Youssry Henien and Rohit Ganguli discuss the implications of Singapore’s proposed wealth tax.
By Jill Wong
Talk of a wealth tax has been brewing in Singapore. If it materialises, a wealth tax may have profound implications for the city-state’s private banking industry.
Finance Minister Lawrence Wong said a wealth tax of any form in Singapore should be consistent with the country’s fair and progressive tax system.
From one perspective, progressive wealth taxes are not good news for high-net-worth individuals because it means they face higher tax rates as wealth grows.
Capital gains taxes or property taxes may pose disincentives to wealth accumulation and make it harder for banks to mobilise savings and capital for investments.
On the other hand, growing income disparities would make the case for wealth taxes. In Singapore, the transparency of its tax system could mean high-net-worth individuals would find it easier to stomach wealth taxes here than the uncertainty of Hong Kong tycoons face their Godfather movie momentfacing Hong Kong tycoons.
A family office chairman and a private banker share their thoughts.
Youssry Henien (pictured, left), Windsor Family Office
Chairman
‘Depending on which side of the table you are sitting at, one could view a wealth tax as either positive or negative. It is no secret that Singapore is attractive for high-net-worth individuals given its low and attractive tax rates. In addition, the big sell for a stable political and business environment is key. This may be one of many new highlights to entice those from leaving and or coming.
Wealth taxes are not new; they played an instrumental role in Europe and still remain in few countries today. I believe the covid-19 pandemic displayed strong economic and social impacts creating many inequalities and so could have played a role behind this.
Such a wealth tax could have some form of an impact on the wealth management industry in general. It would just be hard to determine the level of impact and whether it would force those to move to other jurisdictions. But the big question is – where during this climate?
In general, tax systems should be fair and progressive. It will be interesting to see how this rolls out and how industry players will reposition.’
Rohit Ganguli (pictured, right), EFG Bank
Senior vice president, head of wealth planning Asia
‘The recent discussion and comments from senior ministers and authorities about a possible wealth tax in Singapore has set off much speculation on how such a tax will impact Singapore’s wealth management industry.
While this is a concern, it is important to note that when the earlier estate tax in Singapore was abolished in 2008, it was acknowledged by the then finance minister that abolishment of that tax would ‘make Singapore an attractive place for wealth to be invested and built up.
From this statement, it is clear that there is an awareness that a tax on assets may well have the impact of capital flight and when finalizing any levy in this regard. Regulators will definitely bear this unintended consequence and ensure that any wealth tax – whether on net assets, on property or any other base – should be conceptualized and implemented in a manner that minimizes any such impact.
That said, whatever the final outcome of the discussions around any wealth tax imposition, the sooner this is concluded on the better since, as with many legislative changes, often the speculation before it is finalized is what triggers the most concern.’