TAX CHANGES TO ACCOMPANY THE GST

Corporate Tax Change

The corporate tax rate of 30% will be reduced by 3 percentage points to 27%. This will take effect from Year of Assessment 1994. The reduction represents a major step towards the target of a 25% corporate tax rate. It will ensure that Singapore's corporate tax rate remains competitive internationally. The estimated revenue loss is $318 million per annum.

Personal Tax Changes

The top personal income tax rate of 33% will be reduced by 3 percentage points to 30%, with proportionate reductions in other tax brackets. The reduction in personal tax rates for each tax bracket is in Appendix B (Cols. 605 - 606). Appendix B - REDUCTION IN PERSONAL INCOME TAX RATES WITH EFFECT FROM YA94 (Cols. 605 - 606)

Personal relief will be increased by $1,000, from $2,000 to $3,000

A rebate on individual income tax will be granted annually. The rebate will be $700 in the first year, declining by $50 per year until it reaches $500 in the fifth year, after which it will remain at $500. This means that resident individuals will have their income tax liability reduced by the amount of the rebate, that is to say, $700 in the first year. Individuals whose liability is already $700 or less will not have to pay income tax for that year.

I have chosen to give a combination of tax rebate and personal relief, rather than to rely on higher personal relief alone, because a tax rebate benefits low income taxpayers more than higher personal relief, for the same amount of revenue forgone.

The personal income tax changes will take effect from Year of Assessment 1994. Revenue loss is estimated at $494 million per annum.

Property tax rebate

The Government will give owner-occupied residential properties with annual values of less than $10,000 a property tax rebate based on a sliding scale. For properties with annual values of $5,000 or less, the maximum rebate of $150 per annum will be given. For annual values between $5,000 and $10,000, the rebate will vary along a straight line from $150 at $5,000 to zero at $10,000. This will benefit most HDB owner-occupiers, and also households staying in lower-end private properties such as terrace houses, shophouses and private walk-up flats. The revenue loss is estimated at $69 million per annum.

Changes in Other Existing Indirect Taxes

The Government currently levies a range of indirect taxes, for example tourism cess, utilities taxes on PUB and Telecom bills, excise duty on petrol and import duties on vehicles. The Government will suspend or reduce the following levies with effect from 1st April 1994, to offset the GST.

The cess charge of 4% levied on tourist restaurants and hotels will be reduced to 1%.

The 5% tax on the bills of domestic telephone subscribers will be suspended.

The 5% tax on PUB bills of households in excess of $40 will be reduced to 2%.

The 5% entertainments duty on all forms of general entertainment will be suspended.

Cinematograph film hire duty will be suspended. Royalty payments for film hire will be liable to income tax as at present.

Existing duties on petrol and diesel will be adjusted downwards to nullify the effect of the GST. These duties were introduced as a means to control the usage of cars. Government does not intend the introduction of the GST to cause an increase in total taxes payable on these fuels.

The import duties on cars, taxis, motorcycles, and buses will be reduced to nullify the effect of the GST. Like duties on petrol, these were introduced as part of a package of measures to control car ownership and road congestion. Government does not intend the introduction of the GST to result in cars paying higher total taxes.

Duties on tobacco, alcohol and gambling will, however, not be reduced when the GST is introduced.

The revenue loss from the changes in existing indirect taxes is estimated to be $162 million per annum.