WEBVTT - 5 things you need to know about why Singapore is a millionaire magnet | EP 21

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<v Speaker 1>Hi, I'm Suna Ramesh for money mind today, I'm going

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<v Speaker 1>to be finding out about why Singapore tracks the ultra rich,

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<v Speaker 1>what benefits do they bring to the local economy and

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<v Speaker 1>could a wealth tax slow down the momentum with me,

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<v Speaker 1>Ryan lin, director at Bayfront Law in alliance with Nishimura

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<v Speaker 1>and Asahi, Siva Kumar Sarabyn, senior partner at Crow Singapore

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<v Speaker 1>and an ICO senior advisor at the Business Families Institute. Ryan,

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<v Speaker 1>tell us why Singapore has become a wealth hub. And

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<v Speaker 1>what role has government regulation played

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<v Speaker 2>first? Usually is the tax friendly regime that we have.

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<v Speaker 2>If you look at our taxes and what they are

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<v Speaker 2>being taxed in their jurisdictions comparatively lower, that's a very

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<v Speaker 2>big draw.

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<v Speaker 2>The other one is really the certainty of our laws

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<v Speaker 2>and the transparency and they find it very easy to

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<v Speaker 2>do businesses in Singapore because of the certainty that they

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<v Speaker 2>have here. Some other reasons include languages because we speak

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<v Speaker 2>english here and then we have the other languages that

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<v Speaker 2>we speak around the region,

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<v Speaker 2>so they find easy to be in here where they

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<v Speaker 2>manage their wealth. It's easier to communicate. There are other

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<v Speaker 2>reasons as well, including they want their Children to be

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<v Speaker 2>schooled in the Singapore educational system, they like them educational

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<v Speaker 2>system in Singapore. Our universities are ranked from the primary

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<v Speaker 2>education all the way to the tertiary levels. I think

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<v Speaker 2>we do have a very good system.

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<v Speaker 1>Siva, do you think the pandemic accelerated the process

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<v Speaker 2>single

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<v Speaker 2>for both is very strong ecosystem to support wealth planning

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<v Speaker 2>and structuring, including family office structures, there are different aspects

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<v Speaker 2>to this ecosystem. On one hand, we have a deep

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<v Speaker 2>pool of talent such as asset managers, private bankers, legal

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<v Speaker 2>and finance professionals like tax advisors and financial advisors. On

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<v Speaker 2>the other hand, there's already a sizable number of family

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<v Speaker 2>offices in Singapore

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<v Speaker 2>and this kind of creates a network to develop more

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<v Speaker 2>investment opportunities for the family officers.

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<v Speaker 2>What the covid pandemic has actually shown is that people

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<v Speaker 2>value safety, stability and predictability in times of crisis. Now

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<v Speaker 2>this goes for everyone, right? Not just for the high

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<v Speaker 2>net worth individuals. So from that perspective, Singapore has done

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<v Speaker 2>very well in managing the,

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<v Speaker 2>the pandemic and I think this has certainly enhanced Singapore's brand.

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<v Speaker 2>So many high net worth individuals and families see Singapore

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<v Speaker 2>as a safe place to look at and grow their

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<v Speaker 1>wealth talent and capital is so mobile these days. So

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<v Speaker 1>tell us where the ultra rich here really come from.

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<v Speaker 2>Traditionally we do have family officers coming from neighboring countries

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<v Speaker 2>like Indonesia increasingly for the past 2-3 years. I do

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<v Speaker 2>see an uptick in Chinese clients coming to set up

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<v Speaker 2>family offices in Singapore in so far as they have

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<v Speaker 2>already

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<v Speaker 2>have their capital built outside china, they tend to want

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<v Speaker 2>to station it and manage it out of either Hong

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<v Speaker 2>kong or Singapore. But given what happened joe politically, there

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<v Speaker 2>are some things that happened

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<v Speaker 2>like the protests which changed our mindset in the past,

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<v Speaker 2>Hong kong used to be perhaps a bit more vibrant

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<v Speaker 2>in terms of the capital economy. But right now they

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<v Speaker 2>do think that perhaps Singapore might be a soft, a

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<v Speaker 2>safer bet for them now. Apple to Apple comparison. I

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<v Speaker 2>do think there are a bit more chinese clients coming

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<v Speaker 2>in to set up family office compared to other countries.

