Stamp Duties (Amendment) Bill

Order for Second Reading read.

Mdm Deputy Speaker: Deputy Prime Minister and Minister for Finance.

3.01 pm

The Senior Minister of State for Finance (Mr Chee Hong Tat) (for the Deputy Prime Minister and Minister for Finance): Mdm Deputy Speaker, on behalf of the Deputy Prime Minister and Minister for Finance, I beg to move, "That the Bill be now read a Second time."

The Stamp Duties (Amendment) Bill 2022 introduces the Additional Conveyance Duties for Trust, or ACD (Trust), and imposes stamp duty in relation to the renunciation of interest by a beneficial owner in a residential property that is held on a trust.

If passed by Parliament, the amendments in the Bill will take effect on 10 May 2022, that is, one day after the First Reading of the Bill. As the Bill amendments are market-sensitive, this approach brings the Bill into effect the day after its introduction.

Before I go through the key amendments in the Bill, let me explain the rationale for the changes.

Today, residential properties can be acquired directly or via equity interests, including unlisted shares, in Property Holding Entities, or PHEs. These refer to entities whose primary tangible assets are residential properties in Singapore.

Direct acquisitions of residential property are subject to Buyer's Stamp Duty, or BSD, and, where applicable, Additional Buyer's Stamp Duty or ABSD.

Acquisitions of unlisted shares in PHEs are subject to share duty of 0.2%, based on the purchase price or the value of the shares. Such acquisitions may also be subject to ACD, if the acquirer is a significant owner of the PHE or becomes one after the acquisition. A significant owner is a person who beneficially owns at least 50% of the equity interests or voting power in the PHE.

ACD was introduced in 2017 to address the stamp duty rate differential that previously existed between the direct acquisition or disposal of residential properties and the acquisition or disposal of equity interests in PHEs. ABSD and ACD thus operate together to promote a stable and sustainable residential property market in Singapore.

Madam, previously, when a residential property was transferred into a living trust with no identifiable beneficial owner of the property at the time of transfer, ABSD did not apply.

As trusts are complex instruments and serve diverse purposes, the Government carefully studied the issue before deciding on how transfers of residential properties into trusts would be treated. We then introduced Additional Buyer's Stamp Duty for Trust, or ABSD (Trust), on 8 May 2022, which took effect on 9 May 2022.

ACD (Trust) follows from the introduction of ABSD (Trust). With ACD (Trust), ACD may apply when equity interests in a PHE are transferred into a living trust, regardless of whether there is an identifiable beneficial owner of those interests at the time of transfer.

These changes ensure similar stamp duty treatment for transfers of residential property or equity interests in a PHE, whether acquired directly or through a trust.

If an Institution of a Public Character, or IPC, is the sole beneficial owner of the residential property or equity interests in a PHE transferred into the trust, among other conditions, the IPC can apply for a remission of ABSD (Trust) or ACD (Trust). Today, donations of immovable property or unlisted shares to IPCs qualify for stamp duty remission.

Let me elaborate on ACD (Trust), which is, primarily, provided for under clause 5 of the Bill.

To determine whether ACD (Trust) applies to the acquisition of equity interests in a PHE that are to be held on a trust for beneficiaries who are not identifiable beneficial owners, we will consider the equity interests in the PHE that are to be held by the trustee of the trust for those beneficiaries.

This consideration is only of the portion of interests to be held on trust for those beneficiaries. For example, if the trustee is to hold 10% equity interests in a PHE for identifiable beneficial owners and another 5% for other beneficiaries who are not identifiable beneficial owners, only the 5% equity interests will be considered to be held by the trustee for the purpose of determining whether ACD (Trust) applies. ACD (Trust) will apply in such a case only if the trustee is a significant owner with at least 50% equity interests or voting power in the PHE or becomes one after the acquisition.

In determining the trustee's significant ownership status, the equity interests that are beneficially owned by the trustee's associates will be treated as beneficially owned by the trustee. A treatment for associates already exists in the ACD regime to cover arrangements under which individual buyers act in concert to purchase equity interests, with the objective of avoiding ACD. Examples of associates include parents, children, spouses and associated companies.

