SINGAPORE: Singapore is among the lowest-taxed economies in South-east Asia and among economically advanced nations as a whole, according to a report issued on Tuesday by the Organisation for Economic Co-operation and Development (OECD).
Only Indonesia ranks lower than Singapore in terms of the ratio of taxes to gross domestic product (GDP) in six Asian nations surveyed by the OECD – Japan, South Korea, the Philippines, Malaysia, Singapore and Indonesia.
The report, which includes Singapore for the first time, shows that tax-to-GDP ratios in all six countries are lower than the OECD average of 34.2 per cent.
“Levels of tax revenues among the six Asian countries ranged from 12.2 per cent of GDP in Indonesia to 32 per cent in Japan in 2014.”
The taxes involved include income taxes, profit and capital gains taxes, payroll taxes, property taxes, as well as goods and services and other taxes. Compulsory social security contributions to central governments are classified as taxes by the OECD.
The report showed that in the case of Singapore, the ratio of total tax revenue to GDP was just 13.9 per cent as at 2014, while the ratio of taxes on incomes and profits to GDP was 6.2 per cent and taxes on goods and services to GDP 4.4 per cent.
For Indonesia, the total tax burden was 12.2 per cent of GDP while the other two figures were 5.2 per cent and 5.4 per cent respectively. The comparable ratios in Malaysia were 15.9 per cent, 10.9 per cent and 3.6 per cent respectively, and in the Philippines, 16.7 per cent, 6.6 per cent and 6.7 per cent. Taxes in Japan were much higher with the total tax burden equal to 32 per cent of GDP while income and profits taxes represented 10.2 per cent of GDP and goods and services taxes 6.3 per cent. For South Korea, the respective burdens were 24.6 per cent, 7.2 per cent and 7.4 per cent.
“Apart from Singapore, the tax-to-GDP ratios for the remaining five Asian countries in 2014 were higher than in 2000 – in part due to tax reforms and the modernisation of tax systems and administrations,” the report noted.
“The share of corporate income taxes as a percentage of total tax revenues in all six countries was higher than the OECD average of 8.8 per cent.” This share ranged from 12.8 per cent in South Korea to 52.6 per cent in Malaysia in 2014, although in each country the share was lower than in 2013.
“In contrast, the share of value added tax (VAT) to total tax revenues in 2014 remains lower than the OECD average of 20 per cent in all countries – due to generally lower VAT rates, except for Indonesia where the share was 32 per cent.”
Singapore experienced a decrease in its tax-to-GDP ratio by 1.6 percentage points over the period from 2000 to 2014, mainly due to several decreases in corporate income tax rates, the OECD said.
“The four South-east Asian countries (Indonesia, Malaysia, the Philippines and Singapore) rely principally on taxes on goods and services and taxes on incomes and profits, which together make up more than 75 per cent of their total tax revenues.
“In contrast, the tax structures of Japan and South Korea are more evenly split between the main categories of tax revenues in 2014, similar to the OECD average.”
