Speaker 1: Hi, I'm Suna Ramesh for money mind today, I'm going
Speaker 1: to be finding out about why Singapore tracks the ultra rich,
Speaker 1: what benefits do they bring to the local economy and
Speaker 1: could a wealth tax slow down the momentum with me,
Speaker 1: Ryan lin, director at Bayfront Law in alliance with Nishimura
Speaker 1: and Asahi, Siva Kumar Sarabyn, senior partner at Crow Singapore
Speaker 1: and an ICO senior advisor at the Business Families Institute. Ryan,
Speaker 1: tell us why Singapore has become a wealth hub. And
Speaker 1: what role has government regulation played
Speaker 2: first? Usually is the tax friendly regime that we have.
Speaker 2: If you look at our taxes and what they are
Speaker 2: being taxed in their jurisdictions comparatively lower, that's a very
Speaker 2: big draw.
Speaker 2: The other one is really the certainty of our laws
Speaker 2: and the transparency and they find it very easy to
Speaker 2: do businesses in Singapore because of the certainty that they
Speaker 2: have here. Some other reasons include languages because we speak
Speaker 2: english here and then we have the other languages that
Speaker 2: we speak around the region,
Speaker 2: so they find easy to be in here where they
Speaker 2: manage their wealth. It's easier to communicate. There are other
Speaker 2: reasons as well, including they want their Children to be
Speaker 2: schooled in the Singapore educational system, they like them educational
Speaker 2: system in Singapore. Our universities are ranked from the primary
Speaker 2: education all the way to the tertiary levels. I think
Speaker 2: we do have a very good system.
Speaker 1: Siva, do you think the pandemic accelerated the process
Speaker 2: single
Speaker 2: for both is very strong ecosystem to support wealth planning
Speaker 2: and structuring, including family office structures, there are different aspects
Speaker 2: to this ecosystem. On one hand, we have a deep
Speaker 2: pool of talent such as asset managers, private bankers, legal
Speaker 2: and finance professionals like tax advisors and financial advisors. On
Speaker 2: the other hand, there's already a sizable number of family
Speaker 2: offices in Singapore
Speaker 2: and this kind of creates a network to develop more
Speaker 2: investment opportunities for the family officers.
Speaker 2: What the covid pandemic has actually shown is that people
Speaker 2: value safety, stability and predictability in times of crisis. Now
Speaker 2: this goes for everyone, right? Not just for the high
Speaker 2: net worth individuals. So from that perspective, Singapore has done
Speaker 2: very well in managing the,
Speaker 2: the pandemic and I think this has certainly enhanced Singapore's brand.
Speaker 2: So many high net worth individuals and families see Singapore
Speaker 2: as a safe place to look at and grow their
Speaker 1: wealth talent and capital is so mobile these days. So
Speaker 1: tell us where the ultra rich here really come from.
Speaker 2: Traditionally we do have family officers coming from neighboring countries
Speaker 2: like Indonesia increasingly for the past 2-3 years. I do
Speaker 2: see an uptick in Chinese clients coming to set up
Speaker 2: family offices in Singapore in so far as they have
Speaker 2: already
Speaker 2: have their capital built outside china, they tend to want
Speaker 2: to station it and manage it out of either Hong
Speaker 2: kong or Singapore. But given what happened joe politically, there
Speaker 2: are some things that happened
Speaker 2: like the protests which changed our mindset in the past,
Speaker 2: Hong kong used to be perhaps a bit more vibrant
Speaker 2: in terms of the capital economy. But right now they
Speaker 2: do think that perhaps Singapore might be a soft, a
Speaker 2: safer bet for them now. Apple to Apple comparison. I
Speaker 2: do think there are a bit more chinese clients coming
Speaker 2: in to set up family office compared to other countries.
Speaker 2: Anecdotally, I have received calls from clients who are saying
Speaker 2: that they don't agree with the policies they think is
Speaker 2: something that is inhibiting their wealth management, wealth preservation. They
Speaker 2: can't conduct business is in those countries so they will
Speaker 2: prefer to manage their wealth somewhere where they think is
Speaker 2: more pro business. Probably not only due to
Speaker 2: Covid, I think even pre Covid there has always been
Speaker 2: an interest for chinese finance work, individuals and families to
Speaker 2: actually move to Singapore. But I think, you know, Covid
Speaker 2: situation accelerated that I'm going back to the same issue
Speaker 2: of safety. The fact that you know, Singapore provides that
Speaker 2: safe environment. It is
Speaker 2: also stable, is predictable. And the way the government actually
Speaker 2: managed the whole Covid crisis gives a lot of assurance
Speaker 2: to people that, you know, this is a good place
Speaker 2: where they can actually locate their wealth.
