Singapore's wealth taxes have further scope for review, but imposing such levies will not replace the need to increase the goods and services tax (GST), said Deputy Prime Minister Heng Swee Keat yesterday, addressing what he called the elephant in the room as he tackled questions from MPs about raising contributions from those who can afford it.
Mr Heng said that wealth-related taxes are not new in Singapore, and the country has enhanced their progressivity over the years.
During the debate on the Budget statement on Wednesday, Ms Foo Mee Har (West Coast GRC) highlighted the traction that wealth taxes have gained globally, citing Argentina's one-time levy on millionaires last December. Several other countries, including Britain, have also brought wealth taxes into the spotlight, she said.
In response, Mr Heng noted that Argentina's one-off tax was imposed to fund higher spending for Covid-19 measures. But Singapore entered the pandemic in a strong fiscal position, and is fortunate to be able to draw on its past reserves, he said.
Adding that he believes Ms Foo's intention 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 they remain progressive.
He also noted that the ABSD is a property market measure, calibrated to keep the market stable and sustainable, rather than a revenue-raising one.
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 duty through tax planning.
Mr Heng reiterated that the country taxes wealth and has been raising wealth taxes over the years. But the question is 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 being progressive and staying competitive, and adds to the country's revenue resilience and adequacy, he said.
Addressing the suggestion by Workers' Party MP Louis Chua (Sengkang GRC) to include 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 said.
He added that relying on land sales for fiscal revenue comes with risks, given the volatility of land prices, and could lead to the Government having a vested interest in keeping land prices high if it comes to rely on land sales to fund spending.
In places where local governments rely on land sales for revenues, the distortionary effects on the welfare of the people 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."