Salary Tax

Lionel Leong changed the Complementary Tax (CT), doubling its exemption to MOP600,000. Until the date of the change, those who worked for others, receiving wages, had a more favourable tax regime regarding the Salary Tax (ST) than the one that focused on corporate profits (Complementary Tax). This scheme for workers was always more favourable for any kind of income level.
Everything has been reversed with the new Complementary Tax table, implemented by Lionel Leong!
Be aware that in ST we are talking about taxable income, which, with only a very few exceptions, is not subject to deductions of any kind of expenses; while in the case of Complementary Tax, the net income is taxed – that is: the income deducted of all the expenses!
That’s why ST was more favourable before the last changes.
Since the date of the change there has been a clear ‘tax injustice’. We can say that now those who have a taxable income below MOP769,000 a year, equivalent to 14 wages of MOP54,929 a month, pay more tax than an entrepreneur with equal profit in CT.
If the exemption of MOP600,000 for the CT was extended to the ST, whoever earned MOP42,857.14 per month, with 14 months of remuneration, was exempt from paying tax.
But it’s not like that.
The government, while not simultaneously changing the ST, created a serious imbalance in the taxation system.
Above all, the most affected are the most disadvantaged classes and the middle class. Whoever earns MOP600,000 a year in ST will pay MOP9,644 tax after all exemptions, deductions and returns. Today, in the ST, tax is payable from MOP13,715/month up, with 14 months remuneration per year.
Those who receive wages cannot escape paying taxes because the tax is immediately kept by the company, while in the CT – where more than 90 per cent of companies are in group B, and are not required to have organised accounting, tax evasion is widespread.
This more favourable treatment of CT is clearly an invitation to ‘financial engineering’!
It is time to deal more favourably with the ST and end this long and complicated process that does not solve the tax injustice.
My suggestion would be to go to a Salary Tax table with an exemption limit of MOP770,000 and defined levels of taxes that never allow anybody to pay more taxes in ST than in Complementary Tax.