Singapore’s dilemma: taxing the super-rich while keeping wealth within shores
The island-nation has increased the income-tax for the top layer in its Budget; now it’s eyeing a ‘net wealth tax’
Singapore, which last week announced plans to increase the income tax rate for high earners, is also looking to introduce net wealth taxes. What is proving a challenge is the concern that such a move may cause money to be parked outside the island nation, in more tax-friendly shores.
As part of its Budget 2022, themed ‘Charting our new way forward together’, Singapore on Friday, February 18, increased taxes for higher earners. From the assessment year 2024, the portion of income from S$500,000 to S$1 million will be taxed at 23 per cent, and that in excess of S$1 million will be taxed at 24%. Currently, both the slabs are taxed at 22 per cent.
The increased taxes are estimated to apply to the top 1.2 per cent of taxpayers, and earn the exchequer S$170 million more.
Challenges of finance hub
According to Finance Minister Lawrence Wong, as quoted by CNBC, the nation wants to tax the wealthy further, but this would “inevitably cause money to flow away from Singapore”.
The island nation, which is a finance hub not only for Asia but also globally, is considering a range of new ‘wealth taxes’, Wong was quoted as saying. Such increased taxes may be levied on capital gains and dividends, for example. Also, there might be a ‘net wealth tax’ on individuals.
A key challenge could be estimating the wealth of individuals, said Wong, apart from retaining the wealth within Singapore. The global examples is not very encouraging. In 1990, around 12 OECD (Organisation for Economic Cooperation and Development) nations were levying additional taxes on the wealthy; now, that number has come down to three. Among those who stopped the practice are Germany, France and Denmark.
Sharing wealth
For now, Singapore is increasing select taxes. Property taxes are going up from 10-20 per cent for non-owner-occupied properties, to 11-27 per cent in 2023. In 2024, they will climb to 12-36 per cent. The country is also increasing the taxes on luxury cars.
The idea, said Wong, is to make sure the taxation is fairer and more progressive. While the government is all for people earning more wealth, it is also focussed on strengthening the social fabric, with the rich contributing more to build the nation, he added.