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Budget 2022: Why taxing wealth based on one’s address can be a bit rich

For the longest time, the Budget statement delivered by Singapore’s Finance Minister at the turn of each year has been a keynote political event, second perhaps only to the National Day Rally, in importance for me.

The author believes that there many who live in landed homes bought them at a time when property prices were relatively low, and should not be considered wealthy.

The author believes that there many who live in landed homes bought them at a time when property prices were relatively low, and should not be considered wealthy.

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For the longest time, the Budget statement delivered by Singapore’s Finance Minister at the turn of each year has been a keynote political event, second perhaps only to the National Day Rally, in importance for me.

It has been that way for decades, ever since I began in journalism, and long after I left the calling. This year was no different.

There has never been an expectation of “goodies”, as many headlines term them — although, like everyone else, I have been pleasantly surprised, and grateful, from time to time. Instead, it is about where we are going as a country, a roadmap of sorts.

This year’s Budget was, arguably, even more important than usual.

After two years in which the main focus was keeping Singaporeans’ heads above water, this year’s Budget laid out our course post-Covid, so we can continue to excel and take maximum advantage of the few good opportunities that come our way, while — more importantly — fashioning others on our own.

It was a remarkable statement of intent about how we will tackle the major challenges ahead, including an ageing population and climate change.

Another major aspect of the Budget was the affirmation of the leftward drift in Singapore, towards helping those who do not do as well, and preparing for a time when more of us will need help.

In his speech, Finance Minister Lawrence Wong laid out long-held truths about Singapore’s fiscal position.

We’re ageing rapidly, and need to do better to look after the less-fortunate among us. There can be no gripes about getting those who are better off to shoulder more of this burden.

As we have been reminded often, in Singapore, if you’re successful, it is not just because of your endeavour. There is a whole eco-system that made your success possible, and it behooves those who benefit from it to return the favour.

It is laudable, therefore, that those of us who can will have to give more.

A progressive system that doles out generous handouts to those who need a hand ought to do wonders for cohesion and a sense of unity in the country — so we can, as Mr Wong said, “continue to stand side by side in solidarity with one another”.

However, one aspect of the plan to raise government income rankles: The so-called “wealth taxes”.

It is hard to argue with higher taxes on investment properties or those fortunate enough — if they still are, given recent headlines — to be able to own Bentleys.

The increased taxes on owner-occupied homes, however, are quite another matter. But not for the reasons you think. If you live in palatial comfort, you’ll find little sympathy if you complain about the, quite frankly, hefty increase in property taxes.

But it is the Government’s definition of what “palatial comfort” is that should be relooked.

It appears that anyone with an address that says “landed property” is bundled into the same boat, never mind how they got there in the first place.

Full disclosure: I live in a landed property, with three generations — and hopefully a fourth, soon — under the same roof.

We consider ourselves lucky to be able to have afforded the space to have my geriatric mother, our married and soon-to-be married children, and their significant others under the same roof.

But wealthy we are not — “comfortable” would be a more appropriate description.

A quick walk around any private estate such as ours will tell you there are more than a few people who, despite having an address that does not have a dash in it, are in a worse position than us.

Theirs are the homes that struggle to get sunlight as wealthy Singaporeans buy land next to them and build towers that reach as high as the rules allow.

They are the ones with chain link fences, window grilles, and front gates of a certain vintage, a throwback to yesteryear, stuck in time.

Many who live in such homes bought them at a time when property prices were relatively low — imagine, a terrace house for five figures! — and they probably held decent middle-class jobs as part of Singapore’s Pioneer Generation.

They’ve long since retired, a position I will find myself in soon, and one imagines that these days, every dollar counts.

They’re excluded from some of the largesse that the Government gives out — by virtue of their address.

My mother sold her Housing and Development Board (HDB) flat to live with us. I have no regrets. But she does.

She frequently laments missing out on the Goods and Services Tax (GST) vouchers and cash handouts she used to get when her address was an HDB one.

By virtue of her new address, she gets nothing these days, even though she has long since retired and now lives on her savings and the too little we give her by way of thanks for a lifetime of looking after us, slogging to make ends meet, and helping bring up the children.

In his speech, Mr Wong pointed out that “estimating wealth accurately and fairly is more complex than estimating incomes”. There is no doubting that. So why do it based on where you live?

A back-of-the-envelope calculation suggests that when the new property taxes kick in, I will have to pay more than the S$1,500 I do now.

It is not very much, and is meant for the greater good, and I will do my part more than willingly. But what happens in a few years, when we hit the retirement wall and join the so-called “asset-rich, cash-poor” class?

Our house is paid for, so we needn’t worry about mortgages and the like.

We’ll have to remember to save enough to pay our taxes the year after we retire, since income earned in one year is payable the next.

If we want to have a beer at the kopitiam down the road, well, that’s our choice, and we’ll have to pony up for it.

But what will we have to fork out on property taxes, based on our postal code and its assessed annual value? Can we afford it then?

To be sure, there are moves afoot to move away from residential addresses as a sort of means test.

Two years ago, Members of Parliament urged the Government to move away from homes as a criterion for aid.

Last year, all households were given Community Development Council (CDC) vouchers — something Mr Wong said on Friday would continue. In addition, he also announced that all Singaporeans will get cash as part of the move to cushion the coming GST increases.

Household per capita income is a measure being used more often when it comes to deciding who will get what.

However, these apply to aid schemes.

While happy to receive CDC vouchers which we can cash in at the neighbourhood FairPrice, SingaporeRediscovers ones for a night at the museum, or even cash handouts, I would rather they be channelled to those who need them more. We are lucky enough not to need them.

The Budget announcement on owner-occupied property taxes falls into a different category altogether.

Will other means, such as household per capita income, be considered when we are assessed for such “wealth” taxes in future?

I would hope so, because I foresee mine being zero before too long, unlike the “value” of our property.

The taxman always includes a cheery note on its tax notices: “Thank you for your contribution to nation-building.”

We’re more than happy to do our little bit, and even forgo handouts so others can have a little more.

But please don’t classify us as wealthy based on where we live. That’s a little, well, rich.

 

ABOUT THE AUTHOR:

Carl Skadian was a journalist for close to 30 years, and his last stint was as Deputy Chief Editor of TODAY. He is now a senior associate director at the National University of Singapore’s Middle East Institute.

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