When it comes to staying attractive to the rich, Asia’s two rival financial centers have always tried to play their tax policies against each other. Hong Kong abolished its estate duty in 2006; Singapore followed suit in 2008. And after Singapore made a play for large family offices, Hong Kong, which boasts the highest population of uber-wealthy after New York, started looking at its own tax code to see where it could do better.
But now Singapore wants to take a different path. It won’t be a sharp left turn, but some kind of
Let’s start with the easy part. Capital gains on expensive condominiums might be a good revenue target, especially if Singapore’s 7% goods and services tax goes up to 9% by next July, as some economists expect. While authorities have set aside funds to cushion low-income households, GST is ultimately a regressive levy as the poor consume more of their income than the rich. While a higher GST will prepare Singapore to better shoulder the fiscal burden of eldercare and climate change, it may be politically more palatable if the wealthy are also asked to make a sacrifice.
The city’s property industry has already started to evaluate what such a sacrifice might mean. Actually, not much. Close to half of the executives surveyed by the National University of Singapore Real Estate (NUS+RE) say that fewer than 10% of Singaporeans would purchase assets overseas as a result of a 10% tax on property gains, though nearly half of the respondents also believe that 11% to 30% of foreigners might be dissuaded from buying Singapore housing in the near term,
None of this is particularly worrisome. Despite pandemic-related restrictions and disruptions, Singapore’s private property prices rose
Also, there isn’t much risk of a capital flight to Hong Kong. If anything, there is a stronger likelihood of flows in the opposite direction. The number of U.S. firms with their Asian hubs in Hong Kong has fallen 10% over the past year to an
Having decided to live with Covid-19, Singapore is
Given China’s sheer size, proximity may still be a $3 trillion wealth-management opportunity for Hong Kong in the next five years. But to tap it, Hong Kong has to stick to the script — and leave capital taxes alone. Singapore, though, could chart a different course. The city-state’s policymakers could safely conclude that their pragmatism is worth 10% of capital gains to globally mobile millionaires and billionaires. Maybe not on stock-market or cryptocurrency gains, or anything that upsets the location choice of family offices. But pricey condominiums or bungalows might be fair game.
Buyers and sellers of residential property in Singapore already face stamp duties, which are pretty steep for foreigners. Being asked to share a part of the profit on sale won’t be terribly upsetting, not for the privilege of living in Asia’s new world city.
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