Windfall tax on bankers’ bonuses

was here last weekend

Britain and France have decided to impose a windfall tax on bankers’ bonuses.

Under the new one-time tax, any bank operating in Britain must pay a tax of 50% on all discretionary bonuses of more than GBP25,000 (SGD$56,500) paid between now and April 5 next year. Banks attempting ‘avoidance schemes’ by postponing bonuses would face further, unspecified punishments. As the bonus payouts are mostly contracted, the banks are obliged to pay. Nobel prize-winning economist Paul Krugman supports the idea.

So what could these fat cat bankers do?
Firstly, they can fly out of Europe to anywhere else such as Asia. They can then do whatever they are doing in Europe but do it in Singapore or Hong Kong instead.

Or secondly, they can stop calling themselves “bankers”. The windfall tax is on bankers’ bonuses and not cleaners’. Perhaps the bankers can call themselves cleaners and they get to keep their bonuses after deducting a nominal income tax. A small humiliation with full pockets.

Advertisements

Suggestion to IRAS

where was i?

There is a significant difference in value placed on a gardener and a household servant in the computation of taxable benefits granted to an employee.

Current laws

  • For a gardener, it is $35 per month or actual wages paid by employer, whichever is lower.
  • Whereas for a household servant, it is based on the actual wages paid by employer.

Refer – www.iras.gov.sg/irasHome/page03.aspx?id=3638

Perhaps the “discrepancy” could be due to:-

  • the gardener’s thingy has been around since the British colonial days where expatriates stayed in bungalows with gardens groomed by gardeners getting $35 salary
  • the household servant is a more recent phenomenon
  • or is it that gardeners are part-timers who come around once a while to touch up on your garden

Whatever it is, I am just trying to cheekily explain the “discrepancy” in IRAS’ valuation of a gardener as compared to a household servant.

So can I advise expatriate employees (if there is any left) to ask their employers to hire “gardeners” who can do household chores to effectively lower your taxable employment income? 🙂

Your IR8A

The Inland Revenue Authority of Singapore (IRAS) encourages all employers to join the Auto-Inclusion Scheme for Employment Income. It is a scheme where employers submit their employees’ income information to IRAS electronically.

The employment income information will be shown on the employees’ electronic tax return and automatically included in their income tax assessments.

Well if things go according to plan as above, all parties involved ie. employer, employee, IRAS and the mother Earth will be all happy.

But what happen when there has been an error or omission in the employer’s submission?

For any omission/error in the Form IR8A, the penalties for any tax understated are imposed on the employer for a failure to report.

However, penalties may also be separately imposed on the employee for failure to report in his personal tax return. You can’t argue with IRAS that the mistake was committed by your employer.

Remember you are the person who finally submit the return!

What is your personal effective tax rate?


For those who have submitted your income tax return in April, have you received your notice of assessment yet? Can share with us your tax payable 🙂

In Feb 2008, Mr Sum Yee Loong of Deloitte & Touche presented the following statistics.

If you are an employee married with two children and earns a gross annual remuneration of $100,000, your effective tax is only 3.98%. The other countries cited:-
– Hong Kong 5.15%
-USA 5.35%
– Malaysia 19.26%
– China 20.84%
– India 31.88%

However, if you are an employee married with two children and earns a gross annual remuneration of $200,000, your effective tax would more than doubled to 9.13%. The other countries cited:-
– Hong Kong 11.08%
-USA 14.46%
– Malaysia 23.54%
– China 26.91%
– India 32.94%

Conclusion
While the change in effective tax rate is very high for Singapore for the two income brackets studied, Singapore still offer the lowest effective tax rates for your personal income.

What is your effective tax rate?

SRS enhancements

things people watch together

Old rule – Workers only can top up their own accounts.
New rule – From Oct 1, 2008, employers can top up the SRS accounts for their employees and enjoy tax exemptions.

So if you know that an employee of yours is going to contribute to SRS, why don’t the company do it on behalf of the employee?

Old rule – Currently, members are given 10 years to withdraw their SRS savings from the retirement age of 62.
New rule – It will start only when a SRS member makes his or her first withdrawal.

Other features:-

  • 50% of the amount taken out of SRS account during that 10-year period is taxable.
  • Top-ups will still be capped at $11,475 for Singaporeans and PRs and; $26,775 for foreigners.

Section 94A of the Income Tax (Amendment) Act

two lonely petals

A piece of legislation, passed in Feb last year, has sharply upped the ante for filing late returns. The harsh new penalty kicks in for those who fail to file tax returns for two years or longer. There could also be a fine of up to $1,000.

The new Act has been giving sleepless nights to many, especially this fellow called Joe Ang. He felt so bad that he wrote a letter to IRAS.

“Dear Honourable Tax Officer of IRAS,

I have had many sleepless nights over the last two years for the tax owing. Please see the attached cheque of $100.

Good night.

Your humble taxpayer, Joe Ang.

P/S – If I still can’t sleep, I will send the rest of the monies.”

I will attribute the above adapted joke to Mr Sum Yee Loong who has kindly shared it with us during his budget review presentation on 27 Feb 2008. Cheers.

Why we should kill off "estate duty" asap?

The reasons for abolishing the estate duty are:-

  1. Together with income tax, GST and estate duty, it is a triple whammy for taxpayers. You are subject to tax from the first day of work till one’s last day on earth.
  2. We have a lopsided exemption limit of $600,000 for movable assets against exemption up to $9mio for residential property. This lopsidedness would ensnare many middle-income households to be liable for estate duty.
  3. Will the existence of the estate duty discourage wealthy retirees to settle in Singapore? Maybe. Maybe not. If the tax revenue from this source is relatively insignificant, why risk it?

Why Govt’s hesitation to remove the tax?

  • Allow me to speculate.
  • The Govt could be due to collect some real monies from the estates of tycoon Khoo Teck Puat and ex-OUB banker Lien Ying Chow. While last year’s estate duty collection maybe a “mere peanut” amount of $80mio, the coming years of rapidly aging Singapore should “help” to raise the collection figures on this front.
  • Alternatively, the Govt could be too busy to dedicate resources to review this area that affect only a minority but the very rich few.