SINGAPORE - There is scope to further review Singapore's wealth taxes, but imposing such levies will not replace the need to increase the goods and services tax (GST), said Deputy Prime Minister Heng Swee Keat on Friday (Feb 26).
Responding to questions from MPs about stepping up wealth taxes, Mr Heng said that such taxes are not new in Singapore, and the country has enhanced the progressivity of wealth-related taxes over the years.
During the debate on the Budget statement on Wednesday, Ms Foo Mee Har (West Coast GRC) highlighted how the trend of wealth taxes is gaining traction globally, and cited Argentina's one-time levy on millionaires in December 2020.
Several other countries, including Britain, have also brought wealth tax into the spotlight, she said.
In response, Mr Heng noted that Argentina's one-off tax was done to fund higher spending for Covid-19 measures.
But Singapore entered the pandemic on a strong fiscal position, and is fortunate to be able to tap its past reserves, he said.
Adding that he believes Ms Foo's intent to be for those who came out on top of the crisis to do more for the community, Mr Heng said that Singapore will continue to review its wealth taxes.
Replying to the suggestion by Workers' Party MP Leon Perera (Aljunied GRC) of raising buyer's stamp duty and additional buyer's stamp duty (ABSD) for more expensive properties, Mr Heng agreed that there is a role for property-related taxes and that the Government will continue to review this to ensure that it remains progressive.
He highlighted that the ABSD is a property market measure, rather than a revenue-raising one, and is calibrated to maintain a stable and sustainable property market.
Noting that property tax and stamp duty was made more progressive in the Budgets in 2010, 2013 and 2018, Mr Heng added: "I trust that Mr Perera will give his strong support if and when we make such new moves."
Other options have also been considered as alternatives to GST, including estate duty, he said. But this was abolished in 2008, because the middle- and upper-middle income groups were affected disproportionately compared with the wealthy, who were able to avoid the estate duty through tax planning.
Mr Heng reiterated that the country does tax wealth and has been raising wealth taxes over the years. But the question is not about taxing wealth, but how to design wealth tax moves to ensure that they are effective.
Singapore must ensure that the wealth tax cannot be easily avoided, achieves a balance between progressivity and staying competitive, and adds to the country's revenue resilience and adequacy, he said.
Addressing WP MP Louis Chua's (Sengkang GRC) suggestions on spending land sales proceeds in the Budget, Mr Heng said that selling Singapore's land does not make the Government wealthier and should not directly support its expenditure. Investing the proceeds instead generates a sustainable stream of income over the long term, and has served the country well, he added.
He also added that relying on land sales for fiscal revenue comes with its risks, given the volatility of land prices and because relying on land sales to fund spending could lead to the Government having a vested interest to keep land prices high.
In places where local governments rely on land sales for revenues, distortionary effects on the welfare of people in countries can be seen, Mr Heng pointed out.
"The current approach of spending the land sales proceeds through the NIRC (Net Investment Returns Contribution) avoids these pitfalls, and allows the Government to make land sale decisions based on what is best for the country's development, and not because it needs to balance the budget."