Govts to boost coffers to fund stimulus packages, says new KPMG report
By
Francis Chan
DECLINING personal income tax rates may soon be a thing of the past as governments around the world try to shore up their reserves after embarking on massive spending plans to stimulate their economies.
A new report released by Big Four accounting firm KPMG on Monday showed that top personal income tax rates fell by an average of 2.3 per cent over the past seven years around the world.
This trend, however, may end as governments look to increase tax revenues to cope with economic pressure and fund stimulus packages, said KPMG.
The report, called the Individual Income Tax and Social Security Rate Survey 2009, was compiled by KPMG's international executive services practice and includes personal income tax and social security rates from 86 countries over the past seven years.
'In the current economic environment, many countries worldwide are facing increasing budget deficits, and they need funding for various economic stimulus packages,' said the head of international executive services at KPMG Singapore, Mr Ooi Boon Jin.
Mr Ooi said there are clear indications that a reversal may be on the way as some governments turn to individuals in the highest income bracket among their base of taxpayers to increase tax revenue.
'With several countries in the European Union (EU) - Ireland and the United Kingdom, specifically - already proposing rate increases for their top earners, other countries may also examine this option in the light of their future government budgets,' he said.
According to the survey, the top average personal income tax rate dropped 0.3 percentage point worldwide from 29.2 per cent last year, to 28.9 per cent this year.
Taxpayers in the EU still pay the highest personal income taxes. However, with the introduction of flat rate taxes in a number of Eastern European countries, the average rate for Europe has fallen from 41.1 per cent in 2003 to 36 per cent this year.
Singapore residents are subject to the highest personal income tax rate only if they earn more than US$217,317 (S$320,000) a year, compared with the United States at US$372,950, which is the highest and No.2 Germany at US$334,448.
Read the full story in Tuesday's edition of The Straits Times.