Speaker 1: We should not just think it's largely Asia, many of
Speaker 1: our european and U. S. Families are also looking at
Speaker 1: investing in Asia where could they form a satellites
Speaker 1: family office, They might even have a dominant family office
Speaker 1: in their own home country, but to be in the
Speaker 1: same time zone, it will be great to be physically
Speaker 1: here on top of that, they are hoping to diversify
Speaker 1: from their own portfolio of subsidiaries in their own home country.
Speaker 1: So Singapore as the HQ for co investment within the
Speaker 1: asian time zone and the asian region.
Speaker 1: So a stable political environment and laws, an attractive tax
Speaker 1: regime and resilience shown during the pandemic. Now, these are
Speaker 1: some of what draw the world's ultra rich here to Singapore.
Speaker 1: Many families come from nearby economic giants like china and
Speaker 1: India with china seeing an uptick in entrance since the
Speaker 1: Hong kong protests and even the recent lockdowns there. But
Speaker 1: there is also interest from european and american families who
Speaker 1: want to establish a foot in asean
Speaker 1: the MES estimates there are about 700 single family officers
Speaker 1: or Sfo set up here and we've been talking about
Speaker 1: the benefits Singapore brings to the ultra rich, what benefits
Speaker 1: do they bring to Singapore? Many of these companies that
Speaker 1: are coming here are very, very strong on wanting to
Speaker 1: look at renewable. So green jobs that's called new arena.
Speaker 1: I'm not
Speaker 1: eventually universities teach you how to do green jobs. So
Speaker 1: that's also magic because it doesn't matter which primary degree
Speaker 1: you have, you can actually do that primary degree, you
Speaker 1: can be from stem, it can be from finance. It
Speaker 1: can even be from community management and then you could
Speaker 1: join one of the S. F. O. S. For internships
Speaker 1: or you can be part of another company
Speaker 1: that the S. F. O. Is investing in and because
Speaker 1: they would like to see things become more sustainable, they
Speaker 1: would like to see use of a circular economy where
Speaker 1: waste is being converted or food products are being up cycled,
Speaker 1: there is that sustainability theme. So we learn together, we
Speaker 1: learn from the new technology they bring, we learn from
Speaker 1: the
Speaker 1: new jobs that they hope to create and they are
Speaker 1: happy to invest. I am very positive like everything else
Speaker 1: we want to make sure that there are safeguards, we
Speaker 1: want to make sure that our guardrails to ensure that
Speaker 1: the nation would definitely benefit from it. And I didn't
Speaker 1: use the word prosper, I'm using the word benefit because
Speaker 1: the impact should go beyond just monetary value.
Speaker 1: What sort of safeguards are you talking about? If you
Speaker 1: look at the requirements for setting up a single family office,
Speaker 1: it's not low entry barrier sooner. So I was just
Speaker 1: looking at the 13th oh and 13. You alright? That
Speaker 1: was announced in april.
Speaker 1: So you're referring there to tax incentive regimes under the
Speaker 1: income tax act that are popular among those who are
Speaker 1: looking to establish family officers here. Yes. So you know
Speaker 1: the fun size minimum is 50 million at the point
Speaker 1: of application but if you go with that minimum chances
Speaker 1: that you will not make it to the queue.
Speaker 1: So that's why I think the mes as well as
Speaker 1: the E. D. P. Felt that they do not want
Speaker 1: it to be just passive money management because then we
Speaker 1: know difference like any funds management outfit where it's so
Speaker 1: easy because moving money is much easier. So a single
Speaker 1: family office have to employ people so there will be
Speaker 1: labor contracts.
Speaker 1: They even have their qualification that you need to make
Speaker 1: clear business spending so therefore you need to invest in
Speaker 1: real businesses even if it's just a startup. It's also good.
Speaker 1: We've all seen these headlines about these high value property purchases.
Speaker 1: Is there truth to the perception that the inflow of
Speaker 1: the ultra rich is really pushing up these property prices?
