http://www.tremeritus.com/2014/04/16...-singaporeans/
Singapore is a peculiar country. In a country of more than 5 million people, almost 2 million of the population residing in Singapore are foreign-born – these account for almost 40% of our total population. While it is undeniable that many foreigners have contributed to the economic success of Singapore, the sudden influx has also brought about a wave of social problems. According to the ‘HSBC The Expat Explorer Survey 2010’, around 45% of the expats have a salary of over USD$200,000 (SGD$250,000) in contrast to the global average of 21%. Clearly many of the expatriates are the beneficiaries of our economic success as much as we have enjoyed their expertise.
However, the system is becoming increasingly unfair for Singaporeans. Our local-born males have to sacrifice two years of their lives to do national service, whereas most of the new citizens are exempted from this requirement. Most local-born males also have to go for re-service annually for a 5 – 10 year period depending on their military vocations. There is nothing wrong with Singapore implementing a national service program. The issue is that the government should do more to draw the lines between a foreigner and a Singaporean. Drawing a line is not discriminatory, it is simply a reflection of the sacrifices of the local-born. One way for the government to draw the line is by rethinking the current policy for personal income taxes.
In Singapore, we do not have a different ‘personal income tax scale’ for foreigners. In order to determine the personal income tax that is due, a person would have to find out whether he is a tax-resident or a non-resident. For most expatriates they would all fall under the category of a ‘tax resident’ like most Singaporeans. According to IRAS, You will be treated as a tax resident for a particular Year of Assessment (YA) if you are a:
-Singaporean who normally resides in Singapore except for temporary absences;
or
-Singapore Permanent Resident (SPR) who has established a permanent home in Singapore; or
-foreigner who has stayed / worked in Singapore (excludes directors of companies) for 183 days or more in the year before the YA.
Whether you are a foreign-born or a local-born, as long as you will be working in Singapore for the ‘near-future’, you are definitely a tax resident.
Some would argue that even though foreigners are in the same category as the local-born, we, the local-born, do qualify for tax reliefs that our foreign counterparts do not. Are the tax reliefs really that substantial to draw the line between locals and foreigners? Let us compare two groups of people. Group A is a group of 30-year-old local-born single men with no liabilities, they hold a non-commander position while serving national service and are in the midst of completing their re-service. Group B is a group of foreign-born single men with no liabilities. What is the difference in tax paid by these two groups of men?
If both men make SGD$60,000 each annually, the man in Group A would pay $830 in personal income tax while the man in Group B would pay $1,040. If a both men make SGD$120,000 each annually, the man in Group A would pay SGD$4,730, while the man in Group B would pay SGD$7,835. If they make SGD$250,000 each annually, the man in Group A would pay SGD$18,370, while the man in Group B would pay SGD$29,570.
It is clear that the differences are simply not that substantial. The personal income tax structure in Singapore does not reflect the sacrifices of our local-born men. Moreover, Singaporeans have to contribute to
CPF which reduces our disposable income. Hence the government should consider raising the income taxes of the expatriate and foreign-born community.
One of the reasons why Singapore continues to attract talents to work in our country is because of the low taxes. There is a fear that if we increase the personal income tax for our foreign community, they may leave the country. However, we do not have to increase the tax of our foreign counterparts significantly. Even if we were to increase the ceiling by 5%, we are still a lot more attractive than New York or London. In London if you were to earn SGD$250, 000, you would pay almost SGD$100,000 in taxes. In New York if you were to earn SGD$250,000, you would pay almost SGD$90,000 in taxes. A marginal increase would not prevent the American and British expatriates from coming. They would still receive a large tax discount.
To the question of whether Singapore should increase the taxes for foreigners, I believe there are a lot of other intangible benefits. Tax reliefs are a good way to differentiate between the local-born and the foreigners; and it can more adequately reflect the sacrifices that the local Singaporean men have to undertake. The ‘military tax’ on foreigners can be used to increase the allowances of those doing national service and that would definitely go a long way in reducing the tensions between the local and foreign-born community.