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Thread: Singapore Budget 2018: Stamp duty hike unlikely to put off property upgraders, say ex

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    Default Singapore Budget 2018: Stamp duty hike unlikely to put off property upgraders, say ex

    Singapore Budget 2018: Stamp duty hike unlikely to put off property upgraders, say experts

    With effect from yesterday, the stamp duty on the value or price of a home above $1 million was raised from 3 per cent to 4 per cent.

    Feb 21, 2018

    Rachel Au-Yong
    Housing Correspondent


    The higher Buyer's Stamp Duty introduced in this year's Budget is unlikely to put a dent in any aspiring upgrader's dreams, observers said, but it will mean more for the government coffers to pay for rising expenditure in such areas as healthcare and infrastructure.

    Finance Minister Heng Swee Keat said on Monday that the stamp duty on the value or price of a home above $1 million would be raised from 3 per cent to 4 per cent. The hike took effect yesterday.

    JLL national research director Ong Teck Hui said that based on last year's transactions, the extra duties collected would have been around $200 million.

    But going forward, Cushman & Wakefield research head Christine Li estimates that with higher expected transaction values and land acquisitions, an extra $411 million could be raised.

    She said the higher stamp duty would not derail the recovering private property market, which rebounded in the second half of last year after three years of decline.

    While two-thirds of properties transacted last year were above $1 million, observers said most of the extra revenues will come from the sale of "ultra-luxurious" properties above $5 million, whose buyers have the ability to meet "marginal" increases of $40,000 and upwards in stamp duty, observers said.

    A spokesman for developer CDL said: "We believe discerning buyers will see the strong potential of property investment in Singapore compared with other global cities like Hong Kong, where prices have increased significantly."

    Colliers International research head Tricia Song noted that the median transaction value of non-landed private homes was around $1.2 million last year, which would mean about $2,000 extra in taxes - not significant enough to put buyers off a purchase.

    Ms Li said the cut-off at $1 million strikes a balance, noting: "If the cut-off is too high or too low, you might not generate the right amount of tax revenue, or you may affect most of the population.

    "And if you increase the margin to 5 per cent, it may destabilise a residential market that has only just embarked on its recovery."

    Political scientist Derek da Cunha said the new rates help to address the issue of income and wealth inequality.

    "Those with the means pay more in taxes, which are then eventually redistributed through subsidised programmes to those lower in the pyramid," he said, noting that the top 10 per cent includes Singaporeans and foreigners.

    Property agents said home buyers caught by surprise when the announcement was made have asked whether they can avoid paying the higher stamp duty by changing the date on legal documents.

    They were told it is an offence that carries a fine of up to $10,000, a maximum jail term of three years, or both.

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    Singapore Budget 2018: Buyer's stamp duty hike better than wealth taxes

    Consultants say it won't hurt Singapore's wealth management hub; it also sends message on en bloc fever

    Wed, Feb 21, 2018

    Janice Heng


    WHILE some sort of tax on the wealthy had been expected in Monday's Budget, few thought it would take the form of a hike in buyer's stamp duty (BSD).

    The move however, has received praise from tax consultants and other experts. They say it's less disruptive and easier to implement than alternatives such as capital gains tax or estate duty, which could hurt Singapore's reputation for wealth management and its competitiveness as a financial hub.

    "The introduction of any wealth tax - gift tax, inheritance tax - would run contrary to the initiatives that Singapore has rolled out over the years in successfully developing the wealth management industry," said Goh Siow Hui, tax services partner at Ernst & Young Solutions.

    Effective Feb 20, the top marginal BSD rate was raised from 3 per cent to 4 per cent, applying to the portion of residential property value in excess of S$1 million.

    In the Budget speech, Finance Minister Heng Swee Keat framed the move as one aimed at making Singapore's tax system more progressive.

    He added: "We will continue to study options to ensure that our tax system remains progressive."

    While there may be other measures that also fall under a progressive tax system, experts say these are less appealing for various reasons.

    A rise in personal income tax would have a larger political cost and be especially hard to digest alongside the future increase in goods and services tax, said Maybank Kim Eng economist Chua Hak Bin.

    It could also affect Singapore's ability to attract top talent, said Shantini Ramachandra, tax partner and Deloitte private (tax) leader at Deloitte Singapore and Southeast Asia.

    Wealth taxes such as estate duty or capital gains tax, too, would likely hurt Singapore's ambition to be one of the world's leading private wealth centres, she added.

    KPMG Singapore principal tax consultant Leung Yew Kwong noted that the government's reasons for abolishing estate duty in 2008 remain valid today: encouraging wealthy individuals to bring their assets here; letting ordinary Singaporeans pass their income and assets to their family without being taxed again; and making Singapore an attractive place where wealth is invested and built up, by foreigners and Singaporeans alike.

    As for capital gains tax, EY's Ms Goh said its absence keeps Singapore's tax system simple and is arguably a main factor that attracts foreign investors.

    She noted that out of the S$2.7 trillion of assets under management (AUM) here, more than three-quarters of the funds were sourced outside Singapore, according to a 2016 Monetary Authority of Singapore survey.

    "The risk is that such AUM may as easily leave Singapore if the country is no longer the straightforward and efficient jurisdiction it is currently known to be," she said.

    In contrast, the BSD hike signals a commitment to progressivity "without introducing any new taxes that could be viewed as a direct wealth tax", as Baker McKenzie Wong & Leow head of tax Allen Tan put it.

    Such perceptions matter. In the longer term, investors may be discouraged from accumulating wealth here if they fear some future measure may hit their savings, said Dr Chua.

    "The government will have to manage the external perception (so it is seen) as pursuing 'socially inclusive' and not 'anti-wealth' policies."

    Demerits of other taxes aside, the BSD hike has its own advantages.

    It is easier to implement than the introduction of a new tax, as the mechanism for collecting BSD is already in place.

    Unlike taxes on the holding or appreciation of wealth, BSD is tied to property transactions and is relatively easy to monitor, noted Ms Goh.

    In addition, the BSD hike is also seen as a response to the current en bloc fever, said DBS economist Irvin Seah: "It's a gentle reminder to property market players." The message was not lost on investors, with several property blue chips taking a beating on Tuesday.

    "This is almost like killing two birds with one stone," he said. "You achieve two outcomes with one policy measure."

    KPMG's Mr Leung notes, though, that the hike is not meant as a property cooling measure, as the higher burden is "not so heavy to deter purchases", whether by individuals or by developers.

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