In assessing whether an identifiable beneficial owner of equity interests in a PHE is a significant owner of the PHE, the interests beneficially owned by the beneficial owner and the beneficial owner's associates will be considered.

In the instance where a trustee holds equity interests for a beneficiary who is not an identifiable beneficial owner of those interests at the time of their transfer into the trust, such a beneficiary is considered an associate of the trustee in determining whether the trustee is a significant owner of the PHE. This definition of associates will be provided for in subsidiary legislation.

If ACD (Trust) applies, the trustee will be liable to pay ACD (Trust) at the prevailing ACD rates of up to 44% for buyers, comprising 40% ABSD and up to 4% BSD.

ACD (Trust) may also apply if the trustee, being a significant owner of a PHE, disposes of the trustee's equity interests that were held on trust for a beneficiary who is not an identifiable beneficial owner. If the trustee disposes of the equity interests within three years after acquiring them, the trustee will be liable to pay ACD at the prevailing ACD rate of 12% for sellers, equivalent to the highest Seller's Stamp Duty, or SSD, rate.

In addition, where the trustee transfers equity interests to a beneficiary of the trust who was not an identifiable beneficial owner of those interests at the time they were transferred into the trust, the beneficiary will be liable to pay the prevailing ACD for buyers if the beneficiary is a significant owner or becomes one after the transfer. Clause 3 of the Bill provides for this.

Next, clause 4 of the Bill introduces a new section 22C which imposes a statutory duty on the original beneficial owner of a trust residential property who renounces his or her interest in the property, such that this interest reverts to the settlor of the trust. The original beneficial owner is one who beneficially owns the property at the time it is transferred into the trust.

The original beneficial owner must give a written notice of the renunciation to the settlor and to the Commissioner of Stamp Duties within a specified period. If he or she fails to do so, and the Commissioner becomes aware of this, for example, through IRAS' regular audit, the Commissioner may give the notice to the original beneficial owner and the settlor instead. For his or her failure to give notice, the original beneficial owner will be liable, on conviction, to a fine not exceeding $1,000.

The notice, whether given by the original beneficial owner or the Commissioner, will be chargeable with stamp duty. Specifically, the settlor will be liable to pay BSD and, where applicable, ABSD. If the interest in the trust residential property is renounced within three years after the original beneficial owner first has beneficial ownership of the interest, the original beneficial owner will also be liable to pay SSD.

For any duty paid late or not paid, the original beneficial owner or the settlor will have to pay a penalty of up to four times the duty payable, which is the penalty under the current Stamp Duties Act.

This treatment for the renunciation of interest by an original beneficial owner will ensure that where the beneficial ownership of a trust residential property reverts to the settlor, the settlor would have to pay stamp duty, similar to if he or she had acquired the property directly.

Clauses 8 and 9 make transitional provisions to modify the application of the Bill to matters occurring between 10 May 2022 and the date the amending Act is published in the Gazette. On that, Mdm Deputy Speaker, I beg to move.

Question proposed.

3.12 pm

Mr Louis Ng Kok Kwang (Nee Soon): Madam, this Bill introduces Additional Conveyance Duties for Trust (ACD (Trust)) and stamp duty treatment for the renunciation of interest in residential property held on trust. This will harmonise the stamp duty treatment for equity interests held in trust.

ACD (Trust), along with the introduction of Additional Buyer's Stamp Duty (ABSD) for transfer of residential property into a living trust – ABSD (Trust) – will help to raise tax revenues and go towards stabilising the property market.

I have two short clarifications to raise on this Bill.

First, in determining whether a grantee or grantor is a significant owner of a property holding entity, the new section 23 will take into account equity interests held by an associate of the grantor or grantee.

IRAS has provided on its website guidance on who is to be deemed an associate. This includes parties with an agreement or arrangement, whether oral, written, expressed, implied, to act together to acquire, hold or dispose of equity interest in, or to exercise votes.

Determining the existence of an oral or implied agreement or arrangement is a very fact-specific exercise that can be very time- and resource-consuming. It does not seem practical for IRAS to be undertaking such an assessment for every transaction. Can the Senior Minister of State clarify under what circumstances will IRAS undertake the process to determine the existence of any oral or implied agreement or arrangement?

