This perspective can address one of the longstanding weaknesses of traditional inheritance taxes, which often raise concerns about fairness because beneficiaries may be forced to liquidate family businesses or homes to pay taxes. By contrast, a system linked to realised transactions or deferred payment mechanisms could alleviate cash-flow concerns, while still capturing part of the economic value generated by society as a whole.
That said, measuring the amount of societal wealth within an asset poses its own set of challenges. For example, when assessing the price appreciation in a property, there may not be consensus on whether this is attributed to a new MRT, a new mall or other intangible reasons.
BEHAVIOURAL EFFECTS OF WEALTH TAXES
There is another dimension that has received relatively little attention in the Singapore debate. Wealth taxes are often discussed primarily as revenue-raising tools but their behavioural effects may be equally important.
Property taxes influence investment decisions, allocation of capital and housing market dynamics. If carefully designed, they can encourage more productive deployment of capital rather than passive accumulation of appreciating assets.
At a time when policymakers are seeking to support entrepreneurship, innovation and economic dynamism, it may be worth considering whether parts of the tax system inadvertently favour asset appreciation over productive risk-taking.
This does not mean that property ownership should be discouraged. Rather, it suggests that the tax system should maintain a balanced treatment between wealth generated through enterprise and wealth from passive asset appreciation.
Ultimately, Singapore’s wealth tax debate should not be framed as a simple choice between having or not having an inheritance tax. A more useful question is how Singapore can continue to preserve meritocracy while maintaining competitiveness, attracting capital and ensuring that the gains from collective national success are shared fairly.
Simon Poh is Associate Professor (Practice) of the Department of Accounting at the National University of Singapore (NUS) Business School. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.