TAX has become yet another battleground for centres trying to lure top talent, with Singapore boasting the second-lowest tax rates in Asia.
Its great rival Hong Kong leads the way - its top rate is 16 per cent against 20 per cent here - with competition likely to put more pressure on further cuts.
In fact, the trend across the world is for lower income tax, said a KPMG survey on individual income tax rates in 87 countries. It found that rates have declined by an average 2.5 per cent over the past six years, from an average of 31.3 per cent in 2003 to 28.8 per cent now.
Of the countries surveyed, 33 have been trimming personal taxes over the past six years while seven raised levies.
The rivalry between the financial hubs Hong Kong and Singapore illustrates how key tax rates can be when luring talent.
Singapore trimmed its top rate from 22 to 21 per cent in 2003 and by a further percentage point in 2006 to its present level of 20 per cent.
But these figures do not tell the whole story, said Ms Rosheen Garnon, head of KPMG's International Executive Services practice. She pointed out that 'both the Hong Kong and Singapore governments are prepared to offer their citizens tax rebates if government finances allow'.
Rebates were 20 per cent in Singapore, capped at $2,000, and 75 per cent in Hong Kong, capped at HK$25,000 (S$4,800), said the KPMG report.
Japan has the region's highest top rates - 50 per cent - followed by Australia and China, both at 45 per cent.
Globally, Denmark topped the list with a top tax rate of 59 per cent, followed by Sweden, which dropped its top rate from 57 to 55 per cent last year. The Netherlands levies its top earners at 52 per cent.
Ms Garnon said the fall in personal tax rates, with a similar trend in corporate levies, 'raises the question of what alternative strategies governments are using to raise revenues'.
'The answer may lie in indications that indirect taxation...are rising in many parts of the world,' she said, adding that the level of indirect tax will play a greater role in people's assessment of the economic attractiveness of each country.
This article was first published in The Straits Times on November 08, 2008.