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<v Speaker 2>Anecdotally, I have received calls from clients who are saying

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<v Speaker 2>that they don't agree with the policies they think is

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<v Speaker 2>something that is inhibiting their wealth management, wealth preservation. They

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<v Speaker 2>can't conduct business is in those countries so they will

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<v Speaker 2>prefer to manage their wealth somewhere where they think is

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<v Speaker 2>more pro business. Probably not only due to

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<v Speaker 2>Covid, I think even pre Covid there has always been

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<v Speaker 2>an interest for chinese finance work, individuals and families to

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<v Speaker 2>actually move to Singapore. But I think, you know, Covid

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<v Speaker 2>situation accelerated that I'm going back to the same issue

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<v Speaker 2>of safety. The fact that you know, Singapore provides that

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<v Speaker 2>safe environment. It is

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<v Speaker 2>also stable, is predictable. And the way the government actually

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<v Speaker 2>managed the whole Covid crisis gives a lot of assurance

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<v Speaker 2>to people that, you know, this is a good place

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<v Speaker 2>where they can actually locate their wealth.

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<v Speaker 1>We should not just think it's largely Asia, many of

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<v Speaker 1>our european and U. S. Families are also looking at

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<v Speaker 1>investing in Asia where could they form a satellites

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<v Speaker 1>family office, They might even have a dominant family office

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<v Speaker 1>in their own home country, but to be in the

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<v Speaker 1>same time zone, it will be great to be physically

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<v Speaker 1>here on top of that, they are hoping to diversify

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<v Speaker 1>from their own portfolio of subsidiaries in their own home country.

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<v Speaker 1>So Singapore as the HQ for co investment within the

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<v Speaker 1>asian time zone and the asian region.

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<v Speaker 1>So a stable political environment and laws, an attractive tax

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<v Speaker 1>regime and resilience shown during the pandemic. Now, these are

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<v Speaker 1>some of what draw the world's ultra rich here to Singapore.

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<v Speaker 1>Many families come from nearby economic giants like china and

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<v Speaker 1>India with china seeing an uptick in entrance since the

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<v Speaker 1>Hong kong protests and even the recent lockdowns there. But

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<v Speaker 1>there is also interest from european and american families who

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<v Speaker 1>want to establish a foot in asean

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<v Speaker 1>the MES estimates there are about 700 single family officers

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<v Speaker 1>or Sfo set up here and we've been talking about

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<v Speaker 1>the benefits Singapore brings to the ultra rich, what benefits

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<v Speaker 1>do they bring to Singapore? Many of these companies that

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<v Speaker 1>are coming here are very, very strong on wanting to

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<v Speaker 1>look at renewable. So green jobs that's called new arena.

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<v Speaker 1>I'm not

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<v Speaker 1>eventually universities teach you how to do green jobs. So

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<v Speaker 1>that's also magic because it doesn't matter which primary degree

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<v Speaker 1>you have, you can actually do that primary degree, you

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<v Speaker 1>can be from stem, it can be from finance. It

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<v Speaker 1>can even be from community management and then you could

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<v Speaker 1>join one of the S. F. O. S. For internships

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<v Speaker 1>or you can be part of another company

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<v Speaker 1>that the S. F. O. Is investing in and because

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<v Speaker 1>they would like to see things become more sustainable, they

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<v Speaker 1>would like to see use of a circular economy where

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<v Speaker 1>waste is being converted or food products are being up cycled,

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<v Speaker 1>there is that sustainability theme. So we learn together, we

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<v Speaker 1>learn from the new technology they bring, we learn from

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<v Speaker 1>the

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<v Speaker 1>new jobs that they hope to create and they are

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<v Speaker 1>happy to invest. I am very positive like everything else

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<v Speaker 1>we want to make sure that there are safeguards, we

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<v Speaker 1>want to make sure that our guardrails to ensure that

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<v Speaker 1>the nation would definitely benefit from it. And I didn't

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<v Speaker 1>use the word prosper, I'm using the word benefit because

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<v Speaker 1>the impact should go beyond just monetary value.

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<v Speaker 1>What sort of safeguards are you talking about? If you

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<v Speaker 1>look at the requirements for setting up a single family office,

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<v Speaker 1>it's not low entry barrier sooner. So I was just

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<v Speaker 1>looking at the 13th oh and 13. You alright? That

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<v Speaker 1>was announced in april.

