SINGAPORE – Singapore wants to introduce a property tax and is studying the possibility of making those with higher finances pay more, Finance Minister Lawrence Wong told CNBC on Monday.
However, the Minister pointed out the challenges of such a wealth tax, which will inevitably cause money to flow out of Singapore.
As part of its 2022 budget, Singapore on Friday raised taxes on higher earners, including taxes on property and motor vehicles, to ensure that those earning the most more will have to pay more.
Singapore, a wealth management hub, is looking at a range of property taxes “very closely”, Wong said. These include capital gains taxes, dividends, and net wealth taxes levied on individuals.
“But the challenge with these wealth taxes is that wealth and financial flows are highly mobile. And if we move but other jurisdictions don’t have similar taxes, it’s very easy to do. assets move out of Singapore to another location,” Wong told CNBC’s Martin Soong.
Tax the highest earners
Among the changes announced Friday is an increase in the tax rate for the top earners that will affect the top 1.2% of taxpayers. It is expected to generate S$170 million in additional tax revenue each year, according to Singapore’s Ministry of Finance.
Beyond those considerations, it can be a “very complex exercise” to estimate individuals’ wealth, Wong added.
He said in his budget speech on Friday that “ideally we would like to tax the net worth of individuals. But such taxation is not easy to do effectively.” He pointed out that other countries also face challenges in doing so.
Germany, France and Denmark have stopped taxing the net worth of individuals, with the number of OECD countries doing so falling from 12 in 1990 to just three in 2020, Wong said on Friday.
“So we continue to study these options. We’re not ruling out anything in that sense,” he told CNBC. “But I think we also have to be realistic and that’s why in the budget we decided to impose… a property tax through… existing vehicles, which means property and cars. luxurious.”
We are determined to ensure that Singapore remains one of the best places in the world to do business.
Lawrence Wong
Singapore Finance Minister
Property taxes will be increased from 10% to 20% for unclaimed property, to 11% to 27% by 2023. In 2024, these taxes will continue to be increased to 12%. up to 36%. Higher taxes will also be levied on luxury cars.
Currently, the wealth tax is “the primary means of taxing wealth,” Wong said in his budget speech.
Doubling tax-free competitiveness
The Finance Minister also addressed the impact of a global minimum corporate tax rate of 15% on Singapore, known as one of the most tax-friendly countries in the world.
The countries of the Organization for Economic Cooperation and Development have agreed to work towards a minimum corporate tax rate 15% in October last year. According to the OECD, the agreement, which comes into effect in 2023, will “re-allocate” $125 billion in profits from the world’s 100 largest companies to countries around the world.
“But we have never relied on taxes alone to compete for investment,” Wong told CNBC. “What does it mean for [Singapore] is that we must redouble our efforts to strengthen non-tax competitive factors. “That would include the city-state’s infrastructure, the capacity of its workforce and enhancing its overall business environment to make it more attractive, he said.
“We are determined to ensure that Singapore remains one of the best places in the world to do business,” said Wong.
Higher taxes as part of ‘reinforced social organization’
A fairer and more progressive way of tax contributions will help unite Singaporean society as it enters a new post-pandemic future, which will be more volatile, Wong said.
“We’re not against people who do better, learn more and accumulate wealth. That doesn’t mean these are good things,” he told CNBC.
“But as part of a renewed and enhanced social organization, we want everyone to pay … their share of taxes – and those with better means should contribute a larger share,” said Wong. added.