Second, my clarification has to do with the related changes to the ABSD regime. The new ABSD (Trust) will only apply to instruments executed on or after 9 May 2022. It is not intended to apply retrospectively. There may be a case of a discretionary trust with no identifiable beneficial trust that was set up before 9 May 2022 where action was subsequently taken after 9 May 2022 to appoint assets to an identifiable beneficiary or to distribute assets to any identifiable beneficiary.

Can the Senior Minister of State clarify if the documents which arise after 9 May 2022 for such a trust is stampable under the new ABSD (Trust) regime? Madam, notwithstanding these short clarifications, I stand in support of the Bill.

3.15 pm

Mr Chua Kheng Wee Louis (Sengkang): Mdm Deputy Speaker, I would like, first, to declare my interest as an analyst looking at the real estate sector.

Mdm Deputy Speaker, when I first came across the term "stamp duties", I thought to myself, "that is a very expensive piece of stamp, compared to the 20- to 30-cent ones we stick on envelopes!" The second discovery was that, much to my disappointment, there was no physical adhesive stamp involved and all documents chargeable for stamp duty are "stamped" electronically or through the e-stamping system.

Most adult Singaporeans would have encountered, or rather, paid stamp duties at various points in their life, most commonly, when buying property. And, indeed, stamp duty is a tax on dutiable documents relating to any immovable property in Singapore and any stock or shares. These include the sale and purchase of property, lease or rental of property, mortgage of property and shares and shares transfers.

Beyond a revenue collection tool, stamp duty has also evolved to play a significant role as a macro-prudential tool to address risks in the property sector, especially in the past decade or so. This is the case not just in Singapore, but also in other jurisdictions, such as Hong Kong and Australia, as well.

From a simple Buyer's Stamp Duty, or BSD, this has now evolved to include Additional Buyer's Stamp Duty, or ABSD, and Seller's Stamp Duty, or SSD, for certain classes of property, such as residential and industrial properties. The differentiated rates of stamp duty have also been adjusted ever so frequently, most recently, in the December 2021 round of cooling measures where Singapore Citizens and Permanent Residents (PRs) buying their second and subsequent property and all foreigners and entities saw raised ABSD rates of 5% to 15%.

Nonetheless, as a tax that is levied on the market values of leases, properties and shares, stamp duty receipts are affected by the stage of the market cycle and, more importantly, should grow over time, in tandem with inflation. From around $1.26 billion in FY2000, stamp duty receipts have grown to $3.28 billion in FY2010 and $3.9 billion in FY2020. What is most impressive about this revenue source is that this growth over the past decade or so is despite the smaller Government Land Sales programme and a lower level of property market transactions today.

More recently, stamp duty receipts in FY2021 have turned out to be higher than what was initially projected by the Government, from an initial estimate of $4.25 billion in Budget 2021 to the revised estimate of $6.45 billion as of Budget 2022, to actual receipts of $6.76 billion, which, I believe, is a record high.

So, the positive surprise to stamp duty receipts worked out to be about $2.5 billion or 59% higher, as compared to what was initially budgeted for in Budget 2021. For FY2022, stamp duty receipts are expected to remain robust at $5.24 billion.

More broadly, I have also observed that actual operating revenue collections for FY2021 have turned out to be higher, as compared to what was initially budgeted for in Budget 2021 and even the revised estimate as of Budget 2022 announced earlier this year. Overall, operating revenues worked out to be $82.5 billion for FY2021, $5.8 billion higher, compared to $76.6 billion as initially budgeted for in Budget 2021 and $2.1 billion higher than the revised estimate of $80.4 billion as of Budget 2022.

This would already be more than sufficient to cover the $1.5 billion support package announced on 21 June. So, I do agree with the Government that there need not be a further draw from the reserves, as the package can simply be funded from the better-than-expected fiscal outturn in FY2021.

In fact, it also appears that while FY2021 operating revenues are higher by about $2.1 billion compared to the revised estimate presented earlier this year, both operating and development expenditures are lower by a combined $3.6 billion, which, I understand, is due to lower-than-budgeted spending on COVID-19 response measures as the Omicron variant turned out less severe than expected.

