Dec 3, 2010
Panel calls for S'pore to slash tax rates
Income tax should be cut to 17% to attract top talent, urge experts
By Yasmine Yahya
SINGAPORE should slash personal income tax rates if it wants to attract more top talent and share the country's economic success with local workers.
That is the view of tax experts who say that while Singapore's personal tax rates are lower than those of regional rivals such as China and Australia, high income earners still have to pay much higher taxes here than they would in Hong Kong.
'Our headline personal tax rate of 20 per cent is dismally short of closing the tax gap with Hong Kong, which has a flat rate of 15 per cent. Coupled with some significant deductions given in Hong Kong, such as home loan interest, Hong Kong's personal tax regime seems to have the upper hand,' said KPMG's head of international executive services, Mr Ooi Boon Jin.
For example, he said, a married individual earning US$2 million (S$2.6 million) would pay a tax of US$300,000 if he were living in Hong Kong. But in Singapore, his tax bill would amount to US$383,000.
The headline personal tax rate should be cut to at least 17 per cent, he said.
KPMG data shows that even if Singapore were to cut its headline rate to 17 per cent, those earning US$1 million or more would still be paying more taxes here than in Hong Kong. But the gap would be narrowed - a married individual earning US$2 million would now pay US$325,831 in income tax.
Ernst & Young international and corporate tax services partner Choo Eng Chuan agreed, saying that attracting more top executives would have a positive knock-on effect for the local population.
'Chief executive officers have a lot of people working under them. So if you attract the boss, you create employment for a lot of other people as well,' he said.
PricewaterhouseCoopers' international assignment services partner James Clemence, however, believes Singapore is already an extremely attractive location for talented executives and that reducing the top tax rates further would not necessarily draw more in.
It is more important for the Government to help middle income earners directly, he said.
'If the Government wanted to make changes to the income tax rates, I would suggest that they make adjustments to remove more taxpayers from the tax net altogether. For example, increasing the 0 per cent tax band from $20,000 of taxable income to $40,000 would remove more low earners from the burden of paying tax and save the tax authority the cost of collecting the relatively small amount of tax.'
Human resources experts also point out that the tax rate is not the most important factor that foreigners consider when choosing where to relocate.
'Lower tax rates mean higher disposable income, so that is one of the top factors. But people also want a place where their whole family can work, live and play. The career opportunities, education system and entertainment and social activities available are all considerations,' said solutions leader of talent consulting at Aon Hewitt, Mr Samir Bedi.
The division director for the financial services group at Robert Half International, Ms Stella Koh, agreed.
'Usually people would turn down one location for another because they have a more exciting job opportunity waiting for them at that other place. I have never heard of anyone turning Singapore down because its tax rate was higher than Hong Kong's.'
yasminey@sph.com.sg
Dec 3, 2010
Singapore now more expensive for expats
It moves from 9th to 8th position in Asia, and 79th to 42nd globally: Survey
By Yasmine Yahya
Living in Singapore is now more costly than Central London (50th position) but much cheaper than New York (39th position). -- ST FILE PHOTO
OVER the past six months, Singapore has become even more expensive for expatriates to live in, climbing from ninth spot in Asia to No. 8, said the latest cost of living survey from ECA International.
Rising prices and the strengthening of the Singapore dollar against major currencies propelled Singapore in the cost of living stakes from 79th position globally to 42nd over the past year.
That means it is more expensive for expatriates to live in Singapore than Central London which is ranked 50th worldwide, but not New York, which came in at No.39, based on ECA's latest twice-yearly survey, released yesterday.
However, it is not all doom and gloom. ECA International regional director for Asia Lee Quane said the rise in Singapore's cost of living is a double-edged sword.
'For companies bringing senior talent into Singapore, the cost of an assignment will increase as higher allowances are required to maintain employees' purchasing power. On the other hand, companies sending employees out of Singapore can apply lower cost of living allowances and still provide sufficient remuneration to maintain a good standard of living.'
The difference between the cost of living in Singapore and that of Hong Kong, the sixth most expensive city in Asia, is also rapidly narrowing, he noted. Two years ago there was a 15 per cent gap in the cost of living between Hong Kong and Singapore. This gap fell to 7 per cent a year ago and now stands at just 2 per cent.
TV producer Sha Liang, 23, who hails from the United States, told The Straits Times that she does feel that certain costs in Singapore are high. Her monthly rent, for example, takes up a third of her salary.
However, an expatriate's cost of living will largely depend on his or her lifestyle, she added. 'If you eat at hawker centres every day, that's affordable. But if you go out with friends a lot and go to nice restaurants, then those bills do add up quickly.'
Overall, Tokyo maintained its position as the most expensive location in Asia and worldwide for expatriates. In fact, ECA International noted that the gap between Tokyo and other locations in the region is widening: a year ago, the difference in cost of living between Tokyo and Hong Kong was 45 per cent. Today, it is 55 per cent.
Stronger currencies have led to HR managers having to increase their cost of living allowances for those in Seoul and Tokyo. Even in typically low-cost locations such as Bangkok and Jakarta, where the relative low cost of living has increased recently, HR managers are having to consider introducing allowances. Equally, the weakening of the euro has seen the cost of living in Dublin plunge.
Worldwide, Luanda in Angola was the second most expensive place after Tokyo. The Japanese city of Nagoya came third.
The survey calculates cost of living allowances for employees assigned around the world. It compiles data on allowances for goods and services consumed by them, such as food, drinks, tobacco and clothing.
yasminey@sph.com.sg
Most expensive Asian cities
1. Tokyo
2. Nagoya
3. Yokohama
4. Kobe
5. Seoul
6. Hong Kong
7. Shanghai
8. Singapore
9. Beijing
10. Busan
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