SINGAPORE - The Government announced a move to tax the rich more, while it gave taxpayers an immediate one-off 50 per cent tax rebate to help middle-income earners.
Marginal tax rates will go up for the top 5 per cent of income earners, who earn at least $160,000, with the increases being larger for the highest earners, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said in his Budget Statement on Monday.
For those in the top-tier, with a chargeable income above $320,000, the marginal tax rate for the additional income will go up by 2 percentage points to 22 per cent from 20 per cent currently. There will be smaller increases in the marginal tax rate for others in the 5 per cent group.
It will apply starting with income earned in 2016, and on taxes to be paid in 2017.
The top 10 per cent of taxpayers currently pay slightly over 80 per cent of personal income taxes, said Mr Tharman.
"This tax increase for high-income earners will enhance progressivity and strengthen future revenues," he said.
"This is a calibrated move. We have assessed that it should not significantly dent Singapore's competitiveness," he added.
For someone earning $250,000 a year, his effective tax rate (dividing the total tax by the total taxable income) will increase from 8.3 per cent to 8.5 per cent, with additional tax payable of $400.
A higher-income earner with income of $800,000 will see his effective tax rate increase from 16.0 per cent to 17.4 per cent, with additional tax payable of about $11,000.
A top income earner with income of $1.5 million will see his effective tax rate increase from 17.9 per cent to 19.5 per cent, or an increase in tax of about $25,000.
The change to the top income tax rates is expected to raise additional revenue of $400 million a year when it comes into effect, said Mr Tharman.
This change - which takes effect in 2017 - as well as including Temasek in the NIR framework, will provide additional revenues equal to about 1 per cent of GDP annually for the Budget over the next 5 years.
All taxpayers, meanwhile, will enjoy a one-off tax rebate of 50 per cent, capped at $1,000, for the year of assesment (YA) 2015 for income earned in 2014.
"I have set the cap at $1,000 so as to ensure that the benefits go mainly to the middle and upper-middle income groups," said Mr Tharman.
He added that some 1.5 million taxpayers will benefit from the rebate, which will cost state coffers about $717 million.