maximum tax rate of 45% for those earning more than 80,000 RMB in a year.

Of course, one cannot look at the income tax rates alone. You have to see how much tax rebates you may be eligible for as well. For example, in Belgium, when considering median salaries, someone who isn’t married and has no children can expect to pay as much as 42.8% of the income in tax, while married couples with two children only pay 31.8%.

 

Do you still feel Singapore’s taxes are high? Can they afford to be raised if it means more protection for the less privileged? Let us know your thoughts.

Keep updated with all the news!

Tags: ,

Peter Lin

I am the poster boy for reinventing one's self. I've been a broadcast journalist, technical writer, banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you'll ever meet, which is why I'm also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.

  • henrytan73

    Income tax may be low but indirect tax like COE, petrol tax is high. This tax will indirectly pass on to consumer.

    • Lim Chuon Jenq

      All of us cant avoid income tax but most of we can avoid COE n petrol.

      • TAX Truths

        COE, Petrol, ERP, GST, Rental, Middlemen in Supply and Distribution Chains, Land Cost, Development Charges, Overpaid Government Salaries, Et cetera
        ALL these INDIRECT Income Taxes are multiplied many times
        {known as Multiplier Effect in Economics}
        into SINGAPOREANS’ World Highest Cost Of Living !

        • Lim Chuon Jenq

          Sg gov is good for those who don’t mind getting public transport and stay in hdb enjoy the simple life.
          For you is Highest but for me is lowest.

      • henrytan73

        How do avoid? Which grocery product does not need a vehicle to transport? All this cost will eventually build in to our daily necessities.

  • TAX Truths

    WHY NO Exodus from TOP 5 Taxed Countries ?
    AUSTRALIA ?
    CHINA ?
    JAPAN ?
    TAIWAN ?
    Taiwan Food in the streets are cheap and tasty and good and many are handmade !
    KOREA ?

  • TAX Truths

    Singapore suffered from well timed or missed timed Supply Constriction and Demand Compression and Oligopolised Discompetition which do not happen in Other Countries

    • TAX Truths

      Hospital Beds Crunched at A&E but many Other patients are hospitalized for 3-Day Observation Only in public hospitals.
      On the other hand, there is no queue with immediate admission at Private Hospital !
      Such situations are all Man Made and Artificial.
      After SG50 50 years or 5 Decades, Authorities still do not know how to do Planning & Budgeting.
      With the more than 1 Million Foreigners Flooding to build all the condos but yet the public hospitals are not built IN SYNC !?
      Even layman like farmer knows how to plan and budget well over a broad span of 50 Great Years !

  • Chia HuanSeng

    The topic didn’t take into account of Singapore high indrect taxes; like car COE, car ARF, ERP fee, high housing cost, fuel taxes, utlities taxes and services, high rental, etc….all these added into goods and services, thus contributed to our reputation as “WORLD MOST EXPENSIVE CITY”.
    The low Income tax rate only atract oversea high-net-worth families which in turn compete with the locals for the limited resources like cars, housings, transportations needs…..driving cost even higher.I welcome higher rate for those earning 150K and above …including politicians.
    Coming up…….”WORLD MOST CROWDED CITY”.

  • Ed

    Sgp taxes would be among the world’s highest if one adds CPF, COE, ERP, … Not to mention the high costs of real estate, petrol, and daily necessities, which carry a sizeable tax already levied. Many of the nationals listed with higher income tax do not face these additional tax burden.

  • Thomas Wong Loong Kwong

    Those indirect taxes affect the middle and lower income more than the higher income. I feel that we should raise the top ceiling higher to 30% and perhaps ve reduce the lower ceiling slightly.

  • Jie Ming

    I find Singapore tax been reasonable. You paid tax for what you need