Taxes are a fundamental component of every government’s operations. It is the way the government collects money from the nation’s residents, in order to fund the expenditures by the government.
Overview of taxes in Singapore
In Singapore, tax is levied on both individuals and corporations. There are different types of taxes, such as the well-known Goods and Services Tax (GST), Income Tax, and Property Tax. The Inland Revenue Authority of Singapore (IRAS) is the agent that allows the government to collect, reinforce, and assess taxes paid by individuals and corporations.
The revenue earned from taxes are distributed according to the needs of the government. In Singapore, taxes are primarily used for social development, such as the organisation of community-based programmes, the yearly baby bonus packages (where Singaporeans earn tax rebates for conceiving a child) and the continuous improvements to the education in public schools.
Another large portion of Singapore’s tax expenditures is the Security & External Relations sector, which includes spending on military training for National Servicemen, and Foreign Affairs.
For the financial year of 2015 to 2016, the Singapore government collected a total of 64.8 billion Singapore dollars in taxes.
Singapore’s fiscal policy
The Singapore government has three long-term goals in their use of the government budget.
First, to encourage sustained growth of the Singapore economy.
Second, to maintain a balanced budget in government spending.
And third, to allow the government to deliver the essential public goods and services, such as healthcare, education, housing, infrastructure and environment-protection programmes.
The policy is targeted at promoting long-term growth within the Singapore economy, rather than cyclical adjustment or distributing income.
Important taxes to note
The Personal Income Tax is applicable to all tax residents, which includes all citizens and permanent residents in Singapore and foreigners who have stayed 183 days in Singapore in the previous year. Tax residents will have to pay tax equal to a certain percentage of their income. This percentage will increase according to the income they earn.
The Goods & Services Tax is perhaps one of the most commonly known taxes in Singapore, as it is levied on goods and services which are consumed by everyday Singaporeans. Almost all goods and services are taxable, though some items, such as financial services, are exempt. The current rate for GST in Singapore is 7 per cent.
The Property Tax is levied on owners of property, regardless of whether the property is occupied or vacant. Property Tax is applicable to all types of housing, including Singapore’s HDB flats (public housing) and private estates. There are different rates for homes which are occupied by the owner, and homes which are not.
By understanding Singapore’s tax system, you will better understand the need for accounting services for businesses in Singapore. Filing for tax with IRAS can be a complicated process, and professional accounting services will surely aid you in ensuring no essential steps are missed.