S’pore is 11th priciest city after taxes for top earners: Sovereign
Sovereign adjusts rankings of expensive cities by Economist Intelligence Unit
Singapore may be ranked the most expensive city to live in by the Economist Intelligence Unit (EIU), but a different ranking shows that this is hardly the case after accounting for personal income tax rates.
Instead, Singapore comes in 11th in the latest tax-adjusted Worldwide Cost of Living Index for top earners, calculated by international trust and corporate services provider Sovereign Group.
Seoul is Asia's most expensive city, ranking sixth.
For average earners, Singapore ranks a more modest 13th, coming behind other Asian cities such as Tokyo (ninth), Osaka (10th) and Seoul (12th).
Topping both rankings globally is Denmark's capital Copenhagen, with Paris and Tel Aviv rounding out the top three for top earners, and Reykjavik and Geneva for average earners.
Singapore has topped the EIU's annual Worldwide Cost of Living Survey for five consecutive years.
The EIU survey is meant to help businesses calculate compensation packages for overseas staff postings.
Sovereign's index intends to do the same.
However, it takes into account not just the comparative prices of goods and services in cities but also "how much an individual living and earning in a city would need to earn to afford these goods and services after paying local taxes on their earned income".
In its report, Sovereign gave the following illustration: If a gin and tonic costs US$10 (S$13) in Los Angeles but the local tax rate is 50 per cent, a worker must earn US$20 to purchase it.
That same gin and tonic might cost US$15 in the Cayman Islands, where there is no personal income tax, so a worker in the capital George Town would need to earn only US$15 to buy it.
"By this measure, the gin and tonic is cheaper in the Cayman Islands than in Los Angeles," concluded the report.
Sovereign's adjusted rankings for top earners were calculated by taking a city's EIU score and multiplying it by the city's top rate of personal tax on earned income.
For average earners, the "all-in tax" rate was used instead.
This refers to income tax as well as social security contributions as a percentage of gross wage earnings.
- THE STRAITS TIMES