Pre-Budget Brief 2018 Singapore
Contents Economic indicators 1 Economic trends 2 Singapore tax rates a history 3 Co rporate tax Prevailing corporate income tax rates in selected countries 5 as at 1 January 2018 Personal tax Personal income tax rates in selected countries in the region 7 Comparison of effective income tax rates (in percentages) in selected 8 countries with employment income of S$75,000, S$100,000, S$200,000 and S$400,000 Break even salary to pay no Singapore income taxes for 9 Year of Assessment (YA) 2018 Progressive personal income tax system 10 Personal income tax rates for YA 2016, YA 2017 and YA 2018 11 Common personal income tax reliefs 12 Central Provident Fund (CPF) rates 13 Comparative analysis (2017/2018 Hong Kong vs. Singapore 14 YA 2018 tax rate) Goods and services tax (GST) Prevailing standard GST/VAT rates in selected countries as at 1 January 2018 16
Economic indicators Over the first three quarters of 2017, total government budget expenditures declined by 2%, compared to the same time period in 2016. Operating expenditures rose by 7%, boosted by spending on social development, especially in education and national development. Development expenditures, which account for approximately a quarter of the overall budget fell by 23% in the first three quarters of 2017, compared to the same period in 2016. Government operating revenues increased between 5 and 7% each year between 2013 and 2016. In the first three quarters of 2017, revenues rose 4%, compared to the same period in 2016, with tax revenues increasing by 6% and overall fees and charges which include vehicle quota premiums rising by 2%. 1Budget allocation S$ b 80 60 40 20 0 51.7 39.7 56.6 42.7 12.0 14.0 Expenditures are expected to land slightly 80 higher than revenues for the full year 2017, with the overall budget deficit forecast to be 60 S$600m, or 0.1% of real GDP. 57.1 60.0 Total for Q1-Q3 2017: S$53.7b 67.4 48.1 71.0 52.1 19.4 18.9 2013 2014 2015 2016 Total Operating expenditure Development expenditure 2Government revenue S$ b 100 40 63.6 68.0 CAGR 2013-2018f: 6.3% 71.6 77.0 20 0 2013 2014 2015 2016 2017e 2018f 3Primary budget surplus or deficit % of GDP 1.5 1.3 1.3 1.0 0.6 0.5 0.0 0.0 0.0-0.5-1.0-1.5-1.2 2013 2014 2015 2016 2017e 2018f 4 Gross government debt as a percentage of nominal GDP 150 % Notes: e = estimate f = forecast 125 111 113 114 122 124 126 Sources: Accountant-General's Department, Ministry of Finance Singapore Department of Statistics, Haver Analytics (via Oxford Economics) 100 75 2013e 2014e 2015e 2016e 2017e 2018f Pre-Budget Brief 2018 1
Economic trends Real GDP growth vs. Consumer Price Index (CPI) % 18 * 2018f 15 12 9 6 GDP: 2.9%* 3 0 CPI: 1.0%* -3 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018f Economic growth is likely to moderate slightly from 3.3% in 2017 to 2.9% in 2018 due to soft labour market conditions and the ongoing housing market correction.whilst business investment could gradually pick up in 2018 on the back of higher infrastructure spending and government measures to support businesses, domestic inflation is likely to be muted. Trade (goods and services) S$ b * 2018f 1000 Exports: S$866b* 800 600 Imports: S$742b* 400 200 0 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017e 2018f Whilst a cyclical recovery in global trade has boosted economic prospects in 2017 and may continue to do so in 2018 cooling import demand from China could slow down the growth momentum for trade. Net international reserves S$ b 400 300 200 100 * As of 20 December 2017 2018f: 296.9* Ample and growing foreign reserves will continue to provide a sizeable buffer against any crises that could potentially arise from foreign exchange or capital flow volatility. 