Income Tax Payment Too Onerous For Some Migrant Workers

A version of this letter was published on 5 July 2012.

We refer to the letter 'About 10% of work permit holders paid income tax in 2011' and the recent discussions on the income tax of work permit holders. We would like to draw attention to the current inadequacies of our tax system with respect to low wage migrant workers in Singapore.

If a foreign employee works and is physically present in Singapore for 61 to 182 days in a calendar year, he will generally be taxed on his employment earnings as a Singapore non-resident at the rate of either 15%, or at resident rates of tax, whichever results in the higher tax amount. Given the relatively low progressive rates of tax available to residents, it is typically the case that the application of the flat 15% non-resident rate will result in a higher tax amount. 

Under resident rates of tax, the first $20,000 of annual income is taxed at a rate of 0%. However, this effective exemption from tax would not be available to a foreign employee, who is taxed as a non-resident in Singapore. The result of this is a much more onerous tax burden on non-resident foreign workers who earn low salaries.

Non-governmental organisations working on migrant labour issues have noticed that workers whose employment is terminated after working in Singapore for a period between 61 to 182 days have their meagre earnings further reduced because of their tax obligations. While we accept that every taxpayer in Singapore has an obligation to pay all taxes which are rightfully due, we would like to highlight that unlike local employees, migrant workers cannot seek a change of employer, nor do they have any avenues for redress when they are dismissed, to seek compensation for their losses. Those who have incurred huge recruitment debts and are unable to pay them back are the worst off. An onerous tax obligation on top of these difficulties further exacerbates the plight of the workers. 

Even though remissions and waivers of tax are available, these are granted purely at the discretion of the Minster for Finance or the Comptroller of income tax. Such applications also take a number of months to process, which severely disadvantages work permit holders who are unable to remain in Singapore for extended periods of time. We urge the Ministry of Finance and the Inland Revenue Authority of Singapore to review its policies and procedures so that our tax system is not unduly burdensome on low-income earning migrant workers.