Will Singapore levy a property-related 'wealth tax' at Budget 2022?

Feb 08, 2022

SOME form of wealth tax looks to be on the cards at Singapore's upcoming Budget 2022, and watchers believe it is likely to be related to property.

"An expansion of the existing scope of stamp duty and property tax may also be a feasible option given that a large proportion of wealth is in the form of real estate," said See Wei Hwa, tax partner at KPMG Singapore.

With property ownership seen as a "driver of wealth" in Singapore, such taxes could also rein in property prices and prevent the younger generation from being priced out of the property market, See said.

"Singapore will also gain from an additional source of tax revenue. Unlike other forms of wealth prone to capital flight, immovable properties cannot be relocated out of the country or planned away for tax," he added.

Shantini Ramachandra, private tax leader for South-east Asia at Deloitte, also believes the wealth tax could take the form of a recalibration of the property tax rates or buyer's stamp duty rates for higher-value residential properties, or even a new capital gains tax on the sale of luxury residential properties.

"Such taxes should be fairly easy to administer and should not result in excessive compliance costs for taxpayers such as valuation costs," she said.

Adrian Sham, private clients and employer solutions partner at Grant Thornton, also considers investment properties the ideal target for levying a wealth tax in his firm's Budget wish list. Since properties can be perpetually left empty, they provide a "safe-haven parking lot for foreign wealth" and do not contribute to the economy per se, unless they are being used productively for industry, he said.

But a wealth tax can take also take various other forms, See said, "from pure wealth tax applied at a percentage tax on total net worth to estate duty, as well as inheritance tax, capital gains taxes and property taxes".

He noted that the government has always offered attractive tax regimes and incentives to boost Singapore's business-friendly environment and to preserve Singapore's wealth hub status.

"Hence, imposing wealth tax could have a significant impact on Singapore's reputation as a wealth management hub. Any shift away from the existing policies and efforts to promote building and retention of wealth in Singapore, will have to be carefully deliberated and managed," See said.

He added that policymakers will have to consider several factors, including the effectiveness of the new tax in fulfilling its stated objectives and the impact of the tax on the behaviour of the people and businesses as well as any impact to the reputation of Singapore as a country.

Ramachandra said a new wealth tax that is solely targeted at the private assets of the wealthy or the introduction of inheritance or gift taxes would be "counter-intuitive" to the efforts that the government has put in to develop Singapore into a premier hub for wealth management and to attract foreign investors to invest work and live in Singapore.

Sham said based on the experience of other countries, pure wealth taxes based on an individual's net assets have been a driver for ultra-high-net-worth individuals to leave the country.

The idea of a wealth tax has been gaining momentum in recent years amid concern about a widening income gap in Singapore.

But the Republic's political leaders have so far approached the topic with caution, as such a tax could potentially drive investors and wealthy foreigners away.

Last November, Prime Minister Lee Hsien Loong said during the Bloomberg New Economy Forum that a wealth tax is "not so easy to implement" and that Singapore needs to "find a system of taxation which is progressive and which people will accept as fair".

Calling the wealth tax an "element in a comprehensive revenue system", Lee had said: "You tax consumption, you tax income, you tax savings. And you should tax wealth, whether wealth in the form of property, ideally wealth in other forms."

And just a day earlier, Finance Minister Lawrence Wong said the government will not focus on taxing individuals based on their net wealth but will instead look at the entire system of taxes and identify ways to strengthen it.

https://www.businesstimes.com.sg/gov...at-budget-2022