In the run-up to the Budget, there was much discussion about whether Singapore will introduce a net wealth tax. The Minister outlined how only three member countries of the Organisation for Economic Cooperation and Development (OECD) still have such a tax and some of the practical challenges of administering a new tax. His comments that further study is needed to consider how to tax wealth effectively and efficiently leaves open the possibility of some new taxes in the future.
Given the need for tax revenue, one proposal is to adjust the current system of taxing wealth by increasing the residential property tax rates. As real estate is often a proxy for wealth, the increase in rates will go towards enhancing the progressivity of the tax system. It is also efficient in terms of collection since it taps on the current property tax system. The current and new rates, to be implemented over two years, are as follows:
Exhibit A: Tax on owner-occupied residential properties
| Annual value | Property tax rate for owner-occupied residential properties | ||
|---|---|---|---|
| Current | Effective 1 January 2023 | Effective 1 January 2024 | |
| First $8,000 | 0% | 0% | 0% |
| Next $22,000 | 4% | 4% | 4% |
| Next $10,000 | 4% | 5% | 6% |
| Next $15,000 | 4% | 7% | 10% |
| Next $15,000 | 6% | 10% | 14% |
| Next $15,000 | 8% | 14% | 20% |
| Next $15,000 | 10% | 18% | 26% |
| Next $15,000 | 12% | 23% | 32% |
| Next $15,000 | 14% | 23% | 32% |
| Above $130,000 | 16% | 23% | 32% |
Exhibit B: Tax on non-owner-occupied residential properties
| Annual value | Property tax rate for non-owner-occupied residential properties | ||
|---|---|---|---|
| Current | Effective 1 January 2023 | Effective 1 January 2024 | |
| First $30,000 | 10% | 11% | 12% |
| Next $15,000 | 12% | 16% | 20% |
| Next $15,000 | 14% | 21% | 28% |
| Next $15,000 | 16% | 27% | 36% |
| Next $15,000 | 18% | 27% | 36% |
| Next $90,000 | 20% | 27% | 36% |
We will also see an increase in personal tax collections. Currently, the top marginal tax rate for a resident individual taxpayer in Singapore is 22% for chargeable income more than $320,000. From Year of Assessment 2024, the top marginal tax rate will be increased from 22% to 24%, to enhance the progressivity of personal income tax structure. According to the Minister, the increase in personal tax rate will provide Singapore with additional revenue of $170 million per year from the top 1.2% of taxpayers in the country.
You are welcome to use our Personal Income Tax Calculator to estimate your annual Singapore individual income tax payable from YA 2024 onwards to see how the increase in personal income tax rates will impact you.
Along with the above proposals as well as the tax on luxury car ownership at a higher rate (220%) through an additional Additional Registration Fee tier for the portion of open market value exceeding $80,000, the Budget measures on taxing wealth are targeted and progressive.
Will the estimated additional tax collections of $600 million a year be sufficient to help fund the slew of social compact measures? This remains to be seen but should allay concerns that a broad-based net wealth tax will adversely affect Singapore's status as an asset and wealth management hub.
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