How to (LEGALLY) pay less taxes

How to (LEGALLY) pay less taxes

A Legal Unexpected 'Loophole'?


In the latest IRAS Annual report, it was estimated that they brought in nearly $50B in tax revenue for FY2020. As seen in the chart below, showing the tax collection data for the last 5 years.

Of the $50B collected, a good $12.8B came from personal income tax, making it the second highest collection. With GST closing in at $10.3B, though we can expect that number to rise much more with the possibility of GST increasing to 9% as early as July 2022.


You, and I’m sure most people around you may not exactly be happy with paying tax, however, taxes are a fundamental source of revenue for the government. Here are 4 good reasons why:

  1. Taxes enable governments to provision themselves without the use of explicit force, not unlike a dictatorship per se. If there were no taxes it would be difficult for the government to have power over their citizens. If people didn’t need to earn dollars to pay taxes, it would be much harder for the government to find workers to carry out essential jobs.
  2. If there were no constraints on government spending there would eventually be a bad inflation problem. Take Zimbabwe’s average inflation of 86% per year. Taxes act as a restrictor of sorts in that they can help keep inflation under control.
  3. Taxes can be used to distribute wealth and income. Whilst this isn’t used very often, the COVID-19 support schemes implemented by the government were a good example of that. Being rather beneficial to the lower income population.
  4. Governments can also use taxes to encourage or discourage certain behaviours. Money incentives and disincentives can be extremely effective in encouraging and discouraging certain types of behaviours. For example, our COE and ARF impose a high cost on private transport ownership. There are also taxes on items that the government might deem as demerit like alcohol and cigarettes. A new tax that the government is slowly rolling out in an effort to save our planet and slow climate change are taxes on carbon emissions.


After understanding these reasons, you may or may not have a differing opinion on paying your taxes. But we are incredibly fortunate to be living in a country with one of the lowest tax jurisdictions in the world. While there are no ways for us to reduce our GST exposure, with the only way being to stop consuming goods and services altogether. But that’s not exactly possible, is it? There is however, a way for you to lessen your personal income tax if you are still in the workforce.

By contributing to SRS (Supplementary Retirement Scheme), you will be able to reduce your assessable income by the same amount as your SRS contribution. IRAS describes the SRS scheme as follows:

  • The Supplementary Retirement Scheme (SRS) is a voluntary scheme to encourage individuals to save for retirement, over and above their CPF savings. Contributions to SRS are eligible for tax relief. Investment returns are tax-free before withdrawal and only 50% of the withdrawals from SRS are taxable at retirement.


So, you can reduce the taxes you have to pay by simply contributing to your SRS account. After all, who doesn’t want to give less to the tax man? There is a maximum contribution of $15,300 for Singaporean Citizens and PRs, and $35,700 for foreigners. But, reducing your taxable income by such an amount could really help you drop to a lower price bracket, which could reduce your payable tax rather significantly too.

However, don’t just leave your money in the SRS account and forget about it, it could be sitting there making 0% interest for a very long time. If you wish to find out how you can make more out of your SRS money, e.g., Investing it or buying a retirement annuity, choosing from a range of strategies to suit your investment preference and risk profile. The goal is ultimately, to grow the amount over time.

Do speak to your adviser if you’d like to see/hear more details about the SRS, account and/or investments. You can also visit the IRAS website for more information.