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<v Speaker 1>So you're referring there to tax incentive regimes under the

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<v Speaker 1>income tax act that are popular among those who are

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<v Speaker 1>looking to establish family officers here. Yes. So you know

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<v Speaker 1>the fun size minimum is 50 million at the point

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<v Speaker 1>of application but if you go with that minimum chances

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<v Speaker 1>that you will not make it to the queue.

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<v Speaker 1>So that's why I think the mes as well as

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<v Speaker 1>the E. D. P. Felt that they do not want

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<v Speaker 1>it to be just passive money management because then we

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<v Speaker 1>know difference like any funds management outfit where it's so

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<v Speaker 1>easy because moving money is much easier. So a single

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<v Speaker 1>family office have to employ people so there will be

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<v Speaker 1>labor contracts.

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<v Speaker 1>They even have their qualification that you need to make

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<v Speaker 1>clear business spending so therefore you need to invest in

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<v Speaker 1>real businesses even if it's just a startup. It's also good.

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<v Speaker 1>We've all seen these headlines about these high value property purchases.

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<v Speaker 1>Is there truth to the perception that the inflow of

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<v Speaker 1>the ultra rich is really pushing up these property prices?

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<v Speaker 1>Well

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<v Speaker 2>I blame them too.

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<v Speaker 2>You see the high network buying up properties and again

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<v Speaker 2>I think Minister Desmond lee was just saying that you

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<v Speaker 2>do not comprise a big proportion of what we see

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<v Speaker 2>in the papers

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<v Speaker 2>but we do see property prices going up especially the

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<v Speaker 2>private sector and the very high end sector going up.

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<v Speaker 2>And I think it's also a function of them coming

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<v Speaker 2>in the sick residency in Singapore and it causes prices

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<v Speaker 2>to rise and I think the government will be on

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<v Speaker 2>hand in terms of stem duties is not really a

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<v Speaker 2>matter of trying to text the reach is really a

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<v Speaker 2>matter of trying to moderate the property prices

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<v Speaker 1>in the last six months. Media has contributed

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<v Speaker 1>To this, wow another Chinese family buying a whole blog

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<v Speaker 1>in the whole floor. So with that kind of you

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<v Speaker 1>know news, everyone keeps thinking that oh these other people

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<v Speaker 1>pushing up property prices. But in Singapore landed properties cannot

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<v Speaker 1>be bought except if you are a citizen. And I

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<v Speaker 1>think for many of the families that come they do

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<v Speaker 1>want to invest in other things. But if you have

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<v Speaker 1>to commit 200 million without earning any income that's a

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<v Speaker 1>little

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<v Speaker 1>Bit ridiculous in rising inflation markets. So they took a

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<v Speaker 1>plunge and they might put some of their assets under

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<v Speaker 1>management into property assets. But that's not the only thing.

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<v Speaker 1>And of course the government also want to make sure

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<v Speaker 1>that they are not here to put in the property

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<v Speaker 1>and the next minute pull it out. Therefore you have

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<v Speaker 1>stem duties and if you are transacting it you have

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<v Speaker 1>to pay that increment that 30%. It's to ensure

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<v Speaker 1>sure that there is value creation and value in giving

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<v Speaker 1>back to the country and not just using it as

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<v Speaker 1>a tax shelter equivalent or looking at parking the money momentarily.

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<v Speaker 1>And what do you think about murmurings of a wealth tax?

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<v Speaker 1>Could this decreased interest in Singapore? And can we even

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<v Speaker 1>afford that

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<v Speaker 2>how our government works? Is that in terms of wealth taxes?

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<v Speaker 2>They'll calibrate it very very carefully. I don't think we

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<v Speaker 2>will go into a situation where we have net wealth

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<v Speaker 2>taxes

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<v Speaker 2>where you actually text on your physical taxable net assets

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<v Speaker 2>so far we have been texting on transfer of wealth

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<v Speaker 2>where I purchase goods and consume services. I pay my G. S. T.

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<v Speaker 2>Or where I buy a property or buy cars, I

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<v Speaker 2>get taxed with property stem duties or a R. S. Forecast.

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<v Speaker 2>It will be a bit more circumspect. I think

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<v Speaker 2>the government will not risk capital flight where we impose

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<v Speaker 2>a very blunt tool in terms of net wealth tax,

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<v Speaker 2>it will be a very calibrated one. There is this

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<v Speaker 2>tendency to see wealth tax as a form of like

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<v Speaker 2>a Robin hood tax right where the rich attacks to

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<v Speaker 2>provide for the poor, but we have to kind of

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<v Speaker 2>see the philosophy or objective of wealth taxes.

