As was commented in various news reports: 'Tax rich more to fund social spending, says Denise Phua' [ST,29Feb2012], 'New ways to raise revenue needed, says DPM Tharman': "Beyond 2016, the Government will have to find new sources of revenues, including tax revenues." [TDY, 02Mer2012][pict], could it not be suggested that one glaring loophole in the taxation system of Singapore is that of interest income?
Isn't interest earned on income akin to rent earned for the loan of a property, immovable or otherwise- thus shouldn't interest on bonds be a taxable source of income too?
In the case of Genting SG: 'Genting Singapore eyes investments after bond pricing' [Reuters 01Mar2012] issuing $1.8b of bonds with a 5.125% coupon, the annual interest payout by Genting would be $92.25M and considering the highest bracket tax rate for individuals to be 20%, could it be said that by not taxing interest income in this case, the Singapore government could be losing up to $18M plus in income taxation? As I understand, the price per lot of these Genting bonds was $250K (only big investors can afford): could it also be said that the waiver of interest from income taxation is favorable to the rich as those subsisting on such 'rental' incomes enjoy tax free incomes in excess of what is waved in general from taxation in the incomes of all Singaporeans?
It would thus be a torment to the poor and disabled if the government were to further increase GST whilst continuing to favor rich interest earners on the rental income they earn from their money loaned out at rates in excess of what might be reasonably attributed to the annual inflation rate.
Whilst interest might not be income coming from employment, it is certainly income from the practice of a trade/ 'business', in this case, the renting out of one's property (money) to others: it thus should be taxable.
PS: interest income fr local banks, earning minute interest may continue to be tax free but perhaps NOT bond dividends which pay high interest rates!
- IRAS> Home > Individuals (For locals) > Filing tax: Know what is taxable, what is not > Interest [link]
- IRAS circular: TAX EXEMPTION OF INTEREST INCOME DERIVED BY INDIVIDUALS FROM STANDARD SAVINGS, CURRENT AND FIXED DEPOSIT ACCOUNTS IN SINGAPORE (Revised Edition): [link]