Hi, I'm Suna Ramesh for money mind today, I'm going to be finding out about why Singapore tracks the ultra rich, what benefits do they bring to the local economy and could a wealth tax slow down the momentum with me, Ryan lin, director at Bayfront Law in alliance with Nishimura and Asahi, Siva Kumar Sarabyn, senior partner at Crow Singapore and an ICO senior advisor at the Business Families Institute. Ryan,
tell us why Singapore has become a wealth hub. And what role has government regulation played
first? Usually is the tax friendly regime that we have. If you look at our taxes and what they are being taxed in their jurisdictions comparatively lower, that's a very big draw. The other one is really the certainty of our laws and the transparency and they find it very easy to do businesses in Singapore because of the certainty that they
have here. Some other reasons include languages because we speak english here and then we have the other languages that we speak around the region, so they find easy to be in here where they manage their wealth. It's easier to communicate. There are other reasons as well, including they want their Children to be schooled in the Singapore educational system, they like them educational system in Singapore. Our universities are ranked from the primary
education all the way to the tertiary levels. I think we do have a very good system.
Siva, do you think the pandemic accelerated the process
single for both is very strong ecosystem to support wealth planning and structuring, including family office structures, there are different aspects to this ecosystem. On one hand, we have a deep pool of talent such as asset managers, private bankers, legal
and finance professionals like tax advisors and financial advisors. On the other hand, there's already a sizable number of family offices in Singapore and this kind of creates a network to develop more investment opportunities for the family officers. What the covid pandemic has actually shown is that people value safety, stability and predictability in times of crisis. Now this goes for everyone, right? Not just for the high
net worth individuals. So from that perspective, Singapore has done very well in managing the, the pandemic and I think this has certainly enhanced Singapore's brand. So many high net worth individuals and families see Singapore as a safe place to look at and grow their
wealth talent and capital is so mobile these days. So tell us where the ultra rich here really come from.
Traditionally we do have family officers coming from neighboring countries like Indonesia increasingly for the past 2-3 years. I do see an uptick in Chinese clients coming to set up family offices in Singapore in so far as they have already have their capital built outside china, they tend to want to station it and manage it out of either Hong
kong or Singapore. But given what happened joe politically, there are some things that happened like the protests which changed our mindset in the past, Hong kong used to be perhaps a bit more vibrant in terms of the capital economy. But right now they do think that perhaps Singapore might be a soft, a safer bet for them now. Apple to Apple comparison. I do think there are a bit more chinese clients coming in to set up family office compared to other countries.
Anecdotally, I have received calls from clients who are saying that they don't agree with the policies they think is something that is inhibiting their wealth management, wealth preservation. They can't conduct business is in those countries so they will prefer to manage their wealth somewhere where they think is more pro business. Probably not only due to Covid, I think even pre Covid there has always been an interest for chinese finance work, individuals and families to
actually move to Singapore. But I think, you know, Covid situation accelerated that I'm going back to the same issue of safety. The fact that you know, Singapore provides that safe environment. It is also stable, is predictable. And the way the government actually managed the whole Covid crisis gives a lot of assurance to people that, you know, this is a good place where they can actually locate their wealth.
We should not just think it's largely Asia, many of our european and U. S. Families are also looking at investing in Asia where could they form a satellites family office, They might even have a dominant family office in their own home country, but to be in the same time zone, it will be great to be physically here on top of that, they are hoping to diversify from their own portfolio of subsidiaries in their own home country.
So Singapore as the HQ for co investment within the asian time zone and the asian region. So a stable political environment and laws, an attractive tax regime and resilience shown during the pandemic. Now, these are some of what draw the world's ultra rich here to Singapore. Many families come from nearby economic giants like china and India with china seeing an uptick in entrance since the
Hong kong protests and even the recent lockdowns there. But there is also interest from european and american families who want to establish a foot in asean the MES estimates there are about 700 single family officers or Sfo set up here and we've been talking about the benefits Singapore brings to the ultra rich, what benefits do they bring to Singapore? Many of these companies that are coming here are very, very strong on wanting to look at renewable. So green jobs that's called new arena.
I'm not eventually universities teach you how to do green jobs. So that's also magic because it doesn't matter which primary degree you have, you can actually do that primary degree, you
can be from stem, it can be from finance. It can even be from community management and then you could join one of the S. F. O. S. For internships or you can be part of another company that the S. F. O. Is investing in and because they would like to see things become more sustainable, they would like to see use of a circular economy where waste is being converted or food products are being up cycled,
there is that sustainability theme. So we learn together, we learn from the new technology they bring, we learn from the new jobs that they hope to create and they are happy to invest. I am very positive like everything else we want to make sure that there are safeguards, we want to make sure that our guardrails to ensure that the nation would definitely benefit from it. And I didn't use the word prosper, I'm using the word benefit because the impact should go beyond just monetary value.
What sort of safeguards are you talking about? If you look at the requirements for setting up a single family office, it's not low entry barrier sooner. So I was just looking at the 13th oh and 13. You alright? That was announced in april. So you're referring there to tax incentive regimes under the income tax act that are popular among those who are
looking to establish family officers here. Yes. So you know the fun size minimum is 50 million at the point of application but if you go with that minimum chances that you will not make it to the queue. So that's why I think the mes as well as the E. D. P. Felt that they do not want it to be just passive money management because then we know difference like any funds management outfit where it's so
easy because moving money is much easier. So a single family office have to employ people so there will be labor contracts. They even have their qualification that you need to make clear business spending so therefore you need to invest in real businesses even if it's just a startup. It's also good. We've all seen these headlines about these high value property purchases. Is there truth to the perception that the inflow of the ultra rich is really pushing up these property prices? Well
I blame them too. You see the high network buying up properties and again I think Minister Desmond lee was just saying that you do not comprise a big proportion of what we see in the papers but we do see property prices going up especially the private sector and the very high end sector going up.
