Editor,

In your article -

Elected members upset that new tax rate hits MPs pockets

08 Sep 2008, 15:36

You wrote:

[quote] "The Prime Minister used the Cabinet Ministers' parliamentary salaries as an example. He said that a minister's Basic Salary was $32,000. The first $7,400 was tax-free, therefore the remaining $24,600 was taxed 10 per cent. He said that even if the allowances of $5,400 were added on it was only going to be the remaining figures above $30,000 that would be taxed 20 per cent." [end of quote]

Unfortunately this is not the correct explanation of the new taxation.

An income of $32,000 would be taxed as follows:

$7,400 are tax free

$22,600 are taxed at 10% - therefore the tax amounts to $2,260

and the $2,000 exceeding $30,000 are taxed at 20% = $400

The total tax on an income of $32,000 therefore would amount to $2,660 - at an effective tax rate of 8.31% - and that's one of the lowest income tax rates in the world.

Individual Tax rates



Chargeable Income Tax on this Income

$1 - $7,400 Nil

$7,401 - $30,000 10 seniti for each $1 over $7,400

$30,001 and over $2,260 plus 20 seniti for each $1 over $30,000

Assume this helps to clarify the situation.

Best regards,

Frank Schaper

CEO Homegas Ltd

homegas [at] kalianet [dot] to