Comparison between Malaysia Income Tax and Singapore Income Tax 1 --- Tax Rate

It is the period of time for both Malaysia and Singapore governments to collect their revenue......It is time to pay our tax...

This is my first year paying tax in Singapore. Before I accepted my current job, I roughly have the information that Singapore has a lower tax rate compared to Malaysia, it was part of my consideration when I agreed to accept the offer of a lower pay (dollar-to-dollar) in Singapore.

Now, since it is the time for me to declare my income for year 2010, (please note that in Singapore, we consider it as YA 2011, as we are paying tax in 2011) I am think of sharing some comparisons and thoughts between the two income tax system.

Firstly is the tax rate:

Malaysia Income Tax Rate Assessment Year 2010

Singapore Income Tax Rate Assessment Year 2011 (Income of 2010)

As you can see above (please note the unit is RM and SGD respectively without conversion), Singapore obviously has a lower tax rate. Singapore's employees only start to pay tax when our annual chargeable income is above SGD20,000. But in Malaysia, the minimum annual chargeable income that shall incurr tax is RM2,500 (I still remember when I first started to work in Malaysia, my colleagues and I misinterpret that it was monthly income...).

The tax bracket in Singapore also is bigger. Singapore annual chargeable income range is bigger for each tax bracket. Thus, it really helpful for the lower or medium income range employees as we can enjoy the lower tax rate for a longer period (based on yearly increament). In Malaysia, the increament of tax rate is also higher, thus, as a tax payer you shall feel a lot of different when your income upgraded to another tax bracket.It seems like your increment becomes nothing or little if it just make your taxable income to the next tax bracket......Singapore's tax rate increases between tax brackets is not as severe.

Lastly, the maximum tax rate for Singapore employees is much lower as compared with Malaysia's, i.e. 20% versus 26% (I remembered previously in Malaysia, it 27% to 28%).

It is understandable that Singapore is a country with limited natural resources, their strength is in their people. It is important to attract talent from all over the world to work and contribute to the country's GDP. Hence, the income tax rate is much lower, in fact Singapore is the second lowest tax country after Hong Kong in Asia.

Another thing to notes is that Singapore has 7% GST (Good Service Tax) to contribute to the government income. In a way, this is to tax the more wealthy people as the more you buy the more you pay your GST. Malaysia is still in the debate of introducing the 4% GST, but if I not mistaken the Government Service Tax has increased from 5% to 6% (I noticed when I dined in one of the McD in Malaysia).

(to be continued...on Tax Relief and Rebate)