Debated in Parliament on 6 Mar 2023.
Mr Lim Biow Chuan asked the Deputy Prime Minister and Minister for Finance (a) whether he can explain the rationale for adjusting the Buyer's Stamp Duty (BSD) rates for higher-value properties on and after 15 February 2023; and (b) how does the imposition of a condition that the Option to Purchase has not been varied on or after 15 February 2023 before allowing the prevailing BSD rates on and before 14 February 2023 to apply help meet the policy consideration.
Mr Deputy Speaker, the revised Buyer’s Stamp Duty or BSD, rates will make our BSD regime more progressive by having higher rates when buyers purchase more expensive residential and non-residential properties.
The transitional provision and its three conditions are similar to those implemented for the Budget 2018 BSD rate adjustments, and past Additional Buyer’s Stamp Duty or ABSD, rate adjustments. These conditions are designed to ensure that the prior BSD rates apply only to pre-existing Options to Purchase or OTPs, that are granted on or before 14 February 2023, even though they are exercised shortly later. There is a condition that the OTP should not be varied on or after 15 February 2023 to minimise gaming by buyers hoping to circumvent the revised BSD rates.
Buyers who are unable to fulfil the conditions of the transitional provision due to extenuating circumstances may submit an appeal to the Inland Revenue Authority of Singapore (IRAS).
Mr Lim Biow Chuan.
Thank you, Sir. May I ask the Senior Minister of State, I understand the rationale, but there are certain parts of it which I cannot understand, which is the part about variation. For example, if the parties cannot complete for reasons that are not within their control, for example, if it is subject tenancy and the tenant wants to vacate, they cannot vary their contract because it has not impact on the progressive nature of the Stamp Duty. Or if, for example, the parties cannot complete because the bank changes the date. How does that impact this provision to make Stamp Duty more progressive?
I mean, at the end of they, the variation must go to the root of the policy considerations. Which is that you do not want parties to game the system and to avoid the progressive nature of the increase in Stamp Duty. So, perhaps, the Senior Minister of State can confirm, if the terms of variation do not go to the root of the avoidance of the Stamp Duty, can parties still proceed with the variation.
Sir, I think the Member raised a valid point that in some situations, the variations to the OTPs are genuine and minor. So, for this kind of situations, as I mentioned in my main reply, they can submit an appeal to IRAS and IRAS will consider if there is justification to provide flexibility. IRAS has done so for the majority of appeal cases it received so far.
However, when we set the criteria, we have to cater to a range of different possibilities, including cases where people are deliberately trying to avoid paying higher BSD. So, I think we need to strike a balance.
Assoc Prof Jamus Lim.
Just a quick clarification. I understand the motivation just like the hon Member, but it strikes me that why do we not just give a little bit more buffer on the front end? Perhaps