Progressive Taxation in ASEAN: A Review on Personal Income Tax Rates

The wisdom of progressive taxation is to ensure equity and fairness among tax-payers by increasing tax rates as income increases. Despite its criticism for tax evasion, the progressive tax system has been widely used in several nations including countries in ASEAN. However, the marginal tax rate between different income groups from lower band to upper band grossly varies from one country to another. Similarly, classification of the income groups such as Below 40 (B40), Middle 40 (M40), and Top 20 (T20) depends on average median income of the respective countries. The tax rates within and between groups are based on several factors including the policy of the government. Firstly, this article will shed light on the status of progressivity in the personal tax rates among the countries in ASEAN. Secondly, the paper highlights on the higher marginal tax rates for middle-income group in Malaysia. Thirdly, it will compare the top tax rates of countries in ASEAN. Finally, it will conclude by underlining the necessity of tax cuts for the middle-income group in Malaysia in order for them to sustain their life style after retirement.

Keywords: progressive tax, middle-income, M40, top tax rate, T20, tax structure, Tax rates in ASEAN