Assoc Prof Jamus Jerome Lim (Sengkang): Thank you, Speaker. I thank the Minister for his stout and robust defence of the need to raise GST.
I have three clarification questions with regard to three separate areas. The first has to do with corporate taxation. And the question is, whether the Government plans to subscribe to the spirit of the BEPS agreement as a signatory and to roll out, broadly speaking, the framework as prescribed. I mentioned this in part because the Workers’ Party’s proposal for corporate taxation is quite different from the hypothetical.
Mr Speaker: If we can just keep it to largely clarification. I will allow some preamble, but not another speech again.
Assoc Prof Jamus Jerome Lim: Fair enough. So, that was my first question. My second question has to do with wealth taxation and the question is whether the Minister believes that the modest increase in wealth taxation, that is set forth in our proposal, which is broadly consistent with — in fact, it significantly is lower than some other neutral analysts have had. Our estimate is $1.2 billion. Whether he thinks that this modest increase in wealth taxation will be such that it will make Singapore so unattractive that high net worth individuals would relocate and be footloose in that sense.
My third question has to do with land sales. I accept the position that this Government has that they treat land sales as part of reserves, but then I am wondering if he is able to reconcile the treatment of land sales, that is less than 10 years. So, land leases that are of one to nine years, with the broad argument that land sales must all immediately go into reserves, rather than take the first nine years as part of recurrent revenue.
Mr Lawrence Wong: Sir, on the three questions, first on the BEPS 2.0. We are certainly committed to implementing the spirit of BEPS 2.0. We will do so while ensuring that this is indeed implemented around the world. Because our bigger concern is that it must be a level playing field. It cannot be that some countries do it and others do not; and then, there are revenue leakages that will undermine Singapore.
So, we are watching. Yes, countries have signed up to it. But countries have to go through their own domestic processes to roll out BEPS 2.0. It is not a certainty that this will get through their respective parliaments.
Signing the declaration is one thing; 2023, but will it get through all the countries’ Parliaments, legislations and implemented in law? Not so sure yet. So, we do want to make sure that there is a level playing field and we will do our part as a signatory, as an in a responsible member of the international community to likewise implement, when there is that global consensus and global implementation.
On wealth taxes, I recognise a proposal from Assoc Prof Lim and the Workers’ Party for a net wealth tax that will yield revenue of $1.2 billion. I have explained that, yes, in theory, you could design a scheme like that. You could. But in practice, it will be much more complicated and it is not just about the fears of people leaving, but the fact that there are so many ways for high net worth individuals to circumvent, whatever taxation rules you have in place and to plan away the burden of the wealth tax on themselves.
The ones who do, are usually the ones with better means and higher wealth. And this is why even in Switzerland, for example, if you look at the net wealth tax they have there, the burden of tax falls on a much broader base of the population. The so-called net wealth tax in Switzerland is not a wealth tax for the top-end only. Many middle-class, many middle-income people pay for that net wealth tax. This was our experience in estate duty, mind you. As I mentioned, the top end, the very wealthy, knew how to plan it away. But the burden ended up falling on the middle-income and the upper middle-income. That is our bigger concern, on top of the concern that, yes, there will be some competitiveness reasons. That is also a relevant concern.
And that is why we have to study this very carefully. We have to think through, look at the experiences of other jurisdictions. Not very many left to study, because as I said, many of them have dropped the idea of doing a net wealth tax. We will have to consider what is suitable for Singapore, so, we will not rule it out. But at this stage we do not have something that we are confident can be effectively implemented, suited to Singapore circumstances.
On land sales, the easy answer is for these shorter duration leases, we have decided for flexibility and because there are transactions like that, there is no need to regard them as assets, and therefore, we take them in as current revenue. But for the ones with longer leases, we treat them as assets, and then, therefore, we take them into our reserves framework and accord the treatment accordingly.
It is a judgement call. We could have said everything, regardless of the duration of the lease. But we have worked out what we think is a reasonable balance and that has been decided and agreed with the President’s Office.
2 March 2022