Every employee, especially bankers, looks forward to one event in the year – bonus payouts. Not anymore. Definitely not in UK and US at least. The British government recently announced that it will impose a 50% tax on bonuses in excess of £25,000 on employees of financial institutions. Furthermore, there has been an increase in the top personal income tax rate from 40% to 50%. Following UK’s lead is US, which also plans to introduce similar punitive tax measures in a bid to curb bank bonuses.

Needless to say the new found tax measures are a perfect recipe for driving the economy backwards. The bonus tax will not only have serious implications on the financial sector in London but will also on a macro level affect UK’s economy that is heavily dependent on its banking and financial services industry. According to a news report, some of the top industry players such as Goldman Sachs, JP Morgan, Barclays, Royal Bank of Scotland and Nomura are considering relocating their operations to other tax friendly jurisdictions. It’s only a matter of time before other banking giants follow suit. According to The Guardian

“the mayor estimates that up to 9,000 staff, many highly skilled, could leave the UK, potentially costing the exchequer over £1.2bn in lost tax and national insurance contributions annually.”

In an era that rides on the principle of “maximizing profits while minimizing costs” institutions, individuals are constantly relocating to business and tax friendly countries. Clearly the West scores low on these criteria bringing the spotlight on the Asian financial centers of Singapore, Shanghai and Hong Kong. In recent times, Singapore has emerged as the region’s top player owing to its financial stability, low tax regime, stable political climate, cost-friendliness and pro-business environment. The country is renowned for its progressive tax measures that help in attracting and retaining global investments. Singapore’s personal income tax rates start at 0% and end at 20%, while its corporate income tax rate is 17%. This is in stark contrast to UK’s corporate tax rate of 21%-28% and personal tax rates that range from 20%-50%.  GuideMeSingapore.com has recently released a “first of its kind” online tax calculator that allows entrepreneurs to easily compare the estimated taxes they would pay in Singapore with those in another country such as UK.

While UK’s tax regime threatens London’s position as the world’s top financial center, Singapore’s tax regime serves to enhance its competitiveness as a banking and financial hub.

Interested in doing business in Singapore? Find out how to  incorporate a Singapore company.