Speaker 1: Well
Speaker 2: I blame them too.
Speaker 2: You see the high network buying up properties and again
Speaker 2: I think Minister Desmond lee was just saying that you
Speaker 2: do not comprise a big proportion of what we see
Speaker 2: in the papers
Speaker 2: but we do see property prices going up especially the
Speaker 2: private sector and the very high end sector going up.
Speaker 2: And I think it's also a function of them coming
Speaker 2: in the sick residency in Singapore and it causes prices
Speaker 2: to rise and I think the government will be on
Speaker 2: hand in terms of stem duties is not really a
Speaker 2: matter of trying to text the reach is really a
Speaker 2: matter of trying to moderate the property prices
Speaker 1: in the last six months. Media has contributed
Speaker 1: To this, wow another Chinese family buying a whole blog
Speaker 1: in the whole floor. So with that kind of you
Speaker 1: know news, everyone keeps thinking that oh these other people
Speaker 1: pushing up property prices. But in Singapore landed properties cannot
Speaker 1: be bought except if you are a citizen. And I
Speaker 1: think for many of the families that come they do
Speaker 1: want to invest in other things. But if you have
Speaker 1: to commit 200 million without earning any income that's a
Speaker 1: little
Speaker 1: Bit ridiculous in rising inflation markets. So they took a
Speaker 1: plunge and they might put some of their assets under
Speaker 1: management into property assets. But that's not the only thing.
Speaker 1: And of course the government also want to make sure
Speaker 1: that they are not here to put in the property
Speaker 1: and the next minute pull it out. Therefore you have
Speaker 1: stem duties and if you are transacting it you have
Speaker 1: to pay that increment that 30%. It's to ensure
Speaker 1: sure that there is value creation and value in giving
Speaker 1: back to the country and not just using it as
Speaker 1: a tax shelter equivalent or looking at parking the money momentarily.
Speaker 1: And what do you think about murmurings of a wealth tax?
Speaker 1: Could this decreased interest in Singapore? And can we even
Speaker 1: afford that
Speaker 2: how our government works? Is that in terms of wealth taxes?
Speaker 2: They'll calibrate it very very carefully. I don't think we
Speaker 2: will go into a situation where we have net wealth
Speaker 2: taxes
Speaker 2: where you actually text on your physical taxable net assets
Speaker 2: so far we have been texting on transfer of wealth
Speaker 2: where I purchase goods and consume services. I pay my G. S. T.
Speaker 2: Or where I buy a property or buy cars, I
Speaker 2: get taxed with property stem duties or a R. S. Forecast.
Speaker 2: It will be a bit more circumspect. I think
Speaker 2: the government will not risk capital flight where we impose
Speaker 2: a very blunt tool in terms of net wealth tax,
Speaker 2: it will be a very calibrated one. There is this
Speaker 2: tendency to see wealth tax as a form of like
Speaker 2: a Robin hood tax right where the rich attacks to
Speaker 2: provide for the poor, but we have to kind of
Speaker 2: see the philosophy or objective of wealth taxes.
Speaker 2: So certainly there's a morality aspect that individuals do not
Speaker 2: become wealthy just by their own efforts, only that the
Speaker 2: society and the system also contribute to their success. It
Speaker 2: is kind of fair to expect some of their wealth
Speaker 2: to trickle down to the wider community.
Speaker 2: So basically the idea right, is that the more well
Speaker 2: off should contribute more. Now, if you see from that perspective,
Speaker 2: we already have some form of wealth taxes in Singapore.
Speaker 2: The tax system has been made more progressive over the years.
Speaker 2: So just to give an example, it was announced in
Speaker 2: this year's budget that from the year of assessment 2020
Speaker 2: for the personal income tax rate will increase to 23%
Speaker 2: And this is for chargeable income in excess of $500,000
Speaker 2: and up to a million for chargeable income which is
Speaker 2: in excess of one million. The income tax rate has
Speaker 2: been increased to 24%. So in effect the high income
Speaker 2: earners will actually pay more taxes
Speaker 2: now. Besides that, we also have a very progressive property
Speaker 2: tax regime. There's time duties on properties and taxes on
Speaker 2: cars in a sense when you put all these together
Speaker 2: right the more well off do actually pay more taxes
Speaker 2: I guess. And the question is should more be done.