Combining higher revenues and lower expenses would mean that the Government's primary deficit improved by $5.7 billion, which, again, is more than sufficient to cover the recent $1.5 billion package. So, I do hope that the Government will stand ready to support Singaporeans should inflation and macroeconomic conditions deteriorate from hereon.

Returning to the proposed amendments to the Stamp Duty Act, I note that this Bill introduces the Additional Conveyance Duties for Trust and the stamp duty treatment for renunciation of interest in residential property that is held on a trust. MOF's announcement of the ACD (Trust) follows closely the announcement on the introduction of the ABSD (Trust) on 8 May 2022, which, I recognise, plugs a gap in the existing ABSD and ACD regimes.

I am reminded of a news article I read in The Business Times late last year, which reported that a certain crypto billionaire – well, at least back then – was at an early stage of buying a S$48.8 million Good Class Bungalow (GCB) as trustee for his nearly three-year-old child. This transaction apparently closed in March this year, but I wonder if headlines, such as this, prompted MOF to undertake a review of the ABSD regime?

More broadly, the practice of purchasing residential properties via trusts has been well documented since the implementation of the ABSD regime about a decade ago.

Not having to pay ABSD for what would have been a multiple property purchase, but with no access to financing were the key features of such purchases, in what some would call a loophole, albeit a well-publicised one.

While I recognise that this was born out of a periodic policy review, will the Minister shed light on what were the considerations and why is the gap only closed now and not years ago? What were the number and dollar value of such transactions which have made use of this gap in the ABSD regime, and was there a material increase in such transactions which prompted the MOF review?

That said, I view this development with a glass-half-full lens and it could even be seen as a form of wealth tax which has a targeted and narrow scope. With concerns that residential property prices have continued to be firm despite the December cooling measures and amid rising interest rate concerns, was the implementation of the ABSD and ACD (Trusts) meant to achieve a signalling effect to the market, particularly amid news just last month of how an individual acquired 20 units at Canninghill Piers, a luxury condominium along the Singapore River, for over S$85 million, despite the recently raised ABSD rates for foreigners in December last year?

With the introduction of ACD (Trust), as included in the Bill, I recognise that this will go hand in hand with the policy intent of ABSD (Trust), of which I am supportive. I am again reminded of news from yesteryears, when ACD itself first came into effect in March 2017. Unbeknownst to many, stamp duties on the transfer of shares in a company are only levied on net asset values, and at a mere 0.2%, significantly lower in rate and tax base, as compared to buyers' stamp duties and ABSD levied on the value of the residential properties themselves. Back then, there were several bulk sales of properties by developers via the sale of property holding entities, to avoid extension charges under the qualifying certificate, or QC, conditions for not completing the sale of all residential properties by certain deadlines. This loophole was, subsequently, closed with the introduction of ACD.

While I recognise the policy intent of QC and ABSD in ensuring developers do not hoard inventory, the current ABSD remission rules for developers, in particular, cause greater cyclicality in the residential market, arguably, as it imposes harsh ABSD penalties for failing to complete the sale of all residential units within the prescribed period. This would apply, regardless of whether the project has 2,000, 200 or 20 units to begin with, and could even have discouraged developers from triggering for what would have been our first master developer site in Kampong Bugis. As part of its periodic policy review, is MOF looking at reviewing the ABSD remission conditions for property developers to ensure greater stability in the property market?

Finally, I read with interest recent news in Australia, which highlighted that New South Wales is planning to give first-time home buyers a choice of not paying for upfront stamp duty but to replace this with an annual property tax which is paid over a period of time instead.

Stamp duties represent a not insignificant upfront cost for home buyers even in Singapore. Using the median resale price of a 4-room HDB flat in Sengkang of $510,000, stamp duties would amount to $9,900. While this may not mean much in percentage terms as compared to the price of the flat, in absolute terms, assuming one saves $500 a month, stamp duties could represent close to 20 months' worth of savings. Again, as part of a periodic policy review, would the Government consider such a move in reducing upfront property purchase costs, particularly with continuing momentum in increasing HDB resale prices, which are now up by a worrying 19% in the last 18 months alone? Notwithstanding my clarifications, I support the Bill.

