Wednesday, July 16, 2008

56% Income Tax and 25% GST! Really?

I am always tickled when the Singapore media mentions that tax rate of other countries (in this case Sweden) "justifies" why some things can or can not be done in Singapore.
Here is the excrept:
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She also pointed to the tax burden in Sweden — tax levied on goods and services is 25 per cent, while income tax is 56 per cent at the higher end of the scale. “We’re quite different in terms of our tax structure, so the Government will have to balance all this.”
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Of course there's no mention that most Swede (just like most Singaporeans) would not be exposed to the higher end tax rate of 56%.

A simple dig would have unearthed this:
The Swedish Tax System
Swedish Tax Guide for Expatriates
And of course, some wikipedia data.

Now, while I am not an expert at tax matters, just skimming these documents have shown me that the maximum tax rate only affects people who earn at least the equivalent of $65,000. This amount and the tax exempt amount (which, at approx $3500, is less than Singapore's) is adjusted upwards yearly to accomodate inflation.

I also found out that the GST is a tiered one, with 0% levied on basic items such as medicine and public education. Foodstuff in general is taxed at 12% (except restaurant dine-in) and transportation is at 6%. As it is, Singapore has this annoying 10% service charge for restaurants. I did not have to pay any service charge/tips in Japan and I had way better service.

So I have come out with the other end:
The lower end tax a resident has to pay in Sweden is 0%, while it is 7% in Singapore.

(Another oversimplification, if you don't get it)

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