High taxes remain
Attempt to cut tax rate, one of Asia's highest, fizzles out, but Australia remains a magnet for settlers (inclusing 1,000 Singaporeans every year).
By Seah Chiang Nee
Aug 26, 2002

Some 17 years ago, when I went to Sydney for a heart transplant, I had the privilege of meeting a naturalised Australian, a medical doctor from Singapore.

Dr. Wong (who has since sadly passed away) had uprooted from Singapore with his wife and seven teenage and pre-teen children, who later made it to university.

As Australians, their education costs, from milk to textbooks, were free. It was a bomb of a saving.

It was, in fact, the strongest reason for his emigration, he told me. I had got to know the family well since the members had invited me several times to their home for meals when I was recuperating from my operation.

It was a case of strangers hitting it off. The Wongs were kind and generous to a fault. The wife operated a small travel agency.

Dr. Wong continued to run his medical clinic in Geylang for months at a time before returning to Sydney for a couple of weeks with his family. That was the pattern of his life.

Why not in Australia? "High tax," was his reply. He had no objection to paying it but he was against the large dole unemployed Australians were being paid.

"I'm not going to give my hard-earned dollars those lazy bones who refuse to work," he told me. He would rather work in Singapore and pay tax here. It was lower.

In those days Australia had high personal taxes, high-social welfare and high indebtedness. It is less so today - not by much though.

With its Asian neighbours reducing taxes all around it, expatriates and Australians bear a very heavy tax burden - 47 percent on earnings above S$60,000.

While Singapore was debating about "quitters or stayers" (Australia is top attraction) the International Herald Tribute reported on Saturday that the minority Conservative government had withdrawn its move to reduce personal taxation.

"Taxes for foreigners living in Australia are among the highest anywhere," it said. The government had wanted a cut to make the country competitive with its Pacific neighbours in attracting professionals and other skilled workers.

But the Tribune said just as legislation was coming up for a vote, the Labour Party said it would withhold its support, forcing the minority government to drop the measure.

That leaves workers, foreign and domestic, paying tax at a rate of 47 percent on earnings above 60,000 Australian dollars ($32,750).

What is worse, foreign residents in Australia for at least six months, unlike expatriates in almost any other country, must pay tax on worldwide investment income and gains at their top marginal rate.

"As things stand, we treat expatriates the same as everyone else - we tax them to the hilt," said John Fauvet, a tax partner in the Sydney office of PriceWaterhouseCoopers, the paper said.

The Ralph Report, a study commissioned by the government suggested in 1999 a friendlier tax regime for expatriates, lest they and their companies choose to move to low-tax cities like Hong Kong and Singapore.

"At the very last minute, the opposition cried foul and the legislation was withdrawn," Fauvet recalled.

"It's ironic that some of the individuals in the opposition who were going to vote against it were parties to the report that put forward the recommendations."

The Labour Party said there was no evidence that Australia was uncompetitive in attracting skilled foreigners.

Consultants say the tax burden is offset by lower social charges, compared with those in some European countries and that numerous bilateral treaties guarantee that the same income will not be taxed twice.

Despite the high tax, Australia remains attractive to Singaporeans who find it mitigated by cheaper costs of housing, cars and - as in Mr. Wong's case - subsidies in education and health services.

These items cost a lot higher in Singapore although direct taxation is lower.

Still, they say, the high tax rates and broad reach of the revenue authority make Australia a less appealing place than others in the region for high-earning foreigners to live, according to the Tribune

"There is an absolutely vicious system for making sure people who come here pay their fair share of taxes," said one tax specialist who insisted on anonymity.

"If we're ever going to become another Singapore or Hong Kong, then something needs to be done" it reported.

It is too early to tell whether the 11th-hour about-face is having an impact on the desire of foreigners to take up posts in Australia.

Expatriate taxes had been "a sticking point for a long time," the paper quoted a diplomat as saying.

"If you're a reasonably senior executive, chances are you have large investment income," he said. "All of that income is taxable at 47 percent.
Aug 26, 2002