Tax system change from PY to CY basis of assessment
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"Preceding Year [PY] Basis of Assessment
3. Our current income tax system has the following characteristics:
„h Basis Period of Assessment: The incomes derived by individuals and companies are assessed for tax on a preceding year basis. In other words, income tax payable this year is based on income earned in the previous year.
„h Method of Assessment: Singapore currently operates an Official Assessment System (OAS). This means that the legal onus is on IRAS to assess the tax liability based on the taxpayer¡¦s declaration of income. IRAS will then issue a Notice of Assessment on the amount of tax payable.
4. In addition, companies are required to file an Estimated Chargeable Income (ECI) within 3 months from the end of the accounting year. Hence, a company whose accounting year ends on 31 Dec is required to file an ECI by 31 Mar of the following year. The tax computed based on the ECI can be paid in installments.
5. Companies need only submit their final income tax return (Form C) together with their accounts and tax computation by 31 Jul of each year. The final tax liability will be determined based on the return filed.
6. Individuals are required to report their incomes earned in the previous year by filing the income tax return (Form B or Form B1) by 15 Apr of the following year. IRAS then assesses the tax payable and issues a Notice of Assessment to taxpayers. Tax is payable within 1 month from the date of the Notice of Assessment.
7. Taxpayers who are paying income tax via GIRO start paying their income tax based on estimated taxes before their actual tax liability is assessed by IRAS. However, upon the filing of income tax returns and after IRAS has assessed the actual tax payable and issued the Notice of Assessment, the outstanding installments will be adjusted to reflect the actual tax payable.
Current Year [CY] Basis of Assessment
8. Under the CY basis of assessment, the income earned by individuals and companies is assessed to tax on a current year basis i.e. tax is paid based on the income for that year, rather than income of the preceding year. For salaried individuals, the tax amount may be withheld by the employers on a monthly basis from their salaries and then paid to the tax authority. For companies, tax may be paid in installments."
http://www.mof.gov.sg/quick_guide/attachments/CY_basis%20_Con_paper.doc
Okay, I will summarize for you. Our current tax system, is based on Previous Year basis of assessment ie. For this current year, we pay last years' taxes. With the new system, they are considering having a Current Year basis of assessment ie What you earn is taxed immediately.
Which do you prefer? -
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. -
Still can't think of one good reason for the change from PY to CY. What's the benefit of doing so?
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wow gd leh sg collect current money more valuable..
bt anyay income tax will return u back if there's access -
Haha... the benefit is to collect taxes faster, however its at the expense of us, we the taxpayers, as it will be us who will have to fork out taxes for PY & CY.Originally posted by Qitai:Still can't think of one good reason for the change from PY to CY. What's the benefit of doing so? -
Do you pay taxes?Originally posted by Ah Ma:wow gd leh sg collect current money more valuable..
bt anyay income tax will return u back if there's access
That means you pay more faster and now! -
With the current economic environment, the fact that IRAS wants us to pay for income that's not even earn by the commoners really says how 'moneyface' the govt is.
They have been letting out news of better economic growth, etc to placate people but in reality, joblessness is still pretty stable. Although they claim that they will refund the excess, can you imagine the hassle of it all? What we need is liquid money and not some money to tie down somewhere.
May be they are intending to use taxpayer's money to invest in some stupid projects again, that's why the suggestion of paying CY taxes. Honestly, I don't think there is any added advantage to this new system.
Anyway, I have a feeling that this will be implemented regardless of protests. -
Its being practiced in the UK currently... however there will be an initial rouse... if its put into effect. Just imagine, having to pay 2 years of taxes in 1 year!!!Originally posted by VS40:With the current economic environment, the fact that IRAS wants us to pay for income that's not even earn by the commoners really says how 'moneyface' the govt is.
They have been letting out news of better economic growth, etc to placate people but in reality, joblessness is still pretty stable. Although they claim that they will refund the excess, can you imagine the hassle of it all? What we need is liquid money and not some money to tie down somewhere.
May be they are intending to use taxpayer's money to invest in some stupid projects again, that's why the suggestion of paying CY taxes. Honestly, I don't think there is any added advantage to this new system.
Anyway, I have a feeling that this will be implemented regardless of protests.