3.24 pm

Mr Leong Mun Wai (Non-Constituency Member): Mdm Deputy Speaker, I support the Bill. However, the Government should have introduced this Bill at least 10 years ago, perhaps around 2011, when the Additional Buyers' Stamp Duty (ABSD) was introduced. We are disappointed that the Government has allowed loopholes in the ABSD scheme to be left open and exploited by some rich buyers of properties for so long.

We ask the Government to tell us the number and value of properties transferred to living trusts since the introduction of ABSD in 2011. And are there any properties being sold to realise a profit while under a living trust without paying the ABSD?

Given Singapore already has a tax regime that favours the rich, such tax loopholes are inexcusable and should be dealt with strictly. Thus, we propose two amendments to this new Bill.

Firstly, to apply this Bill retrospectively to all properties transferred to living trusts since the introduction of ABSD in 2011 and the ABSD be collected retrospectively, based on the ABSD rates at the time of the purchase.

Secondly, the ABSD should be charged at the point of transfer from now on, only to be refunded after the settler has passed away. This will eliminate the trouble of having to determine whether the living trust is genuine or not.

Mdm Deputy Speaker, in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] Deputy Speaker, I support the Bill to levy stamp duty on living trusts. However, the Government should have introduced this Bill at least 10 years ago, around 2011, when the Additional Buyer Stamp Duty (ABSD) was introduced.

We are disappointed that the Government has allowed loopholes in ABSD to be left open and exploited by some rich buyers of properties for so long.

We ask the Government to tell us the number and value of properties transferred to living trusts since the introduction of ABSD in 2011. And are there any properties being sold to realise a profit while under a living trust without paying ABSD?

Given Singapore already has a tax regime that favours the rich, such tax loopholes are inexcusable and should be dealt with strictly. Thus, we propose two amendments to this new Bill. Firstly, to apply this new Bill retrospectively to all properties transferred to living trusts since the introduction of ABSD in 2011 and ABSD should be collected retrospectively, based on ABSD rates at the time of the purchases.

Secondly, ABSD should be charged at the point of transfer from now on, only to be refunded after the settlor has passed away. This will eliminate the trouble of having to determine whether the living trust is genuine or not.

Deputy Speaker, I support the Bill and propose that a thorough review of property market policies be conducted by the Government before Singaporeans are further disadvantaged.

(In English): Mdm Deputy Speaker, I support the Bill and propose that a more thorough review of the property market policies be conducted by the Government before Singaporeans are further disadvantaged.

Mdm Deputy Speaker: Order. I propose to take a break now and I suspend the Sitting and will take the Chair at 3.50 pm.

Sitting accordingly suspended

at 3.30 pm until 3.50 pm.

Sitting resumed at 3.50 pm.

[Deputy Speaker (Ms Jessica Tan Soon Neo) in the Chair]

Stamp Duties (Amendment) Bill

Debate resumed.

Mdm Deputy Speaker: Order. Mr Don Wee.

3.50 pm

Mr Don Wee (Chua Chu Kang): Mdm Deputy Speaker, I declare that I am working with a Singaporean bank and I am a council member of the Institute of Singapore Chartered Accountants, but I do not handle any client.

I rise in support of the Bill. I am in favour of applying the Additional Buyer’s Stamp Duty (ABSD) of 35% on any transfer of residential property into a living trust, even if there is no identifiable beneficial owner at the point of transfer. As such trusts are instruments only available to the ultra-high-net-worth individuals who can afford to pay for the properties in cash, it is all the more important that we close the loopholes which may be exploited by such buyers to avoid paying ABSD.

Similarly, the introduction of the Additional Conveyance Duties (ACD) for Trust and the stamp duty treatment for renunciation of interest in residential property that is held on a trust, are welcomed, particularly during this period of widening income equality. I agree with the Ministry that such measures are necessary to promote an equitable and sustainable residential property market, where the high-net-worth individuals should not have a particular advantage in avoiding taxes which other property buyers would have to pay.

I have some questions.

