Abolish income tax for lowest earners, government urged

They contribute very little to the national budget.

Policymakers should consider doing away with income tax for the country’s lowest earners, the Singapore Institute of Accredited Tax Professionals (SIATP) said today.

In its recommendations for Budget 2016, SIATP said that the lowest two tax bands— 2% for those who earn from $20,000 to $30,000 and 3.5% for those who make between $30,000 to $40,000—should be abolished to ease the tax burden on lower earners and free up valuable resources from the Inland Revenue Authority of Singapore (IRAS).

SIATP noted that based on tax statistics, close to one-third or 32.08% of all individual taxpayers earned an annual income of $40,000 or less in YA 2014.

This group of taxpayers however, contributed to only 0.78% of the net tax assessed from all individual taxpayers in the same period.

“In this regard, the reduction in revenue from our proposal to abolish the two lowest individual tax bands is not expected to be significant. The increase in individual tax rates in the higher income brackets starting from YA 2017 (as announced in Budget 2015) should more than compensate for the expected reduction in revenue from our proposal,” the statement said.