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this actually has the effect of "reducing" your disposable income. you think you are actually earning less (although if extrapolated into a yearly basis is not really the case) cos each month after the tax is deducted immediately,you will get a smaller amount back from what u usually experienced and making you feel that you actually have less to spend when infact you don't. Will this result in people being more prudent in their spending and affect the economy thru less demand for goods and services and thus slower economic growth?
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But now also sama sama, they deduct tax from my bank account every month without me approving it. The different is just, (1) boss pay me after deducting projected tax; (2) Boss pay me, government force deduct tax from my bank account for last's year's tax. Got difference meh?Originally posted by GenX:this actually has the effect of "reducing" your disposable income. you think you are actually earning less (although if extrapolated into a yearly basis is not really the case) cos each month after the tax is deducted immediately,you will get a smaller amount back from what u usually experienced and making you feel that you actually have less to spend when infact you don't. Will this result in people being more prudent in their spending and affect the economy thru less demand for goods and services and thus slower economic growth? -
But you are earning less GenX... under CY we're going to pay current year's taxes now but under PY we get to accrue it and in a sense delay the TVM, time value of money, you are able to pay something at a later period, hence the value is worth less in the future which is next year.Originally posted by GenX:this actually has the effect of "reducing" your disposable income. you think you are actually earning less (although if extrapolated into a yearly basis is not really the case) cos each month after the tax is deducted immediately,you will get a smaller amount back from what u usually experienced and making you feel that you actually have less to spend when infact you don't. Will this result in people being more prudent in their spending and affect the economy thru less demand for goods and services and thus slower economic growth?
And generally speaking, most taxpayers usually pay higher taxes year on year, assuming steady increase of salary + bonus and a steady tax rate. Hence, you will be paying much more...
Of course this system doesn't affect to working individuals who earn less than $25k a year (taking in most of the reliefs) which works out to be $2,083 a month excluding 13th aws or any bonus etc.
And it doesn't quite affect those whose salary are roughly around $250k pa. as they have sufficient tax adv and breaks and with proper tax advice be able to do some tricks
But those poor souls who earn from $30k - 120k feel the pinch.... to climb that ladder yet get eaten by worms... ah...
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Very simply put...Originally posted by Qitai:But now also sama sama, they deduct tax from my bank account every month without me approving it. The different is just, (1) boss pay me after deducting projected tax; (2) Boss pay me, government force deduct tax from my bank account for last's year's tax. Got difference meh?
PY, you pay last year's taxes this year. You only pay taxes incurred this year, next year only.
CY, you pay both last year's and this year's taxes now. You have less money now unlike before you were taxed on a later date.
Compren de? -
Faham.Originally posted by :Very simply put...
PY, you pay last year's taxes this year. You only pay taxes incurred this year, next year only.
CY, you pay both last year's and this year's taxes now. You have less money now unlike before you were taxed on a later date.
Compren de?
I refering to after first year lah! First year sure big big problem one. Still, why change it? Got benefit meh? -
the only difference is it will benefit the govt cos they collect taxes faster and thus have the potential to put it into useful purpose (whatever it maybe) faster, the govt never say it will benefit youOriginally posted by Qitai:But now also sama sama, they deduct tax from my bank account every month without me approving it. The different is just, (1) boss pay me after deducting projected tax; (2) Boss pay me, government force deduct tax from my bank account for last's year's tax. Got difference meh?
Maybe it will only indirect benefit you if that faster taxed amount is put into good use immediately (non guaranteed)for the better of the country,but i m sure most people will not feel much on this indirect "benefit" one cos it is quite taken for granted sadly if i have to say. -
The benefits I have stated before, for the govt, they get to collect taxes faster and instead of being paid in arrears for last year's taxes, they get paid for taxes today and are guaranted payment as its deducted from the salary pay check.Originally posted by Qitai:Faham.
I refering to after first year lah! First year sure big big problem one. Still, why change it? Got benefit meh? -
they tout they save paper work bt lidat more paperwork every mth tax officers have to do more work...& tis yr ppl gt to pay for both last yr n this yr?wow lidat sure broke....... lidat sg got more money to invest mah.....bt everytime they say employment stable i dn tink so leh..most jobs around are contract based...nt much full time jobs around....i tink if they going to have tis system sure confirm implement 1 no matter hw ppl argued.....nothings gona stop them nw.....like tat time GST increase to 5 % aso lidat mah.....they held talks , QnA on tv , asking experts to ans public Q, wats the use..in the end waste time...aso implemented mah