SINGAPORE: Singapore is known as a tropical refuge for the world’s wealthy, endowed with exclusive residential enclaves, a marina for super-yachts, two casinos and an annual Formula One race that brings in the global jet-set.
But as the orderly city-state comes within a whisper of overtaking Switzerland as the world’s largest offshore wealth hub, a growing public backlash is forcing the government to tone down its policies catering to the rich.
The government’s budget on Friday could raise levies on high-end cars and purchases of multiple properties, along with a possible widening of the top income-tax rate, say economists. It would build on measures announced last year that cooled Singapore’s red-hot property market and targeted mostly rich homeowners.
With maximum income tax rates of 20 per cent and no capital gains tax, Singapore has long been synonymous with affluence, boasting the world’s highest concentration of millionaires. Daimler’s Mercedes was the top selling car brand last year, followed by BMW, government data shows.
Businesses that service the wealthy say their clients fear the new policies could mark the start of a trend as the long-standing ruling party, under pressure since its worst-ever election showing in 2011, tries to ease the burden in a country where the average monthly wage is S$3,705.
“There are a lot of people who don’t know what’s next,” said Juliet Poh, owner of SG Vehicles, which sells car brands Ferrari , Rolls-Royce, Aston Martin and Lamborghini .
Cars in Singapore are already expensive by most global standards owing to the cost of a government 10-year licence that must be purchased with each new vehicle.
But in last year’s budget, the government introduced a new tiered tax system targeting luxury cars. The first S$20,000 of a car’s open market value is taxed at 100 per cent, the next S$30,000 at 140 per cent, and anything above S$50,000 at 180 per cent. As a result, sales of luxury cars fell more than 80 per cent in the second half of 2013, official data shows.
In measures partly aimed at buyers of multiple homes, the government also tightened property curbs last year, including a rise in stamp duties. Sales of private homes to the wealthiest 15 per cent of the population have tumbled in the past few months.
“A lot of people are affected by the property curb. It is like an indirect curb on cars,” said Poh, whose dealership saw car sales drop around 50 per cent in 2013.
“A lot of people can’t buy-and-sell properties and do not make money. Thus, they don’t have the cash flow to buy the cars.”
Public anger at the rich-poor divide and new taxes aimed at the ultra rich has been bubbling in fiscally stretched large Western economies since the 2008 global financial crisis. The changes in Singapore illustrate how that is spreading to countries usually seen as low-tax enclaves for the wealthy. — Reuters