Singapore's personal tax rates still among region's lowest despite surprise hike

Income taxes elsewhere could be as high as 45%.

Singapore's personal tax rates are still among the region's lowest in spite of the surprise rate hike that was unveiled in this year's budget.

The government caught the market flat-footed when it decided to increase the top marginal personal tax rate from the current 20% to 22%, which will take effect from year of assesment 2017.

“The increase in the top marginal personal tax rate from 20% to 22% has come as a surprise. Nonetheless, the increase only affects a small population of taxpayers and is unlikely to significantly impact the competitiveness of Singapore," said Kerrie Chang, Partner, Human Capital, Ernst & Young Solutions LLP.

In spite of the hike, data from EY show that personal income tax rates in other countries in the region are considerably higher than Singapore's.

For instance, the personal income tax rate in Australia and China stands at 45%, while the rate in Japan and Taiwan stands at 40%.

Tax rates in other ASEAN countries are also higher than Singapore's. For instance, Thailand and Vietnam have a personal tax rate of 35%, while the Philippines' income tax rate stands at 32%.

Indonesia has a personal income tax rate of 30%, while neighboring Malaysia has a personal income tax rate of 26%.

However, Singapore's personal income tax rate is higher than Hong Kong's, which stands at 17%.