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The Big Read in short: Taxing the rich less straightforward than it seems

Each week, TODAY’s long-running Big Read series delves into the trends and issues that matter. This week, we look at the global debate over taxing the wealth of individuals amid the pandemic. This is a shortened version of the full feature.

In Singapore, discourse on wealth taxes has gathered steam over the course of the pandemic, especially after an unprecedented 2020 when the Government had to dip into the country’s reserves numerous times.

In Singapore, discourse on wealth taxes has gathered steam over the course of the pandemic, especially after an unprecedented 2020 when the Government had to dip into the country’s reserves numerous times.

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Each week, TODAY’s long-running Big Read series delves into the trends and issues that matter. This week, we look at the global debate over taxing the wealth of individuals amid the pandemic. This is a shortened version of the full feature,​ which can be found here.

  • Discussions over whether Singapore needs to introduce a new form of wealth tax has picked up pace recently
  • There are echoes to the 2007 to 2008 global financial crisis, when people sought solutions to address the widening wealth inequality worldwide
  • The coronavirus pandemic has somehow allowed some people to gain wealth, even as economies were hit badly
  • The idea of wealth taxes to tackle inequality has merits, said experts
  • But there are complex issues to navigate when trying to impose levies on net wealth and assets


SINGAPORE — A little more than a decade ago, the leaderless Occupy Wall Street movement burst into the scene from the shadows of the global financial crisis, but quickly faded away in less than a year, leaving many to wonder what it actually achieved.

The protest was a response to the growing disparity in wealth, and the result of pent-up anger over the avarice of wealthy bankers in the United States, who many had thought were responsible for the crisis in the late 2000s, but were not held accountable for their actions.

Today, a different crisis — the Covid-19 pandemic — is driving a renewed debate on taxing wealth.

In the United States, policymakers are proposing a law so that the capital gains of the top 700 billionaires in the US can be taxed to fund government spending.

The International Monetary Fund earlier this year called for a wealth tax to compel the rich to pony up for Covid-19 costs. Argentina carried out such a one-off levy last December, raising US$2.4 billion to fund coronavirus-related measures amid controversy over the tax.

In China, there is also much chatter over an upcoming property tax to address social inequality — one that would exclude rural, poorer households  — as part of President Xi Jinping’s common prosperity drive.

And in Singapore, discourse on wealth taxes has gathered steam over the course of the pandemic, especially after an unprecedented 2020 when the Government had to dip into the country’s reserves numerous times.

At the same time, the wealth gap in Singapore is expected to grow. One report found that the top 1 per cent of wealthy persons in Singapore held a third of the total wealth as of the end of 2020.

Members of the Occupy Wall Street movement take part in a protest march through the financial district of New York October 12, 2011. The protest was a response to the growing disparity in wealth. Photo: Lucas Jackson/REUTERS

Prime Minister Lee Hsien Loong, speaking at the Bloomberg New Economy Forum last week, said the Government wants a wealth tax in principle, but implementing such a tax — which would be imposed on a range of assets such as property, stocks, artwork and cryptocurrency — is a challenge.

“We need to find a system of taxation which is progressive and which people will accept as fair.

“‘Fair’ means everybody needs to pay some, but if you’re able to pay more, well, you should bear a larger burden,” Mr Lee said.

The Republic already taxes assets which the wealthy are likely to spend more in, like property and motor vehicles, though it does not have a tax on inheritance, capital gains or net wealth.

There are people on both sides of the debate. Those against a wealth tax argue that taxing capital — wealth that can be used for investing or starting business — is against economic fundamentals, and could indeed lead to capital flowing elsewhere.

“Whenever governments get hard up for money, they will start looking for everything they can tax, including wealth,” renowned Singapore-based investor Jim Rogers, 79, told TODAY.

“But history has been pretty clear on this: The more you tax wealth, the less prosperity you have.”

On the other hand, advocates of a wealth tax say Covid-19 offers an opportunity to balance the scales.

Ms Foo Mee Har, a Member of Parliament (MP) for West Coast Group Representation Constituency (GRC) who has called for wealth taxes several times in Parliament, argued that there are new developments in wealth transparency around the world.

“When tax is well structured, targeted and at competitive rates, our wealth tax regimes may actually be an allure for assets to be maintained in Singapore,” said Ms Foo.

