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Old 31-08-2016, 03:03 PM   #1
Aces
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Default Scope to raise GST, taxes on high-income: Experts

SINGAPORE — Despite the increase in taxes collected, the amounts as a percentage of the government’s operating revenue have fallen over the past five years, and industry experts said there is scope to consider increasing the Goods and Services Tax (GST) and tax rates on high-income individuals.

Associate Professor of Accounting, NUS Business School Simon Poh Siew Beng said: “Although our government has stated that there will be no GST rate increase till the end of the decade if our fiscal position permits, there is certainly scope for a gradual GST increase in the medium term of three to five years. Certainly a 1 per cent increase in the year 2020 is palatable.”

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For financial year 2015/2016, taxes collected rose 3.2 per cent from a year earlier to S$44.8 billion, the Inland Revenue Authority of Singapore (Iras) said on Tuesday (Aug 30) in its annual report, while total government operating revenue rose to S$64.8 billion.

Iras’ collection as a percentage of government operating revenue fell 2.2 percentage points from a year ago to 69.1 per cent, compared to 75.3 per cent five years earlier.

Besides Iras’ tax collection, the government’s operating revenue comprises customs and excise duties, motor vehicle taxes, vehicle quota premiums, as well as other fees and charges. Even as taxes are falling as a proportion of operating revenue, government expenditure is on the rise. Last year, total expenditure jumped to S$68.4 billion from S$56.7 billion a year earlier, showed data from the Ministry of Finance.

“Discontinuing the 50 per cent corporate tax rebate (currently extended to companies in the year of assessment 2016 and 2017) may bring in some tax revenue. For individual taxes, maybe we can introduce a higher tax bracket of say 25 per cent (3 per cent more than the maximum 22 per cent), but only for taxable income that reaches a very high taxable income threshold, say S$2 million (currently at S$320,000),” Prof Poh said.

However, he cautioned that the increase in corporate and individual income tax rates from the current 17 per cent and maximum 22 per cent, respectively, may disincentivise companies and individual enterprises. Corporate income tax accounts for the largest portion of total government operating revenue at around 20 per cent, followed by GST at 16 per cent and personal income tax at 14 per cent.

The government had previously used fiscal policy measures to make the business environment more competitive, such as when it cut corporate taxes and raised the GST. By 2007, the GST was at 7 per cent, up from 3 per cent in 1994.

For the longer term, the focus on productivity, innovation and internationalisation is crucial, industry 
experts said.

“The best way is to continually strive to achieve sustainable growth in our economy through productivity and innovation, while continuing to attract global companies to locate to Singapore. For the former, this will ensure companies remain profitable and employees can continue to receive higher wages. For the latter, the continued influx of global companies locating to Singapore will play a pivotal role in contributing to corporate profits in Singapore and hence increase in corporate tax,” Prof Poh said.

Mr Tay Hong Beng, head of tax at KPMG in Singapore, said: “The best way to increase tax collection is to nurture a healthy economy. A healthy economy will generate more spending by consumers, increase profitability for businesses, raise salaries for employees and increase valuation for properties — all of which will contribute more taxes for the government. The government should thus continue to focus on supporting the businesses to grow, through innovation and internationalisation.”

Source: http://www.todayonline.com/business/...income-experts
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