Business Times - 26 Jan 2007
Personal income tax rates may also be cut: consultants
By WONG WEI KONG
(SINGAPORE) The proposed tax cut for companies suggests personal income tax rates will also fall, tax consultants say.
The current personal income tax rate is 20 per cent for the highest bracket - on par with the present corporate tax rate.
'One question is whether a reduction in the corporate tax rate will be matched by a reduction in the highest individual tax band rate,' said Paula Eastwood, tax partner and head of corporate tax at PricewaterhouseCoopers.
'The rates were aligned this year and the question is whether this will continue if the corporate tax rate is further reduced.'
According to the head of tax services at KPMG, Owi Kek Hean, a corresponding cut in personal income tax 'will equalise any unintended disparity on tax payable by a business carried out as a corporation while inadvertently penalising unincorporated entities such as sole proprietors or partnerships.'
'Some of these unincorporated entities, which could one day become Singapore's global companies, would end up paying more tax on the higher end of the income bracket,' he said.
The last cut in the personal income tax rate came with the 2005 Budget. The top personal income tax rate was cut to 20 per cent from 22 per cent in two stages. It was lowered to 21 per cent in Year of Assessment (YA) 2006, and then to 20 per cent in YA2007.
The tax rates for all other income brackets were also cut. The personal income tax rate does not affect most Singaporeans - about 70 per cent pay no income tax. But the impact on higher income earners may have implications for Singapore's ambitions to be a global wealth management centre. As Ms Eastwood noted: 'A reduction in the personal tax rate encourages high net worth individuals to be based in Singapore.'
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