http://www.businesstimes.com.sg/sub/...83140,00.html?
Published April 3, 2012
LETTER TO THE EDITOR
Time to introduce capital gains tax on property
ALTHOUGH the government has introduced an array of property cooling measures, it should consider a capital gains tax and complement the stamp duty to
rein in the property market fever while
providing a good source of government revenue.
Stamp duty on property transactions or inheritance tax can be avoided or minimised through setting up a corporate vehicle to buy and hold the property.
Creative tax arbitrage opportunities may exist for individuals to buy and hold properties through special-purpose vehicles (SPVs) to avoid or minimise stamp duties, if the stamp duty rate on residential property transactions is higher than on share transfer transaction of the company holding the properties.
In addition, the SPVs can be set up in an offshore tax haven to further exploit tax advantage between Singapore and these jurisdictions.
Further, tax loopholes can be potentially exploited through avoidance of inheritance tax or estate duty when the property is passed on.
The government should consider implementing a capital gains tax on all property transactions unless they are held for, say, more than 10 years.
It should also impose such a tax on, say, second non-owner-occupied homes, regardless of the holding period.
This would protect genuine long-term investors seeking wealth protection instead of pursuing short-term trading profits at the expense of a healthy property development industry in Singapore, foreigners and locals included.
In addition, the current additional buyer's stamp duty should be revised upwards for high-end property transactions worth more than, say, $5 million.
The UK government recently introduced a slew of changes, including hiking stamp duty on residential property transactions worth more than £pounds;2 million (S$4 million) and imposing a 15 per cent stamp duty on purchases made through companies in its 2012 Budget.
This has been done amid rising property prices driven by foreign purchases, and
acts as a stabiliser against declining corporate income tax revenue after legislated reductions in income tax rates.
We can take a leaf out of the UK government's book to simultaneously rein in the property bubble and add to the state's coffers. Hopefully,
this would provide sustainable fiscal support to enable the government to hold back GST increases beyond the five years promised.
Ee Teck Siew