Your paycheck might seem bigger in a foreign country, but country income taxes could negate your hard-earned pay increment. By Lisa Cheong

For expatriates, any decision to move to another country means having to deal with a whole new set of tax laws and regulations. According to Ooi Boon Jin, head of international executive services at KPMG Tax Services in Singapore, tax rates will have an impact on employee mobility – especially when employees are posted to high tax countries without any defrayment from employers.

On the flip side, a country with lower tax rates and a higher net disposable income can also attract more individuals to their shores. Hence, Ooi says a company that has a tax equalization policy will help take the issue of personal taxes out from decision to embark on an international assignment.

Furthermore, a recent report by KPMG found that top personal income taxes are falling across the world by an average of 2.3% over the last seven years. Top rate personal income tax rates around the world have fallen by 0.3% from an average of 29.2% in 2008 to 28.9% in 2009. One reason for this is the competition for talent, as certain countries attempt to attract talent with lower direct taxes or zero taxes.

Singapore is one of these countries trying to lure talent with lower personal income taxes, says Ooi. For instance, the Not Ordinarily Resident (NOR) taxpayer scheme announced in the Singapore Budget 2002 Statement encouarges the relocation of foreign talent to Singapore by targeting individuals who are not ordinarily residents in Singapore. “The scheme gives special benefits which effectively reduces their tax liability,” Ooi adds.

However, the report titled Individual Income Tax and Social Security Rate Survey 2009 predicts that the era of lowered taxes may not last for long, as governments are looking for ways to increase revenue to cope with their stimulus packages that were doled out to cope with the recession.

And across Asia Pacific, Japan has the highest personal tax of 50%, while average rates in this region have declined from an average of 36.1% in 2003 to 33.9% in 2009.The lowest rate in the Asia-Pacific region is in Hong Kong, with 15%, followed by Singapore and Parkistan at 20%.

Source: Individual Income Tax and Social Security Rate Survey 2009