Some very senior bankers in Singapore will soon face five-figure tax rises, but this shouldn’t affect the city state’s ability to attract and retain talent, say headhunters.
The top marginal tax rate in Singapore for income earned over S$320k (US$256k) is increasing by two percentage points, to 22%, and there are smaller increases above S$160k. The new rates (click here to compare them with the current ones) will apply to money earned in 2016 and payable in 2017.
The tax changes, announced yesterday by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in his Budget address, won’t make much of a dent in the wallets of mid-level finance professionals. For example, if you’re a VP earning S$250k, your effective tax rate (dividing your total tax by your total taxable income) will increase only from 8.3% to 8.5%, so you will pay about S$400 more a year, according to the Straits Times.
Top-performing senior investment bankers and private bankers in Singapore, whose combined salary and bonuses put most of their income into the top-rate bracket, will be most affected. Those earning S$800k, for example, will see their effective tax rate increase from 16% to 17.4%, with additional tax payable of about S$11k. And if you earn S$1.5m, you will pay S$25k more in tax.
Still, headhunters say the new tax rises are two small to dissuade senior foreign bankers from basing themselves in Singapore Share on twitter. But if Singapore continues to raise tax rates on high earners in future budgets, it risks losing talent to Hong Kong, where the top tax rate is currently capped at 17%.
Further tax increases seem unlikely in the foreseeable future in Singapore, however. Describing his recent rises as a “calibrated move” that shouldn’t significantly affect Singapore’s competitiveness, Tharman added: “It would be naive to think that we can keep raising tax rates without affecting our competitiveness. We must remain an attractive place for world-class teams to be in Singapore with Singaporeans at the core, and to keep our place in the world.”
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