Singapore hiking tax on pricey property after wealth influx

Singapore will raise taxes for buyers of higher-value properties and luxury cars, as it tackles a growing wealth gap brought on by the arrival of rich families. 

The city-state will also increase levies on tobacco in an attempt to boost income and reduce inequality, Finance Minister Lawrence Wong said in his Budget speech on Tuesday. 

The ruling party, which faces growing health-care and housing costs, is fighting hard to raise revenue. Singapore’s infrastructure and stability has attracted a growing number of ultra-wealthy individuals, contributing to a spike in costs for everything from luxury cars to golf club memberships and condominiums.

For the portion of the value of homes valued in excess of S$1.5 million ($1.13 million) and up to S$3 million, this will be taxed one percentage point higher at 5%. That in excess of S$3 million will be taxed two percentage points higher at 6%. 

The portion of non-residential properties in excess of S$1 million and up to S$1.5 million will be taxed one percentage point higher at 4%. That in excess of S$1.5 million will be taxed at 5%, up from the current rate of 3%.

The changes will apply to all properties acquired from Wednesday, Wong said. The move is expected to generate an additional S$500 million in revenue a year. 

Even with the hikes, buyers of high-end real estate might not be deterred, said Christine Sun, senior vice president of research and analytics at OrangeTee & Tie.

“Properties in the upper tier may not see a major impact as wealthy buyers are not likely to be deterred by the additional” tax, said Sun. “Properties with good product attributes and location will continue to draw buying interest.”

Singapore was expected to get around 2,800 high-net-worth individuals in 2022 alone, according to residence and citizenship planning provider Henley & Partners. The firm estimates that 249,800 residents there have a net worth of at least $1 million, making it the fifth wealthiest city on Earth.

Singapore is also planning to implement a 15% increase in tobacco excise duty effective from Tuesday. The move could generate about S$100 million in additional revenue per year. 

Singapore is also expected to raise an additional S$200 million via changes in levies related to luxury cars.

In last year’s budget, Singapore increased taxes aimed at its richest residents, focusing on income, property and cars that were expected to generate a combined S$600 million a year. A growing fear among locals that social mobility has slowed is pushing the government to re-examine some of the policies that have made it one of the wealthiest nations in the world. –BLOOMBERG