Wednesday, Feb 25, 2015
THE STRAITS TIMES
TOP NEWS
Top 5% of earners to pay more income tax
Published on Feb 24, 2015 2:45 AM
By Mok Fei Fei
THE rich will be giving a little more back to the wider community with higher personal income taxes coming their way.
Income tax rates for the top 5 per cent of income earners - those pulling in at least $160,000 a year - are about to be raised. The move will net the Government about $400 million more a year.
Taxpayers with more than $160,000 in chargeable income, or the income taxable after taking into account personal reliefs, will face a higher tax rate of 18 per cent on the next $40,000 of their income, up from 17 per cent.
From there, the marginal tax rate will be higher as a person's income increases. The top marginal rate will rise from 20 per cent to 22 per cent for the highest income earners with a chargeable income of above $320,000.
For instance, someone earning $250,000 a year will pay an extra $400 in income tax a year while someone earning $800,000 will pay an extra $10,800.
The changes will start with income earned next year with the taxes to be paid in 2017.
Raising the top income tax rate helps the Government to meet its objectives, Deputy Prime Minister Tharman Shanmugaratnam said yesterday. For starters, it builds a fairer and more equitable system of taxes, with the well-off having to contribute more through the progressive tax regime.
As things stand, the top 10 per cent of taxpayers already pay slightly more than 80 per cent of personal income taxes, while a majority of Singaporeans do not pay income tax at all.
Mr Tharman said Singapore had designed its system such that it has lower overall taxes than most countries, while maintaining a highly progressive regime.
"The higher-income group makes a significant net contribution into the system, which enables the lower-income group in turn to get significantly more benefits than the taxes they pay. In other words, when we add up all our taxes - GST, income, property and other taxes - and compare them to benefits received, the low income group gets more benefits than the taxes they pay, while the high-income group pays more taxes than benefits received."
Property taxes have also been tweaked from a flat rate for residential properties to a tiered system where those with higher annual values are taxed more.
Taxes for the middle-income group have been reduced while the lower-income group has benefited from schemes such as Workfare, which supplements the incomes of low-wage workers.
"It is fair that this enhanced support for those with low incomes should come chiefly from revenues contributed by the high-income group," he said.
"Those with higher incomes have also been seeing stronger growth in incomes than the average Singaporean in recent years."
Raising the marginal tax rate of the top income earners also helps to boost government revenues. But the move is not expected to significantly dent Singapore's competitiveness, he said.
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