Singapore has always considered Hong Kong as its benchmark, thus many policies are formulated with the goal of competing with Hong Kong, especially the tax system. Singapore has consistently maintained a slightly lower tax rate than Hong Kong to attract overseas investment. Currently, the corporate tax rate in Singapore has been reduced to below 18%, and it may be even lower in the future, making it one of the cities with the lowest tax rates in Asia.
Regarding personal taxation, a goods and services tax is applied during personal consumption. All goods in Singapore are subject to the same goods and services tax of 7%, which is not low among Asian countries and serves as an important source of national revenue. In terms of personal income tax, Singapore's tax rate is considered one of the lower rates in Asia, and it is very detailed and user-friendly.
Singapore's personal income tax is assessed annually. After accumulating income over the 365 days of the year, the tax rate varies based on the level of income. The higher the income, the higher the tax rate, but the increased rate only applies to taxable income exceeding a certain threshold, which is generally similar to domestic practices.
However, the Singapore government provides various types of "partial income exemptions" (tax relief) to encourage certain behaviors and support specific groups. Each individual can declare based on their actual situation. For example, if your parents are retired, you can deduct up to 5,000 Singapore dollars (1 Singapore dollar is approximately 5 Chinese yuan) from your income under the name of supporting your parents, thereby reducing the tax amount you owe.
If not only your parents are retired, but you are also studying part-time, you can deduct up to 3,000 Singapore dollars from your income based on your tuition fees. Additionally, there are various exemptions available for individuals with disabilities, families with children, families with multiple children, and those who have served in the military, among others.
According to statistics from the Inland Revenue Authority of Singapore, among Singapore's population of over 4 million, more than 80% of individuals pay taxes that account for 0%-2% of their total income. This figure is indeed a legendary low tax rate for a country with no resources, and these taxes can be automatically deducted from your bank account over several months, without interest.
Personal income tax mainly targets the wealthy, while the government primarily relies on the 7% goods and services tax to collect revenue, showing a benevolent approach towards ordinary citizens.
Lowering personal income tax and increasing goods and services tax is an effective method to narrow the wealth gap, as poorer individuals tend to consume less, while wealthier individuals often spend more.