Firstly, as the amendments only apply to instruments executed from 9 May 2022, what about a pre-existing trust if a trustee subsequently appoints assets to an identifiable beneficiary or distributes assets to any identifiable beneficiary?

Secondly, would the amendments apply to trusts incorporated overseas, for example, in a tax haven like British Virgin Islands? Investors may seek to transfer ownership of properties into such trusts to avoid the duties.

Since ABSD was introduced in December 2011, the Government has reviewed and raised the rates, to ensure a stable residential property market. Government has also made refinements, including introducing ACD, to ensure that the policies meet the objectives. However, based on feedback that we hear from time to time, the interest to find ways to avoid such duties will remain and even grow stronger. What will MOF do to ensure that ABSD and ACD will not be easily avoided? Mdm Deputy Speaker, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Mdm Deputy Speaker, how much more are these stamp duties expected to contribute to our tax revenues? Lastly, may I ask the Minister what is the expected impact on Singapore as a wealth management hub? Would these changes reduce Singapore’s appeal to the ultra-high-net-worth group?

Mdm Deputy Speaker: Senior Minister of State Chee Hong Tat.

3.53 pm

Mr Chee Hong Tat: Mdm Deputy Speaker, I thank Members Mr Louis Ng, Mr Louis Chua, Mr Leong Mun Wai and Mr Don Wee for speaking on the Bill and giving their support for the proposed amendments. Let me address their queries.

Madam, ABSD (Trust) is applicable if the residential property is transferred into a living trust on or after 9 May 2022. This applies for both pre-existing trusts and new trusts created on or after 9 May 2022. Living trusts are trusts that come into existence during the lifetime of the person who created it.

Mr Louis Ng and Mr Don Wee have asked whether ABSD (Trust) applies where: the transfer of residential property into a living trust took place before 9 May 2022, which is the effective date of ABSD (Trust); and there is a subsequent appointment or distribution of the property to a beneficiary of the trust on or after 9 May 2022.

Since the transfer of residential property took place before 9 May 2022, ABSD (Trust) does not apply, including to a subsequent distribution of the property by the trustee to a beneficiary of the trust on or after 9 May 2022.

Madam, Mr Louis Chua and Mr Leong Mun Wai asked why ABSD (Trust) and ACD (Trust) were not introduced earlier. Before the introduction of ABSD (Trust), transfers of residential property into a trust with an identifiable beneficial owner are subject to ABSD. So, the situation is not entirely as what Mr Louis Chua described and certainly not what Mr Leong Mun Wai said in his speech.

ABSD collected for transfers into trusts where there is an identifiable beneficial owner of the property was not separately tracked before 9 May 2022. It was instead accounted for according to the profile of the identifiable beneficial owner. So, we look at the profile of the beneficial identifiable owner to determine what is the ABSD that is due.

As I have explained in my Second Reading speech, ABSD would not apply before 9 May 2022 for trusts which do not have an identifiable beneficial owner. And this is what the proposed changes for ABSD (Trust) and ACD (Trust) seek to address – to ensure that ABSD and ACD continue to remain relevant as property market cooling measures, irrespective of whether trusts are used or not.

Trusts can be set up for different reasons, including for non-tax purposes, such as to provide for charitable giving. They can involve highly complex arrangements. Given the diversity and complexity of trust instruments, we decided to study the proposed changes carefully and do a thorough review, so that we could achieve our policy objectives while avoiding unintended consequences.

I am glad that all the Members who have spoken agree with the proposed changes. This will allow us to move forward to apply the new changes with effect from 9 May in the manner which I described earlier. [Please refer to "Clarification by Senior Minister of State for Finance", Official Reports, 5 July 2022, Vol 95, Issue No 64, Corrections by Written Statements section.]

It is important for us to also remember that when we implement some of these changes, we also have to bear in mind how they will fit in with our overall system of governance and rule of law. Mr Leong Mun Wai mentioned that we should – if I heard him correctly – retrospectively apply some of these changes to previous transfers, previous transactions. I think it would not be fair or appropriate for us to do that – to apply these changes retrospectively – because this will undermine the rule of law and it would also affect the confidence that the public and businesses have in the certainty that Singapore offers.

