Further scope to review wealth taxes: Heng

Singapore

THERE is scope for Singapore to further review its wealth taxes - though this will not replace the need for a hike in the goods and services tax (GST) rate, Deputy Prime Minister and Finance Minister Heng Swee Keat said in his round-up speech at the end of the three-day debate on Budget 2021.

Singapore is in a new phase of development, where it cannot expect the buoyant gross domestic product (GDP) growth rates of the past, yet has growing expenditure needs and must keep investing, he said, reiterating the justification for the GST rate hike. He noted that Members of Parliament have asked about other taxes, such as Foo Mee Har's suggestion of a one-off wealth tax, akin to what Argentina did to fund Covid-19 measures.

Said Mr Heng: "The impact of the crisis has been uneven. I believe Ms Foo's intent is for those who came out on top of the crisis to do more for our community, and I share her sentiment. So we will indeed continue to review our wealth taxes."

While Workers' Party (WP) MP Leon Perera suggested raising the Buyer's Stamp Duty and Additional Buyer's Stamp Duty, the latter is a property market measure, not a revenue-raising one, said Mr Heng.

But he added: "But I agree that there is a role for property-related taxes. The government will continue to review this to ensure that it remains progressive."

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Estate duty is another option that has been considered, but it affected middle- and upper-middle income groups disproportionately compared to the wealthy, he said. Singapore must also "balance between progressivity and staying competitive", and must "remain attractive to those who work hard and those who invest to create good jobs".

In his speech, Mr Heng spoke on the need to seize opportunities and emerge stronger from the Covid-19 crisis, while making the required tough decisions on how to fund this.

The government expects to fund expenditures for the rest of its term without a further draw on past reserves. But if the global situation is worse than expected and Singapore faces a prolonged slump, transformation will be even more necessary - yet it will also be more challenging to find sufficient fiscal resources.

In such a situation, Singapore must press on with economic investments to emerge stronger, he said.

So after considering the various options, if the public health and economic situation deteriorate sharply and the fiscal situation is worse than expected, the government may have to seek the President's approval for the use of past reserves to continue such economic investments.

But if this happens, the government should do its best to return the amount, he said: "These investments are expected to yield returns for the economy, which can give a boost to our tight fiscal situation and allow us to make good the amount drawn."

In contrast, the amount drawn from the past reserves as a crisis response to Covid-19 is equivalent to about 20 years of fiscal surpluses.

"It will be a challenge to also make good this amount drawn, given the magnitude of the crisis," Mr Heng said. "Nonetheless, we should strive to remain fiscally prudent to build back our reserves gradually."

Besides taxes, Mr Heng addressed other suggested sources of revenue. To WP MP Jamus Lim's suggestion of borrowing for "soft capital" such as education, Mr Heng said that is essentially recurrent expenditure, and should not be funded by borrowing.

But to MP Liang Eng Hwa's suggestion of one-off, special purpose borrowing for economic investments to help Singapore emerge stronger from this crisis, Mr Heng said the government will study this.

In his speech, he gave a recap of how government support has seen the country through the worst of the crisis, averting a lost "Covid generation" of workers and students.

In 2021, support measures will continue to stabilise the economy amid global risks, while Singapore embarks on the next lap of growth.

Moves include support for digitalisation, encouraging capability transfers, and harnessing "complementarities" between local and foreign workers, with details to come in the respective ministries' Committee of Supply (COS) debate, said Mr Heng.

Beyond economic measures, there are also multiple layers of support to help individuals, including moves to raise incomes for lower-wage workers and support those in the gig economy, with details to come in the Manpower Ministry's COS.

The COS, in which each ministry's budget is scrutinised, began on Friday and continues next week.

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