It should come as no surprise to anyone that the Budget Statement of 2019 did not introduce any new taxes on wealth in Singapore nor raise the rates of the few existing wealth taxes.
We should also not be surprised if no Member of Parliament suggests raising taxes on wealth in the budget debate to follow. This is an indication of how dominant or hegemonic Singapore's pro-capital stance is — that even in a Budget that is presented as a socially progressive one, no one is likely to question the low taxes on wealth.
The missing debate on wealth taxes is not just curious, it is also unhealthy.
As Singapore ages and if economic growth slows, wealth inequality will become more pronounced even as the demands on social spending rise. It is therefore important to consider whether and how wealth in Singapore should be taxed.
WHY TAXING WEALTH MAKE ECONOMIC SENSE
As the Paris School of Economics’ Thomas Piketty has explained, differences in wealth is a greater source of inequality than differences in labour income.
Wealth comes from the ownership of capital, i.e. financial and physical assets. As ownership of capital is far more unequally distributed than labour, the former is a bigger determinant of inequality.
In Capital in the 21st Century, Professor Piketty also observed that except in times of war and depression, the annual rate of return on capital has averaged nearly 5 per cent.
In mature economies, labour incomes are increasing at a much slower rate mainly because growth in these economies is well below 5 per cent.
Inequality, Professor Piketty posits, rises when the rate of return on capital exceeds the growth rate of the economy.
Singapore is now growing at below 5 per cent, even as we expect the return on capital to be close to its historical average of 4-5 per cent. If we care about rising inequality at all, we should be taxing wealth — and therefore capital income — more.
Second, the ratio of capital income — that is, capital gains, dividends, interest and rental income — to labour income increases exponentially as one gets closer to the super-rich (e.g. the top 1 per cent) in the income distribution.
In Singapore, capital is taxed very lightly: there is no capital gains tax or inheritance tax; dividend and interest income are also exempt from personal income tax. Property taxes are relatively low, and only rental income is taxed at one's marginal tax rate.
Given that the rich derive a significantly larger share of their income from capital, the very low taxes on capital in Singapore means that capital owners may be paying a lower effective tax rate than the (upper) middle class whose main (if not only) source of income is their labour.
https://www.todayonline.com/commentary/curious-case-missing-wealth-taxes-singapore
We should also not be surprised if no Member of Parliament suggests raising taxes on wealth in the budget debate to follow. This is an indication of how dominant or hegemonic Singapore's pro-capital stance is — that even in a Budget that is presented as a socially progressive one, no one is likely to question the low taxes on wealth.
The missing debate on wealth taxes is not just curious, it is also unhealthy.
As Singapore ages and if economic growth slows, wealth inequality will become more pronounced even as the demands on social spending rise. It is therefore important to consider whether and how wealth in Singapore should be taxed.
WHY TAXING WEALTH MAKE ECONOMIC SENSE
As the Paris School of Economics’ Thomas Piketty has explained, differences in wealth is a greater source of inequality than differences in labour income.
Wealth comes from the ownership of capital, i.e. financial and physical assets. As ownership of capital is far more unequally distributed than labour, the former is a bigger determinant of inequality.
In Capital in the 21st Century, Professor Piketty also observed that except in times of war and depression, the annual rate of return on capital has averaged nearly 5 per cent.
In mature economies, labour incomes are increasing at a much slower rate mainly because growth in these economies is well below 5 per cent.
Inequality, Professor Piketty posits, rises when the rate of return on capital exceeds the growth rate of the economy.
Singapore is now growing at below 5 per cent, even as we expect the return on capital to be close to its historical average of 4-5 per cent. If we care about rising inequality at all, we should be taxing wealth — and therefore capital income — more.
Second, the ratio of capital income — that is, capital gains, dividends, interest and rental income — to labour income increases exponentially as one gets closer to the super-rich (e.g. the top 1 per cent) in the income distribution.
In Singapore, capital is taxed very lightly: there is no capital gains tax or inheritance tax; dividend and interest income are also exempt from personal income tax. Property taxes are relatively low, and only rental income is taxed at one's marginal tax rate.
Given that the rich derive a significantly larger share of their income from capital, the very low taxes on capital in Singapore means that capital owners may be paying a lower effective tax rate than the (upper) middle class whose main (if not only) source of income is their labour.
https://www.todayonline.com/commentary/curious-case-missing-wealth-taxes-singapore
