Death tax removal makes S’pore an attractive place for wealth to be built up, says Tharman
IN A LONG awaited move, the Government yesterday read the last rites for the death tax here.
The tax, known as estate duty, had been imposed if the assets of a person who died exceeded certain limits.
It was abolished with immediate effect yesterday.
The Government believes the move will boost the wealth management industry by encouraging both foreigners and Singaporeans to base their assets here.
Although the move had been keenly awaited, it drew gasps of surprise when announced by Finance Minister Tharman Shanmugaratnam in Parliament yesterday.
Calls to abolish the tax had grown more frequent in recent years as growing affluence meant that even the middle classes were caught by it.
A key grouse was that the exemption limits were lopsided. An estate could, for example, own up to $9 million worth of residential property and not pay the duty.
But everything above $600,000 in cash, shares and other non-residential assets was subject to the duty.
Mr Tharman said the exemption limits tended to ‘affect the middle- and upper-middle-income estates disproportionately compared to wealthier ones’.
The intended target of the tax – the super rich – had been able to set up trusts and other legal arrangements that allow them to minimise the duty.
Estate duty was taxed at 5 per cent on the first $12 million of applicable assets and 10 per cent on amounts above. Assets of $1 million, for example, incurred duty of $50,000.
The duty had been whittled down considerably over the years. In 1984, the top rate was a hefty 60 per cent.
Mr Tharman said that removing the duty was not just a practical and expedient measure but also in Singapore’s collective interest.
‘If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society, not just the individuals who build up their wealth.’
This will be a boost to the wealth management industry here, said KPMG Tax Services executive director Ooi Boon Jin. ‘It will encourage the inflow of foreign talent. People will bring money here, sink their roots here and invest here,’ he added.
On average, the Government collected about $75 million a year in estate duty.
Mr Tharman is encouraging people with accumulated wealth to think of how they can use the savings from the scrapping of the tax to make a contribution to society.
Already, one foreigner living here is making such plans after learning of the move.
Mr Iain Ewing, 62, founder of management training consultancy Ewing Communications, plans to channel half of the estate duty savings to fund university scholarships and other causes. The rest will go to his son, Tejas, 27.
Mr Ewing, a Canadian with permanent residence here, has worked here for 23 years and expects the savings to be millions of dollars.
Two likely recipients are Singapore Polytechnic – where he previously worked as a media producer – and his alma mater, the University of British Columbia in Canada.
‘It’s great that some of my money can do more for other people after I’ve gone,’ he added.
Source: The Straits Times 16 Feb 08