THE International Monetary Fund (IMF) has suggested that Singapore could revisit the idea of taxing current year income – instead of the prior year’s – as a way of stabilising the economy in future.
This proposal was mooted five years ago, but the Government decided against any changes for the time being after two months of consultation.
The IMF recommendation comes as Singapore emerges gradually from its deepest recession on record.
‘Further along the recovery path, fiscal policy would need to play a part in fostering likely transformations in a post-crisis world,’ the IMF said in its annual country report, finished in July after consultations with Singapore economic officials.
PricewaterhouseCoopers tax partner David Sandison said such a change would be appropriate in this recessionary environment as it better matches tax paid with income earned.
In future, such a system would provide fiscal support to the economy in a downturn, while helping companies and individuals with their cash flow.
Under the current system, taxpayers hit by a pay cut or companies that earn less this year pay income tax based on income the year before – meaning a heavier tax burden. Continue reading
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