Why a Wealth Tax is the Wrong Answer to the Right Question

The wealth gap is real.  The data is unambiguous.  Singapore’s Gini coefficient for wealth sits at 0.55.  The top 20% hold an average total wealth of S$5.264 million against the bottom 20%'s S$293,000.  The political instinct to tax the difference is understandable.  It is also structurally misconceived.

Who Does a Wealth Tax Actually Hit

The UHNW client — the family office principal, the Gulf dynasty, the Taiwanese industrialist who moved NT$10.4 trillion to Singapore — does not pay wealth taxes.  Their advisers ensure that.  The assets sit in trusts, foundations, VCCs, and holding companies across multiple jurisdictions.  A legal entity other than a natural person is taxed after expenses.  The architecture that protects wealth from creditors protects it equally from tax authorities.  The more sophisticated the wealth, the more impenetrable the structure.

The person who pays the wealth tax is the cardiologist who earned S$800,000 last year, owns a condominium in Orchard, holds a S$1.2 million investment portfolio, and has not yet accumulated sufficient wealth to justify a family office.  The lawyer.  The engineer.  The specialist professional who got wealthy the conventional way — by working extremely hard for thirty years in a high-skill profession.

These people do not have access to the structural tax planning available to the tier above them.  They hold assets in their own names.  They earn professional income subject to personal income tax.  They are wealthy enough to be caught by a wealth tax and precisely not wealthy enough to architect their way around it.

A wealth tax designed to address inequality ends up taxing the aspirational class — the people society most wants to produce more of — while leaving the genuinely wealthy architecturally insulated.  The policy achieves the opposite of its stated intention.  This is not conjecture.  It is the documented experience of every European country that has implemented and subsequently abandoned a wealth tax.

France introduced its ISF wealth tax in 1982.  It drove capital flight — an estimated 10,000 millionaires left France between 2000 and 2012.  Emmanuel Jean-Michel Frédéric Macron abolished it in 2017.  Sweden abolished its wealth tax in 2007.  Germany, Austria, Denmark, Finland, and Luxembourg all abandoned wealth taxes between 1995 and 2006.  The pattern is consistent: the tax raises less revenue than projected, drives mobile capital and talent to lower-tax jurisdictions, and disproportionately burdens those too wealthy to be exempt but insufficiently wealthy to escape.

Singapore’s Competitive Architecture

Singapore’s competitive advantage is not its port, its location, or its weather.  It is its tax regime, its rule of law, and its institutional credibility.  These three factors have attracted capital from mainland China, Taiwan, Indonesia, India, and the Gulf — capital that generates economic activity, employment, and tax revenue through the consumption and investment it funds domestically.

The UK and the US sustain higher tax rates because their capital markets have depth that smaller economies cannot replicate.  The London Stock Exchange and the New York Stock Exchange provide secondary market liquidity, institutional coverage, and price discovery that justify the additional friction of operating in high-tax jurisdictions.  Nobody lists on the Tokyo Stock Exchange for access to global capital. Nobody lists on the SGX for the secondary market liquidity, as the SGX’s own data makes painful reading. Only four companies listed in Singapore in 2024.  Twenty delisted.  The secondary market is structurally thin outside the GLC complex.

Singapore’s capital markets cannot compensate for a deteriorating tax environment the way London and New York can.  The moment Singapore’s tax regime becomes materially less attractive, the capital that arrived because of it evaluates the alternatives.  Dubai is already competing aggressively.  The UAE has built a parallel financial infrastructure in less than a decade.  Abu Dhabi has ADIA, Mubadala, and ADGM.  The assumption that wealth gravitates to Singapore regardless of the fiscal environment is not supported by how wealth moves.

The Correct Policy Direction

Two levers genuinely address fiscal sustainability without undermining the competitive architecture.

The first is consumption taxation on a progressive scale.  The GST is a blunt instrument — it taxes consumption uniformly, which means it consumes a higher proportion of lower-income household budgets.  The reform is not to abolish it but to make it more sophisticated.  A tiered consumption tax that scales with the category of expenditure — essentials taxed minimally or exempted, luxury goods and services taxed at materially higher rates — captures the consumption of the wealthy without structurally disadvantaging the poor.

Singapore already applies this logic imperfectly through the GST Voucher scheme — cash transfers to lower-income households to offset the regressive impact of the flat GST rate.  The cleaner solution is to build the progressivity directly into the rate structure rather than compensate for it through transfers.  Luxury goods, premium hospitality, high-end property transactions, and private aviation are taxed at rates that capture the spending pattern of the wealthy without touching the savings, investments, or capital structures that generate long-term economic activity.

The second lever — and the more important one — is expanding the tax base rather than increasing the rate on the existing base.  A shrinking tax base subjected to rising rates produces diminishing returns and accelerating capital flight simultaneously.  An expanding tax base at stable rates produces growing revenue without altering the competitive calculus that attracted the base in the first place.

Tax base expansion requires two things.  First, attracting more productive economic activity — more businesses establishing substantive operations, more professionals relocating, more investment flowing into sectors that generate employment and consumption.  The SFO framework, the PCC structure, the MAS fintech sandbox, and the carbon market infrastructure are all instruments of tax base expansion.  They attract capital that would otherwise be elsewhere.  Second, converting non-taxpaying economic participants into taxpaying ones — through schemes that bring the informal economy into the tax architecture and through CPF structures that capture contributions from the self-employed who currently opt out.

The Summary

A wealth tax is the policy equivalent of taxing the people who cannot afford the advice to avoid it, while the people who can afford the advice continue undisturbed.  It raises less revenue than projected, drives the mobile capital and talent it was designed to tax to friendlier jurisdictions, and leaves Singapore’s competitive architecture weakened without a compensating fiscal benefit.

The question is not how to extract more from the existing tax base.  It is how to grow the tax base, retain the capital and talent that generate it, and capture the consumption of the wealthy through instruments that cannot be architectured away.  Consumption taxes on a progressive scale.  Expansion of the economic base through competitive positioning.  These are harder to implement and easier to justify than a wealth tax that achieves the opposite of what it promises.  Singapore got here by being smarter than its competitors.  The fiscal policy debate deserves the same standard.

---

Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code