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