Speaker 2: Some countries have tried implementing well tax and failed due
Speaker 2: to various challenges around things like enforcement, valuation and sustainability.
Speaker 2: So looking at other countries, experience what I think, you
Speaker 2: know for Singapore, what would work is instead of adopting
Speaker 2: a broad brush approach. A more viable approach would be
Speaker 2: to look at areas which we wish to incentivize
Speaker 2: and areas which we would like to de incentivize. So
Speaker 2: this means structuring a wealth tax system that is probably
Speaker 2: uniquely Singapore. One that supports our open economy productivity, entrepreneurial
Speaker 2: culture and foreign investments, but at the same time addresses
Speaker 2: issues like land scarcity and climate change.
Speaker 2: So for example, we can consider a deer approach towards
Speaker 2: property imposing higher stem duty on bias of good class bungalows,
Speaker 2: for example, or high end properties. Now, property tax can
Speaker 2: also be further increased for high end properties. Currently we
Speaker 2: already have the bias stamp stamp duty and so on.
Speaker 2: Now a tax on gains derived from the sale of
Speaker 2: real property can also coexist with the existing stem duty
Speaker 2: regime
Speaker 2: and such a capital gains tax can be imposed on
Speaker 2: gains above a certain threshold to keep it in sync
Speaker 2: with the concept of wealth tax.
Speaker 2: So I think by doing this we can kind of
Speaker 2: influence decisions in a way for wealth to be deployed
Speaker 2: in more productive ways
Speaker 2: that is beneficial to the economy.
Speaker 1: So really the sum is bigger than the whole.
Speaker 2: We don't have much natural resources for financial clout. We
Speaker 2: do need these people come in to invest and new
Speaker 2: Singapore as a platform to invest in the surrounding the
Speaker 2: Southeast Asian region. We need this capital to drive the economy. Unfortunately,
Speaker 2: I do think that they will cost the cost of
Speaker 2: living to be raised in Singapore. But in the long run,
Speaker 2: I'm
Speaker 2: I mean if there's capital flight, if the economy in
Speaker 2: Singapore goes down, it hits the men on the street
Speaker 2: even worse on the balance. I do think that what
Speaker 2: we are doing is correct. We welcome the rich to
Speaker 2: come in to Singapore, to park their wealth and at
Speaker 2: least we have opportunities to manage their wealth out of
Speaker 2: Singapore rather than any other jurisdictions.
Speaker 1: We are not feeling in Asia right now because we
Speaker 1: have grown, but many of my friends in the U. S.
Speaker 1: Actually telling me it
Speaker 1: it's very challenging there right now, shops are getting close again,
Speaker 1: people are losing jobs. If with the ugly head of
Speaker 1: inflation leading to recession we should be grateful that there
Speaker 1: are possible new jobs that will be created. So don't
Speaker 1: let the external manifestation of well detract you from the
Speaker 1: positive parts and the contributions that come. It's not a
Speaker 1: big number
Speaker 1: so a stable political environment, an attractive tax regime and
Speaker 1: resilience shown during the pandemic. These are some of what
Speaker 1: draw the world's ultra rich to Singapore.
Speaker 1: Many families come from nearby economic giants like china and India.
Speaker 1: There's been an uptick of interest from china since the
Speaker 1: Hong kong protests and the recent lockdowns there. And while
Speaker 1: there is some truth to the ultra rich raising the
Speaker 1: cost of living experts warn that the flipside of not
Speaker 1: having them could be worse. This is in terms of
Speaker 1: things like lost capital and opportunities and investments and jobs.
Speaker 1: Finally any wealth tax will be carefully calibrated to ensure
Speaker 1: it does not risk capital flight and increase Singapore's attractiveness
Speaker 1: especially in these uncertain economic times.
Speaker 1: I've been speaking with brian lin director at Bayfront Law
Speaker 1: in alliance with Nishimura and Asahi Siva Kumar, senior partner
Speaker 1: at Crow Singapore and any co senior advisor at the
Speaker 1: Business Families Institute and that's the top five things that
Speaker 1: you need to know about why Singapore attracts the ultra
Speaker 1: rich money mind is every saturday at 10:30 p.m. On
Speaker 1: media cop C. N. A. You can also catch us
Speaker 1: online at CNN dot asia on youtube.