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Finance Minister Lawrence Wong speaking at the 35th Singapore Economic Roundtable organised by the Institute of Policy Studies on Oct 15, 2021. (Photo: Jacky Ho for the Institute of Policy Studies) - 

Singapore continues to study how it can expand its wealth tax system as the country re-examines its fiscal strategies in the face of key challenges such as inequality and climate change, said Finance Minister Lawrence Wong on Friday (Oct 15).

Speaking at the 35th Singapore Economic Roundtable organised by the Institute of Policy Studies, Mr Wong said Singapore has succeeded so far in running a prudent and effective fiscal policy.

He said the task at hand will only become harder with three key challenges - inequality, a rapidly ageing population and climate change - that will determine the trajectory of the country’s fiscal strategies.

These challenges, or "curves", as Mr Wong put it, are interlinked and will need to be tackled comprehensively, Mr Wong said.

“For example, an ageing population can exacerbate inequality, while inequality can make the lower-income more susceptible to the effects of climate change,” he said in a speech delivered at the start of the event.

To arrive at a fairer, greener and more inclusive society, Singapore “must re-examine its fiscal strategies” so that it has the tools to meet the task at hand, he added.

There are three key priorities behind the country’s fiscal moves, he said, with one of them being to uphold a fair and progressive tax system even as it considers different ways to raise more revenues.

One element of progressivity, according to Mr Wong, is to consider not just a person’s income but his wealth. Those who are more affluent should pay their fair share of taxes, the minister added.

Already, Singapore is taxing wealth in various forms such as property tax and stamp duties on residential properties, as well as additional registration fees on motor vehicles.

The country has also been able to mitigate some of the divergence in wealth seen in other places through its home ownership policy.

For instance, “heavy” public housing subsidies have allowed a whole spectrum of home owners to gain from the appreciation in home prices and equity, he noted.

Mr Wong said Singapore’s policies “should continue to promote broad-based wealth accumulation amongst Singaporeans”.

“But just as we have tempered income inequality over the years, we also need to guard against rising wealth inequality,” he added.

“That is why we continue to study options to expand our system of wealth taxes – in ways that are effective and add to our revenue resilience without undermining our overall competitiveness.”

Mr Wong said that Singapore is committed to the global effort of fighting climate change and is taking proactive steps to decarbonise its economy.

But this will not be easy because Singapore faces “a double disadvantage” – a lack of land space and natural resources which makes it very challenging to deploy renewable energy at scale.

It also faces significant risks of coastal inundation and inland flooding. “But our economic story has always been one where we defied the odds,” the minister added.

Among the steps it is taking, Singapore is “seriously considering the import of green electricity” and is finding ways to overcome the high cost, and technical and security challenges.

It is also actively pursuing new opportunities to grow as a sustainable finance hub, while investing in the research and development of new technologies like hydrogen and carbon capture.

The latter, said Mr Wong, will take time to bear fruit but can put Singapore in good stead in the longer term.

Meanwhile, Singapore has also been reviewing the level and trajectory of its carbon tax.

“One of the key levers for the green transition is the carbon price. Our carbon price today is too low,” said Mr Wong, adding that the tax review is done to ensure “it reflects the cost of carbon, and influences investment decisions effectively”.

The Government intends to announce the revised carbon tax rate for 2024 at next year’s Budget, while indicating what to expect up to 2030.

“We are mindful that businesses will need predictability and time to adjust,” he added.

Announced at Budget 2018, Singapore's carbon tax rate has been set at S$5 per tonne of greenhouse gas emissions from 2019 to 2023. The Government said then that this would be increased to between S$10 and S$15 per tonne by 2030//CNA