Support for tax on the rich gaining momentum . . .
In a recent interview with Bloomberg, Singapore Prime Minister Lee Hsien Loong discussed the possibility of a wealth tax. He stated that, ideally, wealth would be taxed in various forms but also noted that taxation of non-property wealth is “not so easy to implement.” Discussions concerning the tax have recently gained momentum, leading some to anticipate an announcement in the coming year’s budget. In the past two months, both Minister for Finance Lawrence Wong and Workers’ Party MP Jamus Lim – a potential future candidate for prime minister – have advocated for the expansion of Singapore’s system of wealth taxation. Although their ideas for the wealth tax diverge significantly, the topic is being actively debated in the upper echelons of Singapore’s political system.
The tension between minimal taxation and inequality . . .
Singapore has levied few taxes on its many wealthy citizens. Its low tax rates and tax incentives have attracted foreign investment and encouraged companies to base their research and business activities in Singapore. However, these tax practices have also contributed to the country’s poor ranking on the inequality spectrum. Oxfam’s 2020 report on inequality ranked Singapore #1 on its list of Top 10 Countries and Regions with Harmful Tax Practices, closely followed by Hong Kong. However, some members of Singapore’s government have argued that the quality of public services, which is high in Singapore, should matter more than the country’s taxation method for measuring inequality.
Competing with Hong Kong . . .
Singapore and Hong Kong have long competed to attract investment as two of the largest financial centres in Asia. If Singapore introduces a wealth tax, it could put it at a disadvantage with Hong Kong. So, why consider doing so now? First, Singapore is experiencing a rapid economic recovery from the pandemic. It has opened flights to major economies, property prices have increased, and the economy grew by 7.1 per cent year-on-year in the third quarter of 2021. Second, Hong Kong has become less attractive to foreign investors since the implementation of the National Security Law and Beijing’s crackdown on large businesses, leading to an 18-year low of U.S. companies with offices in Hong Kong. Third, it could be part of political manoeuvring between the ruling People’s Action Party (PAP) – which took a hit in the last elections in 2020 – and the official opposition Workers Party, as well as PAP’s rebranding of its next generation of its leadership.
- Channel News Asia: Singapore’s economy grows 7.1 per cent in Q3, full-year GDP growth narrowed to about 7 per cent: MTI
- South China Morning Post: Singapore needs to tackle widening wealth inequality, finance minister says
- The Washington Post: Will a wealth tax affect Singapore’s rivalry with Hong Kong?