Reducing Personal Income Tax

1.40 It is equally important for us to lower personal income taxes. The purpose is to reward effort and achievement, promote entrepreneurship, and attract and retain talent.

1.41 Lower personal income taxes allow Singaporeans to keep more of their hard-earned income, and strengthen the incentive for people to strive, create wealth and improve their lives.

1.42 Lower personal income taxes also encourage entrepreneurship. If people are to risk their personal savings on some business venture, then they must be allowed to keep more of the rewards of success. In business, the risk of failure is always there. What drives entrepreneurs to run the risk of losing their last dollar by launching new ventures? The creative urge and the personal drive to achieve something are certainly important. Beyond that, it is the prospect of large personal rewards if a venture succeeds. One important reason, though not the only reason, why the US has more entrepreneurs than Europe is that US personal income taxes are much lower.

1.43 Finally, reducing the personal income tax rate will help Singapore attract and retain talent. In knowledge-intensive industries, such as financial services, the business is really the people in it. Where a business is located depends on where its key people want to live and work. If the people refuse to move to Singapore, then the company cannot come here. And when such people consider where to live, they calculate and compare how much tax they personally have to pay in each place. A low personal income tax rate is therefore crucial for us to stand a chance of attracting such people and businesses.

1.44 Personal income taxes affect our home-grown talent too. In the globalised economy, talent is highly mobile, and doors everywhere are open to talent. If Singaporeans find their taxes too onerous, some of them will move elsewhere. Without talent, whether home-grown or imported, our economy will not hum, new businesses will not start, and the prospects for all Singaporeans will be bleak.