When Deputy Prime Minister Heng Swee Keat said during the recent Budget debate that there is scope to further review Singapore's wealth taxes, there was a flurry of speculation about what this could mean.
With the Government imposing a petrol duty hike and set to raise the GST soon, what other tax increases could be on the cards?
Deloitte Private South-east Asia tax leader Shantini Ramachandra thinks any new tax or tax rise in the short term is unlikely, given the uncertain economic outlook.
In the medium term, she said, there is a case for fiscal moves such as a sugar tax to tackle diabetes since the prevalence of the ailment here is among the highest in the developed world. "Voluntary measures and public education may not be enough," she noted.
During the debate, Workers' Party MP Leon Perera suggested raising the additional buyer's stamp duty (ABSD) instead of broad-based taxes such as petrol duty or the GST.
In response, Mr Heng said the ABSD is a property market measure rather than a revenue-raising one.
Agreeing with Mr Heng, National University of Singapore associate law professor Stephen Phua said that ABSD, together with the total debt servicing ratio and seller's stamp duty, is very effective in enforcing price stability.
"For citizens, the current structure strikes a good balance between the first home and investment properties," he added.
NUS Business School associate professor Simon Poh said there is room for property taxes and stamp duties to be tweaked to become more progressive so that any hikes will not impact the lower and middle-income groups.
This is especially so, he added, as the housing market has been very resilient despite the recession caused by the pandemic.
Ms Ramachandra said one can possibly expect "calibrated upwards adjustments" to the property tax for residential properties, and buyer's stamp duty for higher-value residential properties.
She added that the timing of such moves would depend on the trajectory of the property market, including the public housing one, and whether further price growth is supported by economic fundamentals.
Maybank Kim Eng senior economist Chua Hak Bin suggested applying a higher annual property tax specifically to good class bungalows, as they are limited in number and a more direct way to tax the wealth of the top 0.001 per cent.
PERSONAL INCOME TAX
The annual collection of personal income tax has remained steady at around $12 billion to $13 billion for the last few years.
Some analysts have said there may be scope for the structure to be more progressive, by introducing a tax rate of more than the current 22 per cent for the top tier of income earners.
But KPMG Singapore partner and head of tax Ajay Kumar Sanganeria cautions that the highest income tax bracket is already five percentage points above the corporate rate of 17 per cent.
Human capital is Singapore's main resource, he said.
"The highest tax rate should not create a disparity that could penalise efforts of personal exertion such as employment, professional services and proprietorships versus corporate entrepreneurship."
TAX ON STOCK TRADES
Hong Kong will increase its transaction tax levied on stock trades from Aug 1.
Investors face no such tax in Singapore, and other major stock-trading nations such as the United States and Japan.
Mr Chua explained that Hong Kong has more limited fiscal options than Singapore, as it does not impose any GST and relies heavily on cyclical land sales.
Unlike Hong Kong - which has seen a surge in stock exchange trading volumes with Chinese firms fleeing US political pressure - the volume of stock transactions effected through the Singapore Exchange (SGX) remains comparatively low.
"From a revenue-generating standpoint, such a tax should be considered only if SGX has higher trading volume, and a substantial number of listed companies which attract the interest of global and local investors," said Mr Sanganeria.
Ms Ramachandra said a key consideration is for Singapore to stay competitive with global financial markets.
"Although a transaction tax would be an important source of government revenue with rising trading volumes, it would be far more critical to drive continued vibrancy and attractiveness of Singapore's capital markets."
Before it was abolished here in 2008, collections from estate duty were a modest $70 million to $75 million each year - a fraction of the billions in revenue collected from other avenues such as property tax.
Prof Phua agrees that estate duty can be a "good leveller" in redistributing wealth, but only if certain adjustments are made.
In the past, revenue yield was low because the exemption threshold was set too high, and estate duty on the rest of the assets could be avoided by the use of trusts, he said.
For example, the exemption threshold was set at $9 million for homes used wholly for residential purposes.
Moveable assets of foreigners were also exempted.
Prof Poh, however, sees little value in reintroducing estate duty.
"The low exemption limits of $600,000 for non-residential assets compared to the higher limit of $9 million for residential properties, means that the middle and upper-middle income groups will be affected disproportionately compared to the wealthier ones," he said.
He added that its removal helps Singapore to retain its attractiveness as a wealth management hub, where both Singaporeans and foreigners are encouraged to keep their assets and wealth here.
BALANCING EQUITY WITH HUB ASPIRATIONS
So what will be the next move, should the Government further review taxes?
Increasing the progressivity of property taxes is the most likely, said Mr Sanganeria.
"This is also in line with the Government's promise to maintain a stable and sustainable property market for each generation of Singaporeans."
He stressed that wealth taxes must be deliberated cautiously, given efforts to strengthen Singapore as a financial and wealth management hub.
"Any imposition of wealth tax or capital gains tax may deter ultra-high-net-worth individuals and family offices from setting up a base in Singapore, and at the same time result in capital outflows, adversely impacting our economy."