The Government of Singapore announced Monday, Feb 25 that it will raise taxes for wealthy homeowners in the country. The aim is to make the tax system more effective.
The tax hikes are a part of the 2013 budget announcement. The Finance minister of Singapore, Tharman Shanmugaratnam, asserted that high-end property owners will have to pay more in taxes while those with homes with lower annual values will be liable to pay lower taxes. Taxes on vacant or rented investment properties will also be hiked, reports Bloomberg.
The Illustration of tax impact displayed by the Ministry of Finance:
What Increases
- Any property whose value is accounted to be $150,000 or more is liable to pay 15 percent tax in 2014, which is 5 percent more than the current rate.
- Condominiums in central locations that have an annual value of $70,000 will have to pay 5 percent more tax in 2014.
- Taxes on investment properties or high-end rented properties will have to pay around 12 to 20 percent in home taxes.
What Decreases or Remains Unchanged
- Homes or properties that have an annual value less than $8000 will be exempted from property tax. Earlier, properties with annual value up to $6000 were let off the tax hook. This has now been increased by $2000.
- Property Tax for non-residential buildings will remain unchanged at 10 percent.
All the tax changes will come into effect by January 2015.
"This is fair. The property tax is a wealth tax and is applied irrespective of whether lived in, vacant or rented out. Those who live in the most expensive homes should pay more property taxes than others." Shanmugaratnam told Strait Times.
However, the tax changes will have little effect on foreign investment sentiments in the country. Experts asserted that even though the taxes have been hiked, the absolute quantum increase is comparatively low. They also said that luxury property in prime areas will still remain attractive
"By and large, I don't think you will see a major shift because the high-end market, they are established neighborhoods. The likes of (Districts) 9, 10 and 11 still command certain premium. It may see some downside risk, but I don't think it will see a large impact." Chua Yang Liang, research head at consulting and research firm, Jones Lang LaSalle, said to Channel W Asia.
The new budget also tightens regulations on immigrants and the foreign workforce. The government hopes to increase productivity by reducing reliance of companies on foreign workforce and pushing them to utilize the local labor market more effectively, reports Wall Street Journal.
Foreign employees make up one third of the total workforce in Singapore. With the introduction of the new regulations, the government hopes to revive the local employment market.