Earlier this month, Associate Professor Jamus Lim, Workers’ Party MP for Sengkang GRC also spoke in Parliament for a tax that targets the ultra rich.


Generally speaking, there are a few ways to impose taxes and duties that target wealthy individuals:

— Higher income taxes for top earners

— Asset taxes on property, motor vehicles or luxury goods

— Stamp duties on high value transactions such as property

— Inheritance tax or estate duty, which is levied on the estate when a person dies

— Tax on capital gains, such as when a person makes a profit from selling their assets

— Net wealth tax, in which the total value of their assets minus their debts are taxed periodically

Whether one calls it envy or the desire for equity, the growing number of voices calling for wealth taxes is a result of the protracted rising inequality around the world, said Professor Lawrence Loh from the National University of Singapore (NUS) Business School.

But some noted that there are parallels between the recent discussions on wealth taxes during the ongoing Covid-19 crisis and the Occupy Wall Street movement, albeit in a less dramatic fashion.

Back then, the Organisation for Economic Co-operation and Development (OECD) governments came together in 2009 to establish ways to counteract base erosion and profit shifting (Beps), preventing multinational companies from exploiting gaps and mismatches in tax rules around the world.

Now, with the pandemic, the spotlight is on high net worth individuals and a fair tax system.

After all, it has not escaped many people that wealth gains have been “unusually high” in countries that have experienced a decline in economic output during the worst of the pandemic in 2020, including Singapore, noted Ms Shantini Ramachandra, South East Asia tax leader at accountancy firm Deloitte Private.

Giving an example, Mr Vikna Rajah, who heads the tax, trust and private client practices department at law firm Rajah & Tann, pointed to the stock market rallies occurring last year.

“I think it's probably likely that the affluent could have been able to enjoy these benefits, and with this backdrop of the wealthy increasing asset value, how do we then ensure that we can lessen the wealth gap across generations?” said Mr Rajah.

Progressive income tax systems alone are insufficient as income taxes are unlikely to feature heavily among the ultra-rich. Taxing wealth, on the other hand, takes into account the amassed wealth of the individual.

Associate Professor of Economics Walter Theseira at the Singapore University of Social Sciences (SUSS) said wealth taxes could be “less economically distorting than other taxes which are based on income or consumption”.

“Wealth taxes largely discourage concentration of resources, whereas income and consumption taxes discourage economic activities,” added Assoc Prof Theseira, a former Nominated MP.


On net wealth taxes, one way to see how it may work is to look at countries like Switzerland, which imposes varying degrees of tax based on canton. Such a flat tax on wealth is arguably the purest form of wealth tax since it encompasses everything a person owns instead of individual items.

Based on estimates, Assoc Prof Theseira said wealth taxes account for around 3.6 per cent of total tax revenue in Switzerland, which like Singapore, is also a wealthy country.

Mr Christopher Gee, head of the governance and economy department at the Institute of Policy Studies (IPS), argued that the Swiss example shows instead that the revenue impact of a net wealth tax is too small to offset Singapore’s expenditure needs.

“To me, it's a form of signalling — just to say that ‘we've got this, we levy a wealth tax, and (thus) it can be seen that we have a more fair system’,” Mr Gee said.

The reality is that while discourse over wealth taxes has been raging in the past two years of the pandemic, countries have been stripping away such taxes over the course of a decade.

Eight out of 12 European countries that had a wealth tax in 1990 later discarded them by 2019. Out of the 38 member nations in the OECD today, only four have a net wealth tax — Colombia, Norway, Spain, and Switzerland.

France, which had a levy on wealth that it called its “solidarity tax”, abolished it in 2018 over continued fears of capital flight, a phenomenon in which wealthy individuals move their wealth into another tax jurisdiction where it cannot be taxed, or move out of the country entirely, taking their assets with them.


Singapore, too, had abolished its system of inheritance and estate taxes in 2008 owing to low tax collections, which was believed at the time to be due to the mobility of wealth.

Capital flight is thus a serious concern if a wealth tax is imposed, said most of the experts interviewed.

Mr Chris Woo, tax leader of accountancy firm PwC Singapore, said even bringing back inheritance and estate taxes would have a negative impact and discourage entrepreneurs from relocating here, thus denying Singapore a source of capital and innovation that can potentially generate significant local economic spin-offs.

