Monday, April 05, 2010

High rate of tax

America is discussing how to curb the high salaries of top CEOs.

In my view, the best way is to impose tax of 90% on salaries above 50 times of the average national wage. The current average net compensation in America is $40,000. This will mean that the special tax will apply to salary above $2 million. The salary of the President of America is only $400,000.

There is an argument that high tax will drive away the top CEOs. I disagree. The top CEOs have to work in a company that is likely to use the human resources or market of the domicile country. It is not easy for the top CEOs to relocate to another country. For example, the health care companies in America make their profit in that country and cannot be relocated overseas. This also applies to the profits from the other big professions, such as law and accountancy.

The financial services industry may be one that can be relocated overseas. However, the top bankers and financial traders make their profits from excessive speculation and leverage, which is likely to be curbed and is not sustainable anyway.

The wonderful outcomes of a high tax on excessive earnings are:
- prevent the rampant profiteering at the expense of consumers
- can abolish the wasteful  and unfair Goods and Services Tax.

There should also be an international agreement among the countries to prevent the use of a tax haven strategy to attract the high income earners to move their profits or earnings into that country. It is almost like cheating other countries of their tax revenue.

Tan Kin Lian

7 comments:

Anonymous said...

Tax on income can be useful, but the reality is that some other country will lower their taxes and attract the CEOs.

Perhaps a "buy-in" from the CEO or high salary earners.. like off set to donate to a charitable cause or a fund that helps people in a downturn caused by the greed of large companies.

It is sickening to learn that some people can actually command a 50 million dollar salary. How in the world can that be done? Must be someone with capabilities thats very close to supernatural!

And what in the world will they do with it? keep it under the mattress? buy virgin forests in Peru and become a recluse?

The greatest gift is sharing and I thank you, Mr Tan, for your willingness to share your knowledge .. I believe you are much happier in knowing that you are sharing and very likely sleep better too!
Thanks!

jamesneo said...

Unfortunately singapore will never agree to an international agreement among the countries to prevent the use of a tax haven strategy as they have been using it for years to boost our GDP.(This will not change unless the PAP falls)

Tan Kin Lian said...

Reply to jamesneo

I hope that Singapore will forget about the strategy of attracting high income earners through a low rate of tax. We should raise our income tax and remove GST.

I know that my wish is impossible for the leaders to agree. But, I still want to state what I think is the right course of action.

Anonymous said...

Financial hub... for the sake of it Sg will sacrifice the interest of its people. Look at how MAS deals with the investor issues. It is dilly dallying hope that everyone forgets and MAS can 'siam'.

jamesneo said...

Mr Tan, in this regards i support your endeavor totally and hope that more mainstream readers can also be exposed to some of your good ideas.

It would be good if you can also communicate your ideas on video that people can upload to youtube. This will enable exposure to more people.

Anonymous said...

Good idea!!!!!

wjsim said...

"There should also be an international agreement among the countries to prevent the use of a tax haven strategy to attract the high income earners to move their profits or earnings into that country. It is almost like cheating other countries of their tax revenue."

I read that as "Price-fixing is allowed for governments to tax on greedy private citizens/businesses/entrepreneurs. Governments should conspire to tax all high-earners so as to be fair for everyone."

I totally agree. Price-fixing is something only monopolies such as governments can carry out.

However, I think a better solution to curb high salaries of CEOs is to let the company go bankrupt. Tax-payers dollars are used in America to prop up failing companies and then complain that their salaries are too high. This is something uniquely American.

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