SINGAPORE (BLOOMBERG) – Singapore’s government has been soliciting feedback on its tax regime, including having conversations around wealth taxes, as discourse grows around this potentially sensitive topic.
While the government regularly consults various industry groups on fiscal policies, the talks around such taxes appear to have picked up pace following comments by Monetary Authority of Singapore (MAS) chief Ravi Menon in July that expanding levies on the rich may be needed to address wealth disparity.
Officials from the administration have met with members of Singapore’s business elite and advisers to the rich to gauge their reactions and understand concerns, according to people familiar with the discussions, who asked not to be identified because of the delicate nature of the topic. The discussions took place through official feedback sessions as well as unofficial meetings over meals, they said.
Singapore’s low taxes and stability have long attracted the world’s wealthiest, from Facebook co-founder Eduardo Saverin to James Dyson, the billionaire founder of the eponymous vacuum cleaning giant, making the city-state a hub for private banking, family offices and asset management. While more of the region’s ultra-rich have made Singapore their home during the pandemic, turbo-charging its property market, many of its local tycoons have grown their fortunes alongside the country’s development.
The government is treading carefully as the issue has the potential to roil the city’s wealthiest families and spook foreign ultra-rich investors. While any new form of taxes would generate some revenue, a bigger objective is addressing a wealth gap that could breed public resentment, the people said. There were no concrete plans for how any levy might be structured or when it would be unveiled, if at all, they said.
The Ministry of Finance said in response to Bloomberg News queries that it regularly consults with academics, industry professionals and analysts on different aspects of fiscal policy. Such consultations take various forms and occur throughout the year, not just in the months leading to every Budget, a spokesperson said in an email.
She added that wealth taxes are not new in Singapore, and the government has in fact been raising such taxes, for example on properties and cars, over the years. “As with other countries, the challenge is to ensure the wealth taxes are effective, progressive and competitive,” according to the spokesperson. “The government will continue to study wealth tax options.”
Singapore ranks among the world’s wealthiest nations, boasting many home-grown tycoons along with foreigners drawn by low tax rates, stable politics and a robust legal system. Its relative success in containing the pandemic earlier this year precipitated the relocation of more wealthy families seeking shelter in the only developed Southeast Asian nation, which has one of the world’s highest vaccination rates.
Still, the government is cognizant that the influx of the well-heeled has the potential to stir resentment among the public and exacerbate equality concerns. Prime Minister Lee Hsien Loong recently announced that firms hiring foreigners must pay all citizen employees a qualifying salary of at least $1,400 a month. There have been calls to do more.
In July, as part of a series of lectures for a local think-tank, MAS managing director Ravi Menon – who was speaking in his capacity as a visiting scholar there – raised eyebrows when he suggested that the city state may need to combat inequality through a levy on property gains or inheritances. That speech generated further conversations on the topic, with multiple commentaries in local media discussing the need and impact of wealth taxes.
Deputy Prime Minister Heng Swee Keat said in February that there’s scope to review Singapore’s wealth-related taxes, though the country has already been raising these over the years. Responding in parliament to suggestions from lawmakers for a wealth tax and higher levies for more expensive real estate, Heng highlighted the need to stay competitive while making sure wealth tax systems are effective.
Finance Minister Lawrence Wong was similarly quizzed in parliament this month about the possibility of wealth taxes as a way to alleviate inequality. In an interview with Bloomberg News last month, Mr Wong said the government considers all options as part of its budgets every year, though any details of its deliberations are premature.
“The finance minister never rules out any revenue options,” Mr Wong said. The overall tax system should be “fair and progressive, that those with the means are able to pay more. And I think in that context, any form of wealth tax will fit into that broader system.”
Governments around the world are grappling with how to combat inequality that’s being deepened by the pandemic. China, for instance, is pursuing a “common prosperity” agenda, which is widely seen as the driver behind a broad crackdown this year on sectors ranging from big tech, property to private tutoring.
In their feedback to officials, some of the people canvassed raised the possibility of a luxury home tax that’s similar to the mansion tax proposed in the UK according to the people familiar with the discussions. For Singapore, this might apply to high-end homes such as good class bungalows – the local equivalent of mansions – as well as luxury apartments such as penthouses and super penthouses, the people said. Singapore currently already taxes property transactions through stamp duties, though it doesn’t have capital gains or inheritance taxes.
There were also views that a wealth tax should not be one-size-fits-all, the people said. It would be unfair, for instance, to lump Singapore’s rich together with the foreigners, according to the feedback conveyed. The local wealthy families have contributed for decades to Singapore’s economy while staying rooted in the country, whereas some wealthy foreigners may have only been residents for a few years and lack long-term ties to the city state, they said.