Are you ready for 7 million people on tiny Singapore?
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Income tax in Singapore kicks in only at $20,000 of taxable income, ie. after deduction of personal relief and CPF relief. Effectively, this is $26,000 ($1,000 personal relief and $5,000 CPF relief). A dual income family can thus have up to $52,000 of annual income ($60,000 if you factor in employer’s CPF which goes towards your retirement) and still pay no income tax. That is $4,333 per month.
At $20,000 - $30,000, income tax is 2%. So for the first $60,000 of taxable income, which is effectively $77,000 ($6,416.67 per month), the total income tax payable is $400 or 0.52%.
At $30,000 - $40,000, income tax is 3.5%. So for the first $80,000 of taxable income, which is effectively $102,000 ($8,500 per month), the total income tax payable is $1,100 or 1.08%.
I think it is beyond argument that a household income of $102,000 per annum is middle income. Bear in mind that I have not factored in other reliefs such as child relief, NS man relief, working mother relief etc.
The lower income tax doesn’t just apply to high income earners hor. -
Just for comparison, a household in the UK with a gross annual income of the equivalent of S$60,000 will enjoy personal relief of £9,440 x 2 = £18,880. At the current exchange rate of £1=S$1.92, that is about S$36,250. The basic income tax rate for the first £32,010 is 20%. That household will therefore have to pay income tax of approximately $4,750.
On top of that, each wage earner in that household will be paying national insurance of 12% on income between £146 and £817 per week. That works out to about another $3,700 for the household.
So, a dual income household with an annual gross income of the equivalent of S$60,000 will pay about $8,450 in income tax and national insurance. A similar household in Singapore pays the grand total of ZERO. -
pirate:
And for the sake of argument, would you say it is unreasonable for a household with a combined income of S$60,000, that pays ZERO income tax, if they spent every single cent they had, to contribute $4,200 a year to state coffers in the form of GST? Bearing in mind they are consuming public services like roads, education, subsidised healthcare and parks?
So, a dual income household with an annual gross income of the equivalent of S$60,000 will pay about $8,450 in income tax and national insurance. A similar household in Singapore pays the grand total of ZERO. -
3Boys:
But residential property is not subject to GST... Anyway, don't ask me. Ask the person complaining about Singapore's GST.
And for the sake of argument, would you say it is unreasonable for a household with a combined income of S$60,000, that pays ZERO income tax, if they spent every single cent they had, to contribute $4,200 a year to state coffers in the form of GST? Bearing in mind they are consuming public services like roads, education, subsidised healthcare and parks?pirate:
So, a dual income household with an annual gross income of the equivalent of S$60,000 will pay about $8,450 in income tax and national insurance. A similar household in Singapore pays the grand total of ZERO.
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Since I've accused of living in a well, here is something for you to play around with....
http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates
Click to rank countries by personal income tax rates, and then compare across to the prevailing VAT/GST.
You will see that MANY countries in the world take a balanced approach to taxation, taking off from personal income tax, corporate tax, comsumption tax, sometimes splitting between national and local/regional level. You will find that some rich countries have high income tax and VAT (Germany, UK, Norway), you will find that some poor countries have high income tax and VAT (Bosnia, Senagal). You will find that the reverse also applies.
There is no one fixed approach, it really depends on your local situation, historical biases, social leanings, and desire for industrial attractiveness.
VAT/GST is not rocket science, nor is it inherently evil, since it is broadly used worldwide.
Taxes are never popular, but if there is one certainty (and necessity) in life, it's taxes! Some form of government spending is always required, and that needs to be funded...via taxation. Why would a balanced system using consumption based and income based taxation be undesirable, if progressive measures are used to help and mitigate impact for the needy? As for the middle income, we all need to pull our weight when it comes to paying taxes, as we are all consumers of public services.
As far as overall taxation goes, Singapore is on the low side, for both GST/VAT, and personal income taxes. -
My view on tax is that government should try to contain spending just like a family with income stagnant or reduced trying to contain their spending.
I just don’t see why should tax should be risen significantly given the fact that no social program will be implemented and that we still have overall positive GDP growth. A GST increment from 7% to 10% is almost a 50% increase which is huge. -
WeiHan:
Really? The parenthood packages don't count? Planned increases in healthcare don't count? Disabled friendly buses don't count?My view on tax is that government should try to contain spending just like a family with income stagnant or reduced trying to contain their spending.
I just don't see why should tax should be risen significantly given the fact that no social program will be implemented and that we still have overall positive GDP growth. A GST increment from 7% to 10% is almost a 50% increase which is huge.
7% to 10% is a 3% gross increase. If you had to pay $107 dollars for your new pair of sunglasses, it'll now cost you $110 instead, which is technically 2.8% increase in price, not 50%.
Anyway, I've not heard that the increase to 10% is anywhere in the near horizon, perhaps you can enlighten where you got that information. -
3Boys:
An increase from 7% to 10% GST is an increase of 42.8% tax revenue from GST alone for the government. That is why i wrote 50% which isn't wrong. I will be surprise if the government need such a huge increase in spending all of a sudden. Anyway, it is good to hear that it is not anywhere near in the horizon.
