Property tax hike not meant as cooling measure: Economist

The newly announced increase in property tax based on the annual value of the property should be taken in the spirit of a wealth tax and not as a cooling measure for the market, UOB economist Barnabas Gan said on Monday.

At a roundtable discussion on the Budget organised by The Straits Times and UOB, moderator and ST associate editor Vikram Khanna said there had been earlier speculation about a tax on the profits made from selling properties.

Mr Gan said: "We must understand the spirit of the term 'wealth tax'. If we are going to talk about property gains tax, that would mean that it would include properties that are being sold on the open market, regardless of the annual value of the properties."

In comparison, the newly announced property tax rate increase will not affect the majority of Singaporeans - more than 80 per cent - who live in Housing Board flats.

Finance Minister Lawrence Wong had announced in his Budget speech last Friday that property tax rates for both owner-occupied and non-owner-occupied residential properties would be raised in two steps - in 2023 and 2024 - with properties at the higher end seeing steeper hikes.

Owner-occupied homes with an annual value of $30,000 or less, such as HDB flats, condominiums and landed property in suburban areas, would not be affected by the tax change.

It is meant to be a wealth tax, and although in an ideal situation, Singapore would want to tax the net wealth of individuals, such a tax is not easy to implement effectively, Mr Wong had said.

Mr Richard Mackender, Deloitte indirect tax and corporate secretarial services lead, said that as the property tax now is based on annual value, it is predictable and stable.

He added: "There is a challenge written in how you effectively administer a tax in that way and how you can police it... One of the things from a tax administration perspective is: You want maximum revenue for minimum enforcement, minimum policing."

On the topic of future wealth taxes, Singapore Business Federation chief executive Lam Yi Young said that nothing can be ruled out, but a lot depends on the kind of social compact the people wish to see in Singapore.

He said: "What is the role the more wealthy think they ought to play in society, and how much tax burden are they prepared to take up?

"And, of course, vis-a-vis, what the less well-off would expect wealthy people to contribute to society."

Mr Gan said that in the long run, it would depend on how strong Singapore's growth is, as 2020 showed that when the Covid-19 pandemic hit, tax generation was affected as there was poor growth.

Agreeing, Mr Mackender said: "Too much tax stymies growth, and Singapore from the start has been very careful to make sure that it encourages an environment for investment, an environment for business, and it encourages people like me to come here, and live here and spend money."