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018f Real growth by sectors % 20 15 10 5 0-5 -10-15 -20 8.4 8.5 18.4-6.9-7.6-9.1 2.1 2.2 0.4 Manufacturing Construction Wholesale and retail trade -1.6-2.0-2.1 3.4 4.5 4.6 Accommodation Transportation and and storage food services 1Q17 2Q17 3Q17 5.9 4.2 0.7 1.1 1.3 1.4 Finance and insurance Business services The manufacturing sector will likely continue to expand in 2018 due to favourable demand conditions in the global semiconductor market. The global economic recovery will benefit externally oriented sectors such as wholesale trade, transportation and storage, and finance and insurance. However, the construction sector will remain subdued due to ongoing weakness in construction demand. Notes: e = estimate f = forecast Sources: Monetary Authority of Singapore, Ministry of Trade and Industry Singapore, Oxford Economics Singapore Department of Statistics, Haver Analytics (via Oxford Economics) Bank for International Settlements, Haver Analytics (via Oxford Economics) 2 Pre-Budget Brief 2018
Singapore tax rates a history % 45 40 35 30 25 20 15 10 5 0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year of assessment (YA) Corporate Individual GST Observations: Corporate income tax has been declining whilst GST has been increasing Personal income tax usually follows corporate income tax but there has been a divergence in recent years Personal income tax could increase as we look at a more progressive tax system Notes: The above are the top marginal tax rates GST commenced on 1 April 1994 Assumes that there is no change in the corporate income tax, individual income tax and GST rates in 2018 Pre-Budget Brief 2018 3
Corporate tax 4 Pre-Budget Brief 2018
Corporate tax Prevailing corporate income tax rates in selected countries as at 1 January 2018 Country Australia India Philippines New Zealand China Indonesia Korea Malaysia Japan US Taiwan Thailand Vietnam UK Singapore Hong Kong Germany Ireland 15 12.5 (e) (g) 28 25 (e) 25 (e) 25 (a) 24 (e) (g) (k) 23.4 (e) (i) 21 20 (a) (b) (c) (n) 20 (e) 20 (g) 19 (f) (l) 17 (h) 16.5 (m) 30 (e) (j) 30 (b) (d) (e) 30 (b) (o) 0 5 10 15 20 25 30 35 % Notes: (a) Lower income bands are generally (with exception and/or subject to certain conditions) taxed at lower rates. (b) An alternative minimum tax is applicable. (c) The taxing threshold for taxable income is TWD120,000 i.e. total net income exceeding TWD120,000 is subject to tax, and the income tax payable may not exceed one-half of the taxable income minus the TWD120,000 threshold amount. (d) A higher rate (40%) applies for foreign companies. (e) Certain income or companies that meet certain conditions enjoy a lower rate of tax. (f) To be reduced to 17% from 1 April 2020. (g) Certain income or companies are taxed at a higher rate. (h) Partial tax exemption is available on a specified amount of taxable income. (i) Reduced to 23.2% for fiscal years beginning on or after 1 April 2018. (j) It has been proposed that the corporate tax rate be reduced to 25% for all companies by 2026/27 and this will be achieved by progressively increasing the qualifying turnover from AUD10m in 2016/17 to AUD1b in 2022/23, and then reducing the rate (i.e., 27.5%) progressively for all companies until the 25% rate is achieved in 2026/27. (k) For YA 2017 and YA 2018, the 24% corporate tax rate may be reduced by between one and four percentage points, based on the percentage of increase in the chargeable income from business sources as compared to the immediate preceding YA. The reduction in rate applies to the relevant incremental chargeable income only, and does not apply to passive income such as interest income or non-business rental income and is subject to certain other conditions. (l) Different rates apply for ring-fence profits (from oil extraction and oil rights in the UK and UK continental shelf). (m) A legislative bill has been published on 29 December 2017 to implement a two-tier profits tax rates regime, whereby the profits tax rate for the first HKD2m of profits of corporations and unincorporated businesses will be lowered to 