Really? The parenthood packages don't count? Planned increases in healthcare don't count? Disabled friendly buses don't count?WeiHan:
My view on tax is that government should try to contain spending just like a family with income stagnant or reduced trying to contain their spending.
I just don't see why should tax should be risen significantly given the fact that no social program will be implemented and that we still have overall positive GDP growth. A GST increment from 7% to 10% is almost a 50% increase which is huge.
7% to 10% is a 3% gross increase. If you had to pay $107 dollars for your new pair of sunglasses, it'll now cost you $110 instead, which is technically 2.8% increase in price, not 50%.
Anyway, I've not heard that the increase to 10% is anywhere in the near horizon, perhaps you can enlighten where you got that information. -
JannettLee:
I gather by the majority you mean >50%?I have always been saying that GST implementation hits majority of Singaporeans hard, and the fact that GST was implemented because govt wants to concurrently reduce income tax from 25% to 20% only benefits the rich (the top few % only).
Based on my research, median income in Singapore in 2011 is approximately 2,633 per month.http://www.mom.gov.sg/statistics-publications/national-labour-market-information/publications/Pages/wages-2011-table.aspx
Based on YA 2012 individual income tax rates, a person receiving the median wage will have to pay income tax of $85 (less CPF and personal relief of $1,000). Based on tax rates in YA1994, the same individual earning 2,633 per month will have to pay income tax of $1,620. To avoid paying the income tax saved into GST ( 1620-85), he will just have to ensure that he spends less than 22,000 a year, i.e. saving around $300 (excluding CPF) per month. Please note that this is before taking into consideration GST Credits, U-Save and S&CC rebates.
Do you think your \"GST hit majority of Singaporeans hard\" statement still stand?
As for your statement of cutting income taxes benefitting only the rich, you are finally getting somewhere on my question on the purpose of GST. First of all, I would like to amend your statement to \"the rich benefited the most from a cut in income tax\", which is precisely the reason from shifting from taxes on income to consumption!!! By reducing the burden on generation of income, we are encouraging folks and corporates in Singapore to accumulate more income. At the same time, we would also like to discourage consumption, by levying a tax on consumption. The net sum effect of the policy is to encourage savings and investments, which will lead to more jobs and a vibrant economy. -
Here, read this.....
http://en.wikipedia.org/wiki/Goods_and_Services_Tax_%28Singapore%29
Some excerpts
\"Objectives
The GST was part of a larger tax restructuring exercise to enable Singapore to shift its reliance from direct taxes to indirect taxes. The government argued that tax reform was necessary in order to maintain Singapore's competitiveness, in order to sustain long-term growth and job creation. The government also argued that with an ageing population, Singapore’s income tax base was expected to decline. With a broad-based GST, the taxation burden would be more evenly spread among the population.
A value-added tax, like the GST, also has several features that make it attractive. A tax on consumption, not income, the tax system inherently encourages savings and investments instead of consumption. The tax also has a self-policing mechanism that discourages evasion, unlike a retail sales tax system or an income tax system, which would be relatively easier to evade.\"
\"To maintain the progressive nature of total taxes and transfers on individuals, Singapore reduced income tax on lower-income earners, as well as instituted direct transfer payments to lower-income groups, resulting in an overall lower tax burden for most Singaporean households. These offsets included lower income taxes, lower property taxes, rebates on rental and service & conservancy charges for public housing, and additional subsidies for health, education and community services. As a result of the income tax cuts, additional tax reliefs and rebates in 1994, about 70% of individuals that used to pay income taxes no longer needed to do so.
The Singapore government has argued that the GST on its own is a flat tax but is part of an overall fiscal system that is highly progressive: higher-income earners pay the highest fraction of their income in taxes. When all taxes were taken into account (income tax, property tax, GST and other indirect taxes), the top 10% of households accounted for 38% of the taxes paid, while the top 20% contributed 53% of all taxes. In contrast, lower-income earners receive substantially more transfers than the taxes they pay. Low- and middle-income households effectively pay 'negative' tax. From 2006 to 2010, the second bottom decile of Singaporean households (ranked by income from work) received transfers (net of all taxes paid) amounting to 23% of their income, the 5th decile received transfers that netted off taxes paid, while the effective tax rate for the top decile was 11%. In particular, when the GST rate was raised from 5% to 7% in July 2007, a household in the bottom 20% had to pay additional GST of $370 per year, but received an offset package of $910 per year, in addition to permanent benefits of $1,000 per year.\"
\"Calls to reduce the GST rate
In response to the rising cost of living, members of the opposition have called for the GST rate to be reduced. The Singapore government has argued that reducing the rate of GST would benefit the wealthy more than the poor, as the bulk of GST is collected from foreigners and higher-income earners. In 2010, 84.2% of all GST paid was collected from foreigners and the top 40% of Singaporean households, while the bottom 20% of households contributed only 4% of all GST paid. The government argued that as the GST was a core part of a fiscal system that provides transfers to the lower income, reducing the GST rate would be costly and inequitable, and leave the government with less resources to help the lower income.\"
Make of it what you will, objectively or otherwise.
Al those people calling for the abolishment of the GST in order to help the poor, you really sure that's the right way?
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