Singapore needs to impose wealth taxes, but it surely’s ‘very simple’ for cash to maneuver away, says its finance minister

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SINGAPORE — Singapore needs to introduce wealth taxes and is finding out the opportunity of making these with better means pay extra, Finance Minister Lawrence Wong informed CNBC on Monday.

Nevertheless, the minister pointed to the challenges of such wealth taxes, which might inevitably trigger cash to circulation away from Singapore.

As a part of its 2022 finances, Singapore on Friday elevated taxes for larger earners, together with duties on actual property and motor autos, to make sure that those that make more cash pay extra.

Singapore, a wealth administration hub, is a broad vary of wealth taxes “very carefully,” Wong stated. They embody taxes on capital features, dividends and a internet wealth tax on people.

“However the problem with these kinds of wealth taxes is that wealth and monetary flows are extremely cell. And if we have been to maneuver however different jurisdictions shouldn’t have comparable taxes, it is extremely simple for wealth to maneuver away from Singapore to a different location,” Wong informed CNBC’s Martin Soong.

Taxing high earners

He said during Friday’s budget speech that “ideally, we’d wish to tax the web wealth of people. However such a tax just isn’t simple to implement successfully.” He identified that different international locations additionally face challenges doing so.

Germany, France and Denmark have stopped levying taxes on people’ internet wealth, with the variety of OECD international locations that accomplish that dropping from 12 in 1990 to solely 3 in 2020, Wong stated Friday.

“So we proceed to review these choices. We do not rule something out in that sense,” he informed CNBC. “However I feel we additionally need to be sensible and that is why within the finances, we determined to impose … wealth taxes via … the prevailing means, which implies property and luxurious vehicles.”

We’re decided to ensure that Singapore stays among the best locations on this planet for enterprise.

Lawrence Wong

Singapore’s finance minister

Property taxes will probably be raised from between 10% to twenty% for non-owner-occupied properties, to 11% to 27% in 2023. In 2024, these will probably be additional elevated to 12% to 36%. Increased taxes may also be levied on luxurious vehicles.

At present, property taxes are Singapore’s “principal technique of taxing wealth,” Wong stated in his finances speech.

Doubling down on non-tax competitiveness

“However now we have by no means relied solely on taxes to compete for investments,” Wong informed CNBC. “What it means for [Singapore] is that now we have to redouble our efforts to strengthen our non-tax aggressive elements.” That can embody the city-state’s infrastructure, the capabilities of its workforce and total strengthening its enterprise atmosphere to be extra enticing, he stated.

“We’re decided to ensure that Singapore stays among the best locations on this planet for enterprise,” Wong stated.

Increased taxes as a part of a ‘strengthened social compact’

A fairer and extra progressive method of tax contributions will assist to carry Singapore’s society collectively because it enters a brand new post-pandemic future that is set to be extra risky, stated Wong.

“We aren’t in opposition to folks doing higher, studying extra and accumulating wealth. Certainly not these are good issues,” he informed CNBC.

“However as a part of our renewed and strengthened social compact, we do need everybody to pay … contribute their share of taxes — and people with better means ought to contribute a bigger share,” Wong added.

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