The big read: As global clamor grows again to tax the rich more, Singapore weighs in on the pros and cons
A wealth report from real estate consultancy Knight Frank earlier this year found that the number of individuals in Singapore with at least $ 30 million in net assets rose 10 percent last year.
âIn this context, the subject of wealth tax was raised,â she said.
Giving an example, Mr. Vikna Rajah, who heads the tax, fiduciary and private client practices department of the Rajah & Tann law firm, highlighted the stock market rallies that have occurred over the past year.
“I think it’s probably likely that the rich were able to reap these benefits, and in this context of increasing the value of wealthy assets, how then do we make sure that we can close the wealth gap between the generations ? Mr. Rajah said.
Okay, Mr. Stephen Banfield, partner and head of family office and private client at KPMG in Singapore, said it’s no secret that there are parts of the company that have done well in the middle. pandemic, and that these are people with high assets.
âIf you look at the market share returns over the past year (and) house prices in various countries, everything is up,â he said.
âCombine that with governments looking for additional revenue and the man in the street who may have suffered the brunt of the lockdowns and business disruptions due to COVID-19, you can see why there has been more focus and more dialogue on things like wealth taxes.
The search for a new tax solution has led many tax jurisdictions to take an interest in the private wealth of the ultra rich, especially given their ability to avoid having to pay income taxes – usually the most important component. most important of the tax collection of a country with the corporation tax.
A ProPublica report earlier this year exposed how the 25 richest people in the United States have successfully used tax evasion methods to reduce their income taxes, in some cases to zero.
While their collective wealth grew by US $ 401 billion from 2014 to 2018, they paid only US $ 13.6 billion in federal income taxes during those years. This amount paid in taxes represents only 3.4 percent of the increase in their wealth during this period.
Among those named in the report were Amazon founder Jeff Bezos, Tesla founder Elon Musk, investor George Soros and businessman Michael Bloomberg.
Global progressive income tax systems have caused those who are generally rich, but not the richest, to pay more, since the amount of income taxes paid varies with the income of the taxpayer. But income taxes are unlikely to feature prominently among the ultra-rich.
Mr Saravan said: âIn reality, for most wealthy individuals and entrepreneurs, their wealth is locked in assets and they generally do not earn high salaries. However, their net worth can be astronomical because of the stakes in companies and the assets they own. From this point of view, the effectiveness of our current tax system has its limits.
The taxation of wealth, on the other hand, takes into account the wealth accumulated by the individual.
Associate professor of economics Walter Theseira at the University of Social Sciences of Singapore (SUSS) said that wealth taxes could be “less economically distorting than other taxes based on income or consumption.”
“Wealth taxes largely discourage concentration of resources, while income and consumption taxes discourage economic activities,” added Professor Assoc Theseira, a former MP designate.
When it comes to wealth tax, one way to see how this can work is to look at countries like Switzerland, which has varying degrees of taxation depending on the canton. Such a flat-rate wealth tax is arguably the purest form of wealth tax since it encompasses everything a person owns instead of individual items.
A Bloomberg report earlier this year looked at how the Swiss are doing with their levy system that applies to property, artwork, cryptocurrency, and even livestock. As the world debates why and how to implement such a tax, the report finds that “the Swiss don’t seem too bothered by all of this”.
Based on estimates, Prof Assoc Theseira said wealth taxes made up around 3.6% of total tax revenue for Switzerland, which, like Singapore, is also a wealthy country.
Although it depends a lot on the wealth tax rate and the size of the tax base, if the Swiss example of net wealth tax were to be used here, it could make a difference of “a few. percentage points “of government revenue for Singapore, although that would not be significant compared to taxes on personal income, corporate income and consumption, he said.
“But it is interesting to note that a wealth tax could result in an amount similar to that of an increase in the tax on goods and services by a few percentage points,” said Professor Assoc Theseira, with a bet caution that the potential wealth tax revenue for Singapore is all speculation at this point.