Mr Leong Mun Wai also mentioned whether we could refund ABSD only when the creator of the trust or the settler has died, again, if I heard him correctly. Madam, we collect fully, upfront, at the point of transfer of the property into the trust. That is what we would do. So, we actually collect the full amount upfront and we only refund when certain conditions are met, and you would have to apply. So, this, actually, is even better than what Mr Leong Mun Wai mentioned, which is to only refund when the creator or the settler has passed away.

Importantly, Madam, we also have to take a look at what is our overall tax and transfer system. So, I do not agree with what Mr Leong Mun Wai said that our tax and transfer system benefit the rich. That is not true.

Overall, our tax and transfer system is fair and progressive and, in fact, the Government has been raising asset-related taxes repeatedly. We did this in Budget 2010, 2013, 2018 and, more recently, in 2022. In Budget 2015 and Budget 2022, we also raised the income tax for higher income earners.

So, overall, our system of taxes and benefits is a fair and progressive one. It is one where everyone contributes but those who have more will pay more, contribute more than what they receive in terms of benefits. It is a fair and progressive system.

Madam, Mr Louis Ng asked about how IRAS determines the existence of an associate relationship between parties with an oral or implied agreement or arrangement to acquire, hold or dispose of equity interests or to exercise votes in a property holding entity. The associate relationship Mr Louis Ng refers to is part of the current definition of "associates" under the existing ACD regime and it is not an amendment that is being proposed in this Bill.

I had earlier explained that where a trustee holds equity interests for a beneficiary who is not an identifiable beneficial owner of those interests at the time of their transfer into the trust, such a beneficiary is considered an associate of the trustee in determining whether the trustee is a significant owner of the PHE. And this definition of associates will be provided for in subsidiary legislation.

Let me briefly explain how IRAS will determine the existence of an oral or implied agreement or arrangement.

Today, if ACD is payable, the grantee or grantor is required to stamp the instrument and submit to IRAS a copy of the instrument and supporting documents.

These supporting documents include a declaration of associates and the equity interests in the PHE that they beneficially own. And this includes associates who are parties with an oral or implied agreement or arrangement.

IRAS will conduct a thorough assessment of the documents submitted, including verifying the existence of any oral or implied agreement or arrangement, using a risk-based approach. For instance, IRAS may interview the parties involved.

Madam, the large majority of our taxpayers comply with stamp duty requirements. We have stringent enforcement in Singapore and there are stiff penalties for tax evasion, whether on stamp duties or other taxes. So, for people who are thinking of circumventing the rules, please do not, because there will be a price to pay when you are caught.

Mr Don Wee asked how much more the new stamp duties are expected to contribute to Government revenue. Mr Louis Chua also alluded to this in his speech.

ABSD (Trust), ACD (Trust) and the imposition of stamp duty on the renunciation of a trust property, are not intended to be wealth taxes or revenue-raising measures. Rather, they are part of our residential property market cooling measures.

We are unable to determine at this juncture the revenue that will be raised from ABSD (Trust), ACD (Trust) and the stamp duty on the renunciation of a trust property as this depends on the extent to which individuals will transfer a property or equity interests in PHEs into living trusts in future.

Mr Don Wee has asked whether the amendments would apply to a trust created overseas.

These amendments are applicable to two groups of instruments. First, an instrument executed in Singapore. Second, an instrument executed outside of Singapore, relating to a property situated in Singapore and received in Singapore. So, this is regardless of whether the trust is created locally or overseas.

Mr Louis Chua asked whether MOF is reviewing the ABSD remission conditions for housing developers.

Madam, the Ministry answered a Parliamentary Question on this in November 2021 and our position remains the same. The three- and five-year deadlines for non-licensed and licensed developers to sell their developments remain relevant to ensure a timely sale of such units to the market instead of keeping them for future sale for possibly higher prices. The deadlines also encourage developers to bid for residential land prudently. The vast majority of developers are able to meet these deadlines.

Mr Louis Chua also asked if the Government would consider a move similar to what was done in New South Wales, Australia, to replace the upfront stamp duty with an annual property tax for first-time home buyers who purchase properties below a certain amount. In this case, it was A$1.5 million.