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<v Speaker 2>So certainly there's a morality aspect that individuals do not

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<v Speaker 2>become wealthy just by their own efforts, only that the

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<v Speaker 2>society and the system also contribute to their success. It

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<v Speaker 2>is kind of fair to expect some of their wealth

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<v Speaker 2>to trickle down to the wider community.

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<v Speaker 2>So basically the idea right, is that the more well

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<v Speaker 2>off should contribute more. Now, if you see from that perspective,

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<v Speaker 2>we already have some form of wealth taxes in Singapore.

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<v Speaker 2>The tax system has been made more progressive over the years.

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<v Speaker 2>So just to give an example, it was announced in

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<v Speaker 2>this year's budget that from the year of assessment 2020

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<v Speaker 2>for the personal income tax rate will increase to 23%

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<v Speaker 2>And this is for chargeable income in excess of $500,000

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<v Speaker 2>and up to a million for chargeable income which is

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<v Speaker 2>in excess of one million. The income tax rate has

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<v Speaker 2>been increased to 24%. So in effect the high income

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<v Speaker 2>earners will actually pay more taxes

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<v Speaker 2>now. Besides that, we also have a very progressive property

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<v Speaker 2>tax regime. There's time duties on properties and taxes on

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<v Speaker 2>cars in a sense when you put all these together

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<v Speaker 2>right the more well off do actually pay more taxes

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<v Speaker 2>I guess. And the question is should more be done.

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<v Speaker 2>Some countries have tried implementing well tax and failed due

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<v Speaker 2>to various challenges around things like enforcement, valuation and sustainability.

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<v Speaker 2>So looking at other countries, experience what I think, you

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<v Speaker 2>know for Singapore, what would work is instead of adopting

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<v Speaker 2>a broad brush approach. A more viable approach would be

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<v Speaker 2>to look at areas which we wish to incentivize

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<v Speaker 2>and areas which we would like to de incentivize. So

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<v Speaker 2>this means structuring a wealth tax system that is probably

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<v Speaker 2>uniquely Singapore. One that supports our open economy productivity, entrepreneurial

0:13:21.510 --> 0:13:24.689
<v Speaker 2>culture and foreign investments, but at the same time addresses

0:13:24.690 --> 0:13:27.420
<v Speaker 2>issues like land scarcity and climate change.

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<v Speaker 2>So for example, we can consider a deer approach towards

0:13:31.630 --> 0:13:37.290
<v Speaker 2>property imposing higher stem duty on bias of good class bungalows,

0:13:37.290 --> 0:13:40.740
<v Speaker 2>for example, or high end properties. Now, property tax can

0:13:40.740 --> 0:13:45.040
<v Speaker 2>also be further increased for high end properties. Currently we

0:13:45.050 --> 0:13:48.610
<v Speaker 2>already have the bias stamp stamp duty and so on.

0:13:48.620 --> 0:13:50.719
<v Speaker 2>Now a tax on gains derived from the sale of

0:13:50.720 --> 0:13:54.900
<v Speaker 2>real property can also coexist with the existing stem duty

0:13:54.900 --> 0:13:55.600
<v Speaker 2>regime

0:13:55.850 --> 0:13:58.990
<v Speaker 2>and such a capital gains tax can be imposed on

0:13:58.990 --> 0:14:02.969
<v Speaker 2>gains above a certain threshold to keep it in sync

0:14:02.980 --> 0:14:05.330
<v Speaker 2>with the concept of wealth tax.

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<v Speaker 2>So I think by doing this we can kind of

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<v Speaker 2>influence decisions in a way for wealth to be deployed

0:14:12.420 --> 0:14:13.700
<v Speaker 2>in more productive ways

0:14:13.940 --> 0:14:16.390
<v Speaker 2>that is beneficial to the economy.

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<v Speaker 1>So really the sum is bigger than the whole.

