Speeches

Thank you, Mdm Speaker. I would also like to thank Ms Jessica Tan for her comments on the changes that we are about to introduce.

Ms Tan has pointed out that owners who occupy their residential properties do not realise any gains from the property until the property is sold and suggested that we limit property tax to owner-occupied homes, only at the very high-end so as not to impact middle-income groups as well as retirees.

Mdm Speaker, property tax is our sole tax on wealth. It is not a form of income tax and, hence, property tax is payable regardless of whether it earns rental income for the owner. The principle of taxing property as an asset that is part of the owner’s wealth-holding is a common practice in several other countries, including the UK, Malaysia and Hong Kong where property tax is payable on owner-occupied properties just as in Singapore. So we are not the only ones that levy property tax on owner-occupied properties.

An important feature of our property tax system is that owner-occupied residential properties are already taxed at significantly lower rates than those held for investment purposes. And this is not the case in Malaysia and Hong Kong. For example, the property tax on a home with an annual value of $30,000 is $880 if it is owner-occupied and $3,000 otherwise. So we have already made quite a distinction between residential properties that are owner-occupied or held for investment purposes and there is a big concession being offered to owners who use it for residential purposes.

I share Ms Tan’s concern for middle-income and retiree households and we were particularly sensitive to this group of owners when we reviewed our property tax structure to make it more progressive. And that is why only the top 1% of homes will pay higher property taxes as a result of this change. The remaining 99% of homes which include all owner-occupied HDB flats and private properties with annual values of less $59,000, in fact, enjoy property tax savings of up to $80 per household. And this will be based on their 2013 annual values.

Just to give an example. A retiree residing at Teachers’ Housing Estate where almost all terraces and semi-detached houses have annual values of $30,000 or less, will enjoy property tax savings. Overall, the changes in the property taxes do not hurt most middle-income and retiree households. In fact, most will enjoy some savings.

As for the complexity of the new property tax rate structure, the majority of homes will, in fact, fall within the first two tiers of the property tax structure of 0% and 4%. But even so, property owners need not worry about calculating their property tax as IRAS will determine the annual value of the property and calculate the property tax payable accordingly.

Property owners who are interested to find out the property tax payable on their properties may also use the online property tax calculator available on IRAS’ website to compute the tax amount.

I also wanted to touch briefly on Ms Tan’s concern that some property owners may be worried because they do not know for a fact how much property tax they are required to pay the next time round. It is a valid concern and it has, in fact, influenced the way we decided on the basis on which to calculate property tax.

In Singapore, as in Hong Kong, the property tax is calculated on the basis of Annual Value which is an estimate of the rental that potentially the property could receive if it was put on the market for rental.

The alternative, which some other countries use is to base property on the Capital Value – what you would realise at the point of sale, for example.

We have chosen to use Annual Value rather than Capital Value for two reasons. The first is that there are far more rental transactions to base Annual Value computations on, as compared to Capital Value which is based on sales transactions. So this is one advantage --many more transactions that we can use. And as a result, there is less volatility, more stable.

The second advantage of using Annual Value instead of Capital Value is that rental tends to be more stable than sales. Sale prices are very much impacted by sentiments, the point of the economic cycle that you are in. So simply by choosing Annual Value instead of Capital Value, we are providing more certainty for home-owners, meaning from year to year, the changes should not be too large.

Nonetheless, I take her point and we will endeavour to ensure that these changes are properly explained and help property owners understand how the property tax is being computed. Of course, we will continue to review the new property tax structure to ensure that it remains as a progressive wealth tax.

I just have a final point, Madam, which is that Ms Tan had talked a little bit about the impact in dollar terms. One of the points that should be highlighted is that this set of changes to property tax was not designed, was not introduced for revenue-raising purpose. It was purely to make our property tax structure more progressive which was something that we did in 2011 and we are taking it one step further.

With that, Madam, I beg to move.