Impact of property tax on Singapore-Hong Kong rivalry

But now Singapore wants to take a different route. It won’t be a sharp left turn, but some sort of tax on capital could make its debut—perhaps in the form of next year’s budget. “You tax consumption, you tax income, you tax savings. And you should tax property, whether money in the form of property, ideally money in other forms,” said Singaporean Prime Minister Lee Hsien Loong, editor-in-chief of Bloomberg. In a recent interview with John Micklethwaite, adding that effective taxation of other forms of money is “not that easy to implement.”

Let’s start with the easy part. Capital gains on expensive condominiums could be a good revenue target, especially if Singapore’s 7% goods and services tax (GST) rises to 9% by next July, as some economists expect. While Singapore authorities have set aside money to provide relief to low-income households, the GST is ultimately a regressive levy, as the poor spend more of their income on consumption than the rich. While a higher GST would make Singapore better able to care for the elderly and handle the financial burden of climate change, it could be more politically palatable if the wealthy are also asked to make sacrifices.

The city’s property industry has already begun to evaluate what such a sacrifice could mean. Actually, not much. Nearly half of executives surveyed by the National University of Singapore Real Estate (NUS+RE) say that less than 10% of Singaporeans will buy property overseas as a result of the 10% tax on property gains, although almost half of the respondents say this, according to Business Times. also believe that 11% to 30% of foreigners may be refused a Singapore residence purchase in the near future.

None of this is particularly worrisome. Singapore’s private property prices rose 1.1% in the third quarter from the previous three months, despite restrictions and disruptions related to the pandemic, and are projected to rise further, recording their 15th consecutive monthly gain in October. It would not be a bad idea to introduce additional taxation which helps to cool down the market a bit.

In addition, there is not much risk of capital flight to Hong Kong. In any case, there is a strong possibility of the flow in the opposite direction. The number of US firms with their Asian hubs in Hong Kong has fallen 10% over the past year to an 18-year low, while Chinese firms with their regional headquarters in the city have seen their ranks rise by 5%. Hong Kong has begun to align its policies so closely with those of mainland China that it is unclear whether it is happy whether it is a fundraiser for Guangdong province other than itself and for Macau, the so-called Greater Bay Area. is the center.

After deciding to live with Covid, Singapore is aggressively resuming quarantine-free flight links with major economies, while Hong Kong—led by China—finds itself a never-ending series of zero-cases. Keeping aloof with the policy. Even the head of Singapore’s central bank wants the People’s Republic and Hong Kong to open early because the city-states do a lot of business with them. Still, it doesn’t look like Hong Kong is in a mood to oblige. A reader of the South China Morning Post wrote in to ask whether the Hong Kong government should give Singapore the title of ‘Asia’s World City’ and change Hong Kong to ‘Ordinary City of China’ instead.

Given China’s enormous size, proximity could still be a $3 trillion money-management opportunity for Hong Kong over the next five years. But to tap it, Hong Kong will have to stick to the script – and leave capital taxes alone. Singapore, however, may chart a different course. City-state policymakers can safely conclude that their pragmatism accounts for 10% of the capital gains of mobile millionaires and billionaires globally. Perhaps not on a stock-market or cryptocurrency advantage, or anything that upsets the choice of location of family offices. But pricey condominiums or bungalows can be fair game.

Buyers and sellers of residential property in Singapore already face stamp duty which is quite tough for foreigners. Being asked to share a portion of the profit on the sale of the property would not be too troubling, not to mention the privilege of living in a new world city in Asia.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services