Question is not whether to tax wealth, but how to do so 'such that it cannot be avoided easily': Indranee

Nov 01, 2021

FOR Singapore, the question is not one of whether to tax wealth, but "a practical one of how to do so effectively such that it cannot be avoided easily", said Second Minister for Finance Indranee Rajah in Parliament on Monday night.

The government will continue to review the issue of wealth tax, she said in response an adjournment motion on taxation, filed by Workers' Party Member of Parliament Jamus Lim.

Prof Lim had proposed a wealth tax starting at 0.5 per cent on net wealth in excess of S$10 million, then rising to 1 per cent for wealth above S$50 million and 2 per cent for wealth above S$1 billion.

On the issue of wealth taxes, Indranee said: "Broadly, we are not in disagreement, in the sense that we are constantly looking for ways to be able to supplement our revenue, but to do that in a way that strikes the right balance."

"So on wealth taxes, it is not about having more types of wealth taxes per se. Rather, what matters is having wealth tax policies that work in the context of each jurisdiction."

Noting that Switzerland has a net wealth tax, estate duty and property-related tax, making for wealth revenue of about 1.9 per cent of gross domestic product (GDP), she said this was comparable to Singapore's wealth tax revenue of about 1.8 per cent of GDP.

"At the end of the day, we do not have any issue with wealth taxes per se. We want to make sure that whatever we put in place actually works."

Though Prof Lim suggested that companies may no longer look at tax rates in making business decisions, "it is not something that can be discounted completely", said Indranee.

Businesses and individuals still consider tax rates, and wealth, talent, and companies "can move", she added. Singapore must thus "tax in a way that is competitive and allows people and companies to generate revenue in order to encourage them to stay here and that revenue can be used and allocated and redistributed".

In her speech, Indranee said the government is continuously reviewing the tax system "not only to meet the needs of today, but the challenges of tomorrow".

She named three structural challenges: a rapidly ageing population that means rising healthcare spending; climate change, which requires investments to mitigate its impact; and "renewing our social compact" through more investments to reduce inequality and promote social mobility, such as in education.

These structural demands come even as revenue streams are uncertain, she added. Investment returns from the Net Investment Returns Contribution "will face significant headwinds in a more challenging global investment environment", while global tax developments under the Base Erosion and Profit Shifting initiative will have an uncertain impact on revenue.

Singapore cannot maintain the status quo, but whatever is does "must strike the right balance among raising sufficient revenue, maintaining competitiveness and progressivity, and being sustainable", she said.