And I think it's also a function of them coming in the sick residency in Singapore and it causes prices to rise and I think the government will be on hand in terms of stem duties is not really a matter of trying to text the reach is really a matter of trying to moderate the property prices
in the last six months. Media has contributed To this, wow another Chinese family buying a whole blog in the whole floor. So with that kind of you know news, everyone keeps thinking that oh these other people pushing up property prices. But in Singapore landed properties cannot be bought except if you are a citizen. And I think for many of the families that come they do want to invest in other things. But if you have to commit 200 million without earning any income that's a little
Bit ridiculous in rising inflation markets. So they took a plunge and they might put some of their assets under management into property assets. But that's not the only thing. And of course the government also want to make sure that they are not here to put in the property and the next minute pull it out. Therefore you have stem duties and if you are transacting it you have
to pay that increment that 30%. It's to ensure sure that there is value creation and value in giving back to the country and not just using it as a tax shelter equivalent or looking at parking the money momentarily. And what do you think about murmurings of a wealth tax? Could this decreased interest in Singapore? And can we even afford that
how our government works? Is that in terms of wealth taxes? They'll calibrate it very very carefully. I don't think we will go into a situation where we have net wealth taxes where you actually text on your physical taxable net assets so far we have been texting on transfer of wealth where I purchase goods and consume services. I pay my G. S. T. Or where I buy a property or buy cars, I get taxed with property stem duties or a R. S. Forecast.
It will be a bit more circumspect. I think the government will not risk capital flight where we impose a very blunt tool in terms of net wealth tax, it will be a very calibrated one. There is this tendency to see wealth tax as a form of like a Robin hood tax right where the rich attacks to provide for the poor, but we have to kind of see the philosophy or objective of wealth taxes.
So certainly there's a morality aspect that individuals do not become wealthy just by their own efforts, only that the society and the system also contribute to their success. It is kind of fair to expect some of their wealth to trickle down to the wider community. So basically the idea right, is that the more well off should contribute more. Now, if you see from that perspective, we already have some form of wealth taxes in Singapore.
The tax system has been made more progressive over the years. So just to give an example, it was announced in this year's budget that from the year of assessment 2020 for the personal income tax rate will increase to 23% And this is for chargeable income in excess of $500,000 and up to a million for chargeable income which is in excess of one million. The income tax rate has been increased to 24%. So in effect the high income earners will actually pay more taxes
now. Besides that, we also have a very progressive property tax regime. There's time duties on properties and taxes on cars in a sense when you put all these together right the more well off do actually pay more taxes I guess. And the question is should more be done. Some countries have tried implementing well tax and failed due to various challenges around things like enforcement, valuation and sustainability.
So looking at other countries, experience what I think, you know for Singapore, what would work is instead of adopting a broad brush approach. A more viable approach would be to look at areas which we wish to incentivize and areas which we would like to de incentivize. So this means structuring a wealth tax system that is probably
uniquely Singapore. One that supports our open economy productivity, entrepreneurial culture and foreign investments, but at the same time addresses issues like land scarcity and climate change. So for example, we can consider a deer approach towards property imposing higher stem duty on bias of good class bungalows, for example, or high end properties. Now, property tax can also be further increased for high end properties. Currently we already have the bias stamp stamp duty and so on.
Now a tax on gains derived from the sale of real property can also coexist with the existing stem duty regime and such a capital gains tax can be imposed on gains above a certain threshold to keep it in sync with the concept of wealth tax. So I think by doing this we can kind of influence decisions in a way for wealth to be deployed in more productive ways that is beneficial to the economy.
So really the sum is bigger than the whole.
We don't have much natural resources for financial clout. We do need these people come in to invest and new Singapore as a platform to invest in the surrounding the Southeast Asian region. We need this capital to drive the economy. Unfortunately, I do think that they will cost the cost of living to be raised in Singapore. But in the long run, I'm I mean if there's capital flight, if the economy in Singapore goes down, it hits the men on the street even worse on the balance. I do think that what
we are doing is correct. We welcome the rich to come in to Singapore, to park their wealth and at least we have opportunities to manage their wealth out of Singapore rather than any other jurisdictions.
We are not feeling in Asia right now because we have grown, but many of my friends in the U. S. Actually telling me it it's very challenging there right now, shops are getting close again, people are losing jobs. If with the ugly head of inflation leading to recession we should be grateful that there are possible new jobs that will be created. So don't let the external manifestation of well detract you from the
positive parts and the contributions that come. It's not a big number so a stable political environment, an attractive tax regime and resilience shown during the pandemic. These are some of what draw the world's ultra rich to Singapore. Many families come from nearby economic giants like china and India. There's been an uptick of interest from china since the
Hong kong protests and the recent lockdowns there. And while there is some truth to the ultra rich raising the cost of living experts warn that the flipside of not having them could be worse. This is in terms of things like lost capital and opportunities and investments and jobs. Finally any wealth tax will be carefully calibrated to ensure it does not risk capital flight and increase Singapore's attractiveness especially in these uncertain economic times.
I've been speaking with brian lin director at Bayfront Law in alliance with Nishimura and Asahi Siva Kumar, senior partner at Crow Singapore and any co senior advisor at the Business Families Institute and that's the top five things that you need to know about why Singapore attracts the ultra rich money mind is every saturday at 10:30 p.m. On media cop C. N. A. You can also catch us online at CNN dot asia on youtube.