0:14:18.429 --> 0:14:22.570
<v Speaker 2>We don't have much natural resources for financial clout. We

0:14:22.570 --> 0:14:25.920
<v Speaker 2>do need these people come in to invest and new

0:14:25.920 --> 0:14:29.160
<v Speaker 2>Singapore as a platform to invest in the surrounding the

0:14:29.170 --> 0:14:34.240
<v Speaker 2>Southeast Asian region. We need this capital to drive the economy. Unfortunately,

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<v Speaker 2>I do think that they will cost the cost of

0:14:36.860 --> 0:14:41.420
<v Speaker 2>living to be raised in Singapore. But in the long run,

0:14:41.420 --> 0:14:41.540
<v Speaker 2>I'm

0:14:41.563 --> 0:14:43.973
<v Speaker 2>I mean if there's capital flight, if the economy in

0:14:43.973 --> 0:14:46.573
<v Speaker 2>Singapore goes down, it hits the men on the street

0:14:46.573 --> 0:14:49.863
<v Speaker 2>even worse on the balance. I do think that what

0:14:49.863 --> 0:14:52.693
<v Speaker 2>we are doing is correct. We welcome the rich to

0:14:52.693 --> 0:14:55.263
<v Speaker 2>come in to Singapore, to park their wealth and at

0:14:55.263 --> 0:14:58.823
<v Speaker 2>least we have opportunities to manage their wealth out of

0:14:58.823 --> 0:15:01.743
<v Speaker 2>Singapore rather than any other jurisdictions.

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<v Speaker 1>We are not feeling in Asia right now because we

0:15:05.253 --> 0:15:08.103
<v Speaker 1>have grown, but many of my friends in the U. S.

0:15:08.103 --> 0:15:09.163
<v Speaker 1>Actually telling me it

0:15:09.186 --> 0:15:13.326
<v Speaker 1>it's very challenging there right now, shops are getting close again,

0:15:13.336 --> 0:15:17.536
<v Speaker 1>people are losing jobs. If with the ugly head of

0:15:17.546 --> 0:15:22.176
<v Speaker 1>inflation leading to recession we should be grateful that there

0:15:22.176 --> 0:15:25.926
<v Speaker 1>are possible new jobs that will be created. So don't

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<v Speaker 1>let the external manifestation of well detract you from the

0:15:31.806 --> 0:15:35.366
<v Speaker 1>positive parts and the contributions that come. It's not a

0:15:35.366 --> 0:15:36.810
<v Speaker 1>big number

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<v Speaker 1>so a stable political environment, an attractive tax regime and

0:15:41.640 --> 0:15:44.650
<v Speaker 1>resilience shown during the pandemic. These are some of what

0:15:44.650 --> 0:15:47.170
<v Speaker 1>draw the world's ultra rich to Singapore.

0:15:47.740 --> 0:15:52.220
<v Speaker 1>Many families come from nearby economic giants like china and India.

0:15:52.230 --> 0:15:54.810
<v Speaker 1>There's been an uptick of interest from china since the

0:15:54.810 --> 0:15:58.370
<v Speaker 1>Hong kong protests and the recent lockdowns there. And while

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<v Speaker 1>there is some truth to the ultra rich raising the

0:16:01.080 --> 0:16:04.479
<v Speaker 1>cost of living experts warn that the flipside of not

0:16:04.490 --> 0:16:07.150
<v Speaker 1>having them could be worse. This is in terms of

0:16:07.160 --> 0:16:11.580
<v Speaker 1>things like lost capital and opportunities and investments and jobs.

0:16:12.080 --> 0:16:16.000
<v Speaker 1>Finally any wealth tax will be carefully calibrated to ensure

0:16:16.000 --> 0:16:19.700
<v Speaker 1>it does not risk capital flight and increase Singapore's attractiveness

0:16:19.710 --> 0:16:23.110
<v Speaker 1>especially in these uncertain economic times.

0:16:23.620 --> 0:16:26.930
<v Speaker 1>I've been speaking with brian lin director at Bayfront Law

0:16:26.930 --> 0:16:31.180
<v Speaker 1>in alliance with Nishimura and Asahi Siva Kumar, senior partner

0:16:31.190 --> 0:16:34.960
<v Speaker 1>at Crow Singapore and any co senior advisor at the

0:16:34.960 --> 0:16:38.620
<v Speaker 1>Business Families Institute and that's the top five things that

0:16:38.630 --> 0:16:41.690
<v Speaker 1>you need to know about why Singapore attracts the ultra

0:16:41.690 --> 0:16:45.580
<v Speaker 1>rich money mind is every saturday at 10:30 p.m. On

0:16:45.580 --> 0:16:48.080
<v Speaker 1>media cop C. N. A. You can also catch us

0:16:48.090 --> 0:16:51.369
<v Speaker 1>online at CNN dot asia on youtube.