Have you thought of how the increase in GST and reduction of income tax will affect you? Here are detailed examples of people in different income brackets, and we assumed that everyone spends 25% of their income on GST-related products.
The results are quite interesting...hmmm........
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Example 1- Lower Income Bracket
In 2006, if after rebates etc and your net taxable income is $25,000, the income tax you need to pay is $187.50 (3.75%). If you spend 25% of your income, which is $6,250, on needed goods and services, the GST paid for 5% will be $312.50.
In 2007, if after rebates etc and your net taxable income is $25,000, the income tax you need to pay is $175 (3.5%). If you spend 25% of your income, which is $6,250, on needed goods and services, the GST paid for 7% will be $437.50.
Effectively, your income tax is reduced by $12.50 but you pay $125 more in GST.
Result: Net Increase of $112.50 in overall tax payable!!!
Example 2 - Middle Income Bracket
In 2006, if after rebates etc and your net taxable income is $60,000, the income tax you need to pay is $2,700 (8.75%). If you spend 25% of your income, which is $15,000, on needed goods and services, the GST paid for 5% will be $750.
In 2007, if after rebates etc and your net taxable income is $60,000, the income tax you need to pay is $2,600 (8.50%). If you spend 25% of your income, which is $15,000, on needed goods and services, the GST paid for 7% will be $1050.
Effectively, your income tax is reduced by $100 but you pay $300 more in GST.
Result: Net Increase of $200 in overall tax payable!!!
Example 3 - Higher Income Bracket
In 2006, if after rebates etc and your net taxable income is $400,000, the income tax you need to pay is $61,650 (21%). If you spend 25% of your income, which is $100,000, on needed goods and services, the GST paid for 5% will be $5000.
In 2007, if after rebates etc and your net taxable income is $400,000, the income tax you need to pay is $58,700 (20%). If you spend 25% of your income, which is $100,000, on needed goods and services, the GST paid for 7% will be $7000.
Effectively, your income tax is reduced by $2950 but you pay $2000 more in GST.
Result: Net DECREASE of $950 in overall tax payable!!!!!
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Wah lau, still don't faster go out and earn more money?? The more you earn, the more you save in taxes!!!
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