Re: Mah Bow Tan: Measures tough but meant to stabilise and not crash the property market

Progressive Property Taxes for SG

Quote:

Originally Posted by Pro-Govt Mah Bow Tan: Measures tough but meant to stabilise and not crash the property market [alt link] Temasek Review Mr Mah Bow Tan, the National Development Minister who has been “caught off guard many a time” over rising property prices has clarified that the new property market cooling measures announced on Thursday were tough but they are meant to stabilise home prices and not necessarily intended to cause them to crash.  Mr Mah emphasised that the measures are not permanent, and once they are no longer necessary, they will be removed. The measures may not be the last as well, he warned, adding that the Government will monitor the market closely and may act again if needed.

**Pls see updates of this post at [link]**
Rather then so many knee jerk, stop gap measures, why can't MND just consider more transparent 'Progressive Property Taxes' for SG.

Based on Annual Value (AV)[alt HDB link] of your owner occupied home, the current tiers are as follows (Source: 'New Property Tax Computation for Home Owners from January 2011' [bensonkoh, 22Feb2010]):-

1. 0% on your first $6,000 of AV
2. 4% on the next $59,000 of AV
3. 6% on anything above $65,000 of AV

I think that to curb speculation, the following tiered tax rate for all residential properties (which mirrors the income tax regime) should apply:

1. 0% on your first $10,000 of AV
2. 4% on next $20K of AV, above $10K (plus nothing)
3. 6% on next $20k of AV above $30K plus $800.
4. 8% on next $20K of AV above $50K plus $2000.
5. 10% on next $20K of AV above $70K plus $3600.
6. 12% on next $20K of AV above $90K plus $5600.
7. 14% on any further AV above $110K plus $8000.
8. All the a/m BEFORE a resident/PR owner occupied tax rebate of up to $800.
9. The 'AV' shall be the "estimated annual rent that your property can fetch" [HDB pdf link] OR 3.5% of the property valuation, whichever the higher.

Why this new regime (subject to tweaking) is a good idea:

1. SG has almost the highest Gini coefficient in the whole world [ref Business-week]. As such, there is an urgent need to reduce taxes on the lower and middle classes and to increase taxes on the upper classes.
   All owner occupied properties below $30K AV pay zero property taxes, ditto all HDB properties.
   The definition of 'owner occupied property' shall be defined as a residential property in which the occupants own at least 80% share of the said property, bank loans notwithstanding.
2. Some Singaporeans choose to live in pte property and enjoy the current benefits of 'owner occupied' tax discounts whilst turning their HDB flat (govt/ public subsidised housing) into a vehicle of profit. This new scheme would go some way towards eradicating this abnormality by limiting the owner occupier to a tax rebate of $800 (or the actual property tax, whichever lower)- a good substitution for the current 'limitless' owner occupied property tax discount. For the avoidance of doubt, where a person owns BOTH HDB and pte properties, the HDB one, such a person SHALL NOT enjoy the (up to) $800 ppty tax rebate on the pte property, it shall by default apply to the HDB one.
3. Eradicate the need for the odd and queer double ('duplicate') 'owner occupied' property tax rebate currently applicable to HDB flats: the first under the usual 'owner occupied scheme' (discounted 4% property tax scheme), the second under the 'HDB owner occupied scheme' (up to $120 discount)[IRAS pamphlet link].
4. Making permanent such progressive ppty taxes would also improve control over the entire residential property market rather then such laissez-faire attitudes dependent on stop gap measures and knee jerk responses- a more sincere concern for social inequalities is necessary rather than profit at all costs objectives.
5. Allow more progressive taxes benefiting the ave SGporean most with Singaporeans enjoying rebates, this is because statistics show that poorer SGporeans are being exploited by their richer brethren.
   Allowing the rich to contribute more towards the building of SG is an egalitarian principle. Residents of public housing and cheaper private residents should not have to pay property tax at all/ pay reduced amounts.
   Acc to 'SG Budget speech2010'>Shift to a Progressive Property Tax Regime, E.20.: "Owners of high-end properties with AVs of more than $77,000 .. comprise the top 3% of private owner-occupied residential properties, or the top 0.4% of all owner-occupied homes in Singapore". By my calc (see bottom), only owner occupied residential properties >$64K AV will pay increased property taxes, everyone else pays less then current (ditto for non-owner occupied res. ppties >$38K). Most pte landed properties are freehold properties, unlike HDB which by virtue of its 99yr lease, remains a depreciating asset- this is why HDB and cheaper pte ppty dwellers ought to enjoy ppty tax discounts/ rebates.
6. Foreigners owning SG properties shall only be entitled to an 'owner occupied tax discount' half of the SGporean/ PR rate- provided that they spend >180days in SG per annum.
7. The waiver of majority of SG'poreans/PR from paying property taxes would do much to reduce SG's Gini coefficient as well as go far to promote home ownership amongst Singaporeans as the rich in SG are disallowed unlimited owner occupant tax benefits at the expense of poorer SGporeans.
8. Allow the increased property taxes collected from rich home owners to offset any need to further increase GST for all Singaporeans and allow the 'progressiveness' of ppty tax rates to mirror income tax rates; make MND's job of regulating property demand easier, and make all Singaporeans feel more welcomed to a home governed on egalitarian principles.
9. 'PS': For further consideration would be a freehold property tax surcharge whereby freehold properties are further taxed a surcharge of 20%. This is to subsidize our currently exorbitant defense spending, the peace and stability SG govt by which the value of expensive pte ppties in SG are upheld- this however, should be a point for consideration only as these additional taxes (like any other taxes) require a step wise approach to implementation. Likewise, all estimates and figures I've suggested are provisional.

Or is Mr MBT just justifying his salary through stop-gap/ knee jerk responses in the midst of lassie-faire governance and ultimately turning the ppty mkt of a small island into another giant commodity mkt where Singaporeans are put on an endless treadmill to pay a minister's salary?
Reference(s):
- 'Countries with the Biggest Gaps Between Rich and Poor': "Top 11 Countries With the Biggest Gaps Between Rich and Poor: 1 Hong Kong, 2 Singapore, 3 U.S., 4 Israel, 5 Portugal, 6 New Zealand..." [BusinessWk, 16Oct2009]
- 'Forever Young (With Lyric and Sing along)' [MrBrown Show Production]: "Gahmen say Singapore must be forever young! Sing to the tune of Alphaville's Forever Young. Lyric credits to MrBrown" [link]

Comments welcomed.
Calc in the post next or see: [link].

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At/ related:
A1:
17Jan2011: Mah Bow Tan: Measures tough but meant to stabilise and not crash the property mar
TR:
17Jan2011: Mah Bow Tan: Measures tough but meant to stabilise and not crash the property market
18Jan2011: MM Lee: Singapore needs strong defence to exist
SGforums:
17Jan2011: Property measures have taken effect: Mah Bow Tan
SGclub:
17Jan2011: New measures to cool property market
STforum:
18Jan2011: Make tax system simpler for rented-out property
18Jan2011: Genuine buyer's problems
HWZ:
28Jan2011: Measures tough but meant to stabilise: Mah Bow Tan
SBoy:
28Jan2011: Progressive Property Taxes for SG
MyCarForum:
28Jan2011: Yet another measure to cool the SG property market
REACH:
28Jan2011: Feeling the effects of property cooling measures
People forum:
28Jan2011: Can property tax curb housing prices in China?
China post.com:
24Feb2010: Singapore shifting to new progressive property tax system
ST forum:
17Feb2011: 'Progressive Property Taxes for SG' to reduce the rich-poor divide