According to reports from the New South Wales government, the home ownership rate had declined for each generation since the baby boomers. For example, 60% of people born between 1942 and 1951 owned homes by age 25 to 34. This dropped by 15 percentage points to 45% for those born 1982 to 1991.

So, the context in Singapore is different. Our home ownership rates remain high. About 90% of Singaporean families own their own homes. And there is no ABSD for Singaporeans who are buying their first residential property.

Importantly, we have good quality public housing which caters to the housing needs of the large majority of our first-time buyers. With subsidies and grants and with mortgage financing provided by HDB, our public housing – HDB flats – remains affordable for first-time home buyers. Close to 90% of first-timer families who bought their flats this year service their housing loans fully using CPF, with no cash payments.

So, it is important for us to bear in mind the differences in our context and our situation when we consider whether we want to adopt ideas and practices from overseas jurisdictions. Their policies are designed to tackle their challenges, which may not be the same as what we face in Singapore.

Finally, Mr Don Wee asked about the expected impact on Singapore as a wealth management hub.

ABSD or ACD already apply to purchases of residential properties in Singapore or transfers of equity interests in property holding entities, as part of our property market cooling measures. The proposed amendments in this Bill are to ensure a fair and consistent tax treatment when such purchases or transfers are made through trusts.

We do not expect ABSD (Trust), ACD (Trust) and the imposition of stamp duty on the renunciation of a trust property to affect Singapore's position as a wealth management hub. Mdm Deputy Speaker, I beg to move.

Mdm Deputy Speaker: Any clarifications? Mr Leong Mun Wai.

4.07 pm

Mr Leong Mun Wai: Mdm Deputy Speaker, thank you. And I thank the Senior Minister of State for replying to my questions. I would like to make two clarifications.

One is, my understanding is that, in the past, before 9 May 2022, ABSD is not collected from trusts that do not have identifiable beneficiaries. If that is the case, if my understanding is right, can I have the number of trusts that have taken advantage of this ABSD loophole? If the number is available, I would like to have it. If not, another time will do.

Secondly, with regard to my point about Singapore being a place that favours the rich, of course, it can be a matter of opinion. But I would like to ask the Senior Minister of State if he has the following characteristics inside the tax system, does he consider it favouring the rich or not.

One, no estate duty.

Two, low personal income taxes, even at 22% or 24% after the revision this year, after the Budget. The effective income tax is actually lower than that. Of course, if you are very rich, you have an income of $5 million, you may be very close to the 24%. But our sliding income tax structure means that the effective tax rate is actually lower than the highest income tax rate. So, generally, our personal income tax is very low.

Third, no capital gains tax.

Fourth, no tax on interest, one layer of tax on dividends only, which is quite extraordinary, compared to other countries.

So, with all these, can we still say that our system is one that favours the rich?

Mdm Deputy Speaker: Senior Minister of State.

Mr Chee Hong Tat: Thank you, Mdm Deputy Speaker.

Madam, we do not have data on the number of property transfers that had taken place through trust where there is no identifiable beneficiary owner before 9 May 2022. But as I have said earlier in my response, I thank Members for their support. If Parliament approves this Bill, with the amendments, moving forward, this is something that, therefore, we will be able to track, we will be able to impose, to ensure that ABSD and ACD are collected, whether it is done directly or through trusts.

I do not wish to veer into a separate debate about the tax system in general because this debate today is on the Second Reading of the Stamp Duties (Amendment) Bill. So, we will focus on the contents of the Bill.

But maybe, just to reiterate, to assure Mr Leong Mun Wai and also Members of the House, that if you look at our tax and benefits system as a whole, and rather than pick and choose individual items, if you consider the tax and benefits system as a whole, where taxes are paid, benefits are given, reallocations are done, Singapore's system is one which is fair and progressive. Why? Because everybody contributes, but those who earn more, those who have more, will contribute more. Those who have less, those who are more vulnerable, the lower-income, they will receive more benefits and more help. That, to me, is what a fair and just society is about.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Chee Hong Tat].

Bill considered in Committee; reported without amendment; read a Third time and passed.