SINGAPORE - Singapore's personal income tax rate remains among the lowest, along with Hong Kong and Macau, in 2012 even as the global average rate increased.
KPMG's latest Individual Income Tax and Social Security Rate Survey 2012 shows that the global average top personal income tax rate has gone up by 0.3 per cent, only the third time that an increase has been observed over the past 10 years.
The report showed that many economies deemed it necessary to increase their highest rate of personal income tax either through the creation of new income tax rate bands for very high income earners, or the introduction of temporary taxes to address immediate budgetary deficit concerns.
In Asia, however, rates remained constant among heavyweights China, Japan and India.
They have not altered their top rate of tax in the last ten years while within South-east and East Asia, Singapore's tax rate remains among the lowest, along with Hong Kong and Macau.
"Given the slower pace in economic recovery and increasing global debt concerns, Singapore is still keeping to having one of the most competitive rates in the region. Effects of this will send signals to businesses, entrepreneurs and talents that we are still one of the choice locations for them to settle down in," said BJ Ooi, partner and head of International Executive Services with KPMG in Singapore.
The highest rate of individual tax in Singapore has stayed static at 20 per cent for the last five years.
The taxable income level at which the highest individual tax rate kicks in is at S$320,000 or about US$261,800(S$322,498.30).
For many multinational companies looking to locate their senior staff to this region, the two competing locations are Hong Kong and Singapore.
Based on KPMG's computations of tax burdens of executives with different levels of compensation, Hong Kong comes in with a lower tax burden than Singapore where earnings exceeding about US$500,000 are concerned.
In Singapore, at an income level of US$100,000, the effective income tax rate is 6.3 per cent with a further 13.9 per cent going towards the Central Provident Fund (CPF).
In Hong Kong, this is 12.6 per cent going towards income tax.
At an income level of US$300,000, 14.1 per cent will go towards income tax and a further 4.4 per cent will go towards CPF.
In Hong Kong, the effective income tax rate is 15 per cent.
There are indications that rates in Japan are set to change with permanent residents soon becoming subject to a Special Reconstruction Surtax.