Some of those interviewed raised fundamental disagreements over such a tax, which also crosses the ethical line of fairness since it could be a form of double, or triple, taxation. The source of that wealth would, after all, already have been taxed previously as income, or capital gains, elsewhere.

Pointing to how many people in Singapore have illiquid assets, Mr Sivakumar Saravan, senior partner and head of tax at professional services firm Crowe Singapore said: “There are also individuals who are asset-rich primarily through years of prior earnings, but who are currently cash-poor as they are no longer working.

“The question is — is it fair for them to sell their assets to settle wealth taxes?”


On this, tax experts noted that Singapore has been trying to achieve its ambition to become an asset and wealth management hub in the region for decades.

By the end of 2019, the total assets under management here amounted to a record S$4 trillion, representing a 15.7 per cent year-on-year increase. More than three-quarters of this were assets sourced from outside Singapore.

Said Mr Stephen Banfield, partner and head of family office and private client at KPMG in Singapore: “They have an ecosystem-sized impact on the economy.”

As of the end of 2020, there were around 400 single family offices operating in Singapore, according to a parliamentary reply in April by then Trade and Industry Minister Chan Chun Sing.

Despite its attractiveness to global wealth, Singapore is no Switzerland yet, said those TODAY interviewed. The European nation has a storied history as a wealth centre and can afford to impose wealth taxes without incurring an exodus of capital, they added.

Ms Ramachandra from Deloitte said: “Singapore’s hard-earned status as a well-developed financial and wealth management hub could be undermined by the imposition of a wealth tax… and may adversely affect Singapore’s ability to remain competitive and attract investors.”

The question is what would be a better option, since Singapore still needs to dig deep to raise tax revenue while addressing the yawning divide between the rich and poor.

To this end, Finance Minister Lawrence Wong last week hinted at what may come when he said that the Government will not focus on taxing the wealth of individuals based on their net wealth, but will consider how the entire system of taxes work in Singapore.

So, rather than a recurring net wealth tax, there are some options left on the table to tax the wealthy, said experts.

For one thing, the idea of a one-off tax on pandemic windfall gains, or even on wealth like that imposed by Argentina, is not yet dead in the water, some said.

Another idea is to introduce a form of capital gains tax. Mr Rajah said while Singapore is experiencing a property boom during the pandemic, the higher-end segment of private properties has surged in value relatively more than other properties, including public housing.

Some said property and motor vehicle taxes could also be adjusted up. Or, the authorities could also consider introducing higher-end tiers of such assets that can be used as a proxy to tax the wealthy.

One of the ways to impose taxes and duties that target wealthy individuals include asset taxes on property, motor vehicles or luxury goods. Photo: Raj Nadarajan/TODAY

Mr Mahesh Kumar, a partner at law firm WithersKhattarWong’s private client and tax team, suggested that the Government could impose additional income taxes for those earning above a certain threshold.

The twist is that these additional taxes would apply unless the person spends a specified part of their income on a charity, or a cause that the public sector has an interest in.

“I see it as a creative way of encouraging private and public partnership by using taxation as a means to get the private sector more engaged in social impact.”


Ultimately, taxing the wealthy is not a straightforward task even if its intentions seem noble and equitable, though there could be creative solutions to an old problem, said those interviewed.

The challenge lies in determining what is a “fair” level of wealth to tax, given the competing societal, economic and political objectives, added Ms Ramachandra.

This is why most of those interviewed by TODAY were cautious about abrupt changes to tax policy that could hurt the country in the longer term.

Said NUS’ Prof Loh: “Singapore’s approach has been based on a progressive personal income tax system coupled with targeted taxes and levies on properties and car ownerships — from a practical viewpoint, this has worked well.

“It is also balanced with more fundamental considerations like sustaining the country as a global business and investment hub which will in turn generate broader benefits for a wider spectrum of workers.”

Just as how the global financial crisis had kindled a worldwide consciousness of wealth inequality, the pandemic also provides an opportunity for Singapore to make tweaks.

“In taxation and tax collection, there’s never a best time,” said Mr Teo from EY.

“(But) the pandemic has brought on a lot of changes, and this may be a time to take a fresh look at Singapore’s current tax system which has worked well for the past decades to see if it is fit for purpose for the new norm.”

Related topics

wealth tax economic inequality assets property Covid-19

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