This is my comment to MOF based on their template for
feedback.
Questions for Individuals
I1: Would switching to a CY basis of assessment smooth out your
disposable income and expenditure patterns? In what way?
I believe that CY basis of assessment will have a great impact on
our disposable income and expenditure patterns if it gets
introduced. At the outset, the individual taxpayer will have to pay
both his/her previous¡¦ year tax liability as well as the current
year! Thus, in a sense being slapped for paying 2 years of taxes in
a single year.
On the effects of disposable income, an individual taxpayer will
naturally have less disposable income as he/she has to fork out
this year¡¦s taxes instead of paying for the previous year¡¦s
taxes. He/she will feel the pinch in his monthly income, as he/she
already is forced to give 20% of his/her pay to CPF(assuming the
taxpayer is 16 - 55) and now coupled with having to pay taxes on
that month¡¦s income (depending on his/her tax rate).
Let¡¦s form an equation:
With CY basis of assessment
DPI = NI (Net Income) - CPF Contribution (20%) - Income Tax (Taxes
for CY & PY)
I2: How would switching to a CY basis of assessment impact your
consumption? In what way?
Whereas a taxpayer with the old system gets taxed only on his/her
previous year¡¦s income, this new CY basis of assessment gets the
taxpayer to pay his/her taxes immediately. Thus, my consumption
would go down, as I would be receiving less income to spend.
Q1: Do you think Singapore should switch from preceding year to
current year basis of assessment? Why?
No. With the PY basis of assessment, we are able to project a more
accurate tax liability than with the CY basis of assessment as we
can base our taxes on our historical income and expenses. If you
were to project or I call it forecasting on future income, you will
bound to encounter some delayed expenses or accruals, which you
would have to file for a reassessment again. I notice that in the
tables for the companies and individual taxpayers showing the
various options and methods, I see a familiar row, ¡§Adjustments¡¨,
together words of forecasting methods such as ¡§estimate¡¨,
¡§changes¡¨ and ¡§circumstances¡¨. As a result, this will cause
more work for both IRAS and we the taxpayers.
With the PY basis of assessment, taxpayers do not really see the
amount of tax they are liable to pay for this year until next year
when the all familiar time to file taxes before the deadline in mid
April. Hence psychologically if/when taxpayers go through a
recessionary period they would have less expenses to worry about in
that current year.
The PY basis of assessment is kind to the taxpayers and allows them
to pay for only their previous year¡¦s tax liability through Giro
which acts like instalments for those taxpayers who cannot afford a
one huge deduction in one shot of their monthly income.