8.25%; profits above that amount will continue to be subject to the standard tax rate of 16.5%. (n) The corporate income tax rate was increased from 17% to 20% effective for taxable years beginning on or after 1 January 2018. (o) Included in the second package of tax reform proposal that was submitted by the Philippine Department of Finance to the House of Representatives recently on 15 January 2018 is a proposal to gradually reduce the corporate income tax rate from the current 30% to not lower than 25%. The above rates are the top corporate tax rates, excluding dividend withholding tax, surcharges, trade tax, or other state or local taxes etc. where applicable. Pre-Budget Brief 2018 5
Personal tax 6 Pre-Budget Brief 2018
Personal tax Personal income tax rates in selected countries in the region Country Australia China Taiwan Japan 45 45 45 # 45* Korea 40 Thailand Vietnam 35 35 Philippines 32 India Indonesia 30 30 Malaysia 28 Myanmar 25 Singapore 22 Hong Kong 17 0 10 20 30 40 50 % Notes: The above rates are the top marginal personal income tax rates prevailing as at December 2017 * Excludes local inhabitant tax # With effect from 1 January 2018, the rate is reduced to 40% Pre-Budget Brief 2018 7
Personal tax Comparison of effective income tax rates (in percentages) in selected countries with employment income of S$75,000, S$100,000, S$200,000 and S$400,000 Employment income S$75,000 Employment income S$100,000 Country Country Australia 22.53 Australia 25.90 India 25.47 India 26.80 China 18.80 China 20.70 Thailand 13.73 Thailand 17.00 Malaysia 16.40 Malaysia 18.30 Hong Kong 0.00 Hong Kong 1.00 Singapore 1.35 Singapore 2.76 Employment income S$200,000 Employment income S$400,000 Country Country Australia 32.80 Australia 39.90 India 31.75 India 34.35 China 26.75 China 35.75 Thailand 20.80 Thailand 29.05 Malaysia 21.55 Malaysia 24.10 Hong Kong 8.90 Hong Kong 12.95 Singapore 8.02 Singapore 13.98 Notes: Based on the assumption of a married man with two children, whose wife has no income and that the sole source of income is from his employment Difference in definitions of taxable income, allowable deductions and like factors can distort effective tax rate comparisons between different countries All figures are approximate and based on latest tax rates applicable to tax years ending in calendar year 2017 8 Pre-Budget Brief 2018
Personal tax Break even salary to pay no Singapore income taxes for YA 2018 Single S$ Married with one child S$ Married with two children S$ Annual salary 30,000 37,500 42,500 Personal reliefs Earned income -1,000-1,000-1,000 Wife -2,000-2,000 Children -4,000-8,000 CPF -6,000-7,500-8,500 Reservist -3,000-3,000-3,000 Chargeable income 20,000 20,000 20,000 Net tax payable Nil Nil Nil Assumptions: Sole source of income is from employment Annual salary is calculated on 13 months Less than 50 years old Wife is not working Active reservist No tax rebate for YA 2018 Pre-Budget Brief 2018 9
Personal tax Progressive personal income tax system Comparison of tax payable on employment income of S$25,000, S$75,000, S$150,000, S$250,000 and S$500,000 over a period from YA 2007 to YA 2018 Effective personal income tax rate YA S$25,000 (%) S$75,000 (%) S$150,000 (%) S$250,000 (%) S$500,000 (%) 2018 0 1.6 5.8 10.3 15.7 2017 0 1.3 5.4 10.1 15.6 2016 0 1.9 6.0 10.2 14.8 2015 0 0.9 5.3 9.8 14.6 2014 0 1.9 6.0 10.2 14.8 2013 0 1.3 5.0 9.6 14.5 2012 0 1.9 6.1 10.3 14.8 2011 0 2.2 6.0 10.0 14.5 2010 0 2.7 7.4 10.8 14.9 2009 0 2.2 6.0 10.0 14.5 2008 0 2.5 6.4 10.3 14.6 2007 0 3.1 7.7 11.1 15.0 Assumptions: A married man who is less than 50 years old, has two children, whose wife is not working and whose sole source of income is from his employment No tax rebate is announced in Budget 2018 10 Pre-Budget Brief 2018
Personal tax Personal income tax rates for YA 2016 Band S$ Rate (%) 0 20,000 0.0 20,001 30,000 2.0 30,001 40,000 3.5 40,001 80,000 7.0 80,001 120,000 11.5 120,001 160,000 15.0 160,001 200,000 17.0 200,001 320,000 18.0 Above 320,000 20.0 Personal income tax rates for YA 2017 and YA 2018 Band S$ Rate (%) 0 20,000 0.0 20,001 30,000 2.0 30,001 40,000 3.5 40,001 80,000 7.0 80,001 120,000 11.5 120,001 160,000 15.0 160,001 200,000 18.0 200,001 240,000 19.0 240,001 280,000 19.5 280,001 320,000 20.0 Above 320,000 22.0 Pre-Budget Brief 2018 11
Personal tax Common personal income tax reliefs Tax reliefs YA 2018 S$ Earned income relief Under age 55 1,000 55 to age 59 6,000 Age 60 and above 8,000 Handicapped earned income relief Under age 55 4,000 55 to age 59 10,000 Age 60 and above 12,000 Spouse or handicapped spouse relief 2,000/5,500 Child or handicapped child relief Qualifying child relief (each) 4,000/7,500 Dependent parent or handicapped parent relief Living with taxpayer in the same household (each parent) 9,000/14,000 Not living with taxpayer in the same household (each parent) 5,500/10,000 Handicapped sibling relief 5,500 Course fee relief 5,500 CPF cash top-up relief By self or employer to self's account Up to 7,000 To spouse, sibling, parents' and grandparents' account Up to 7,000 Foreign maid levy Without foreign domestic worker levy concession Up to 6,360 With foreign domestic worker levy concession Up to 1,440 Grandparent caregiver relief 3,000 National Serviceman (NSman) relief No in-camp training in previous year (non-key appointment holder) 1,500 Attended in-camp training in previous year (non-key appointment holder) 3,000 No in-camp training in previous year (key appointment holder) 3,500 Attended in-camp training in previous year (key appointment holder) 5,000 NSman (wife or parent) relief 750 CPF relief Age 55 and below Up to 20,400 Age 56 to 60 Up to 13,260 Age 61 to 65 Up to 7,650 Above 65 Up to 5,100 Supplementary Retirement Scheme (SRS) relief Singaporean or Singapore permanent resident Up to 15,300 Foreigner Up to 35,700 Note: With effect from YA 2018, the total amount of personal income tax reliefs an individual can claim will be capped at S$80,000 per YA 12 Pre-Budget Brief 2018
Personal tax CPF rates CPF rates for monthly wages S$750 and above, up to a ceiling of S$72,000 for ordinary wages and S$102,000 for total wages Singaporean or Singapore permanent resident* With effect from 1 January 2016 (A) Employees age 55 years and below Employee 20.0% Employer 17.0% Total 37.0% (B) Employees age above 55 to 60 years Employee 13.0% Employer 13.0% Total 26.0% (C) Employees age above 60 to 65 years Employee 7.5% Employer 9.0% Total 16.5% (D) Employees age above 65 Employee 5.0% Employer 7.5% Total 12.5% * Note: For permanent residents, the CPF rates may be lower in the first two years Pre-Budget Brief 2018 13
Personal tax Comparative analysis (2017/2018 Hong Kong vs. Singapore YA 2018 tax rate) 18 16 14 Effective tax rate (%) 12 10 8 6 (297, 11.55%) 4 (129, 4.42%) 2 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 Income level (S$ '000) Singapore Hong Kong Notes: Based on the assumption of a Singaporean married man with two children, whose wife has no income and whose sole source of income is from his employment Hong Kong calculations for 2017/2018 with marginal tax bands widen from HK$40,000 to HK$45,000 Exchange rate used: S$1: HK$5.6922 14 Pre-Budget Brief 2018
GST Pre-Budget Brief 2018 15
Goods and services tax (GST) Prevailing standard GST/VAT rates in selected countries as at 1 January 2018 Asia-Pacific Country China 17 New Zealand 15 Philippines 12 Australia Indonesia Korea Vietnam 10 10 10 10 Japan 8 Singapore Thailand 7 7(a) Malaysia 6 Taiwan 5 0 2 4 6 8 10 12 14 16 18 % Europe Country Denmark Sweden 25 25 Italy Netherlands UK France Germany 22 21 20 20 19 Switzerland 7.7 0 5 10 15 20 25 30 % Note: (a) Until 30 September 2018, pending an extension of the period by the Thai government 16 Pre-Budget Brief 2018
Notes Pre-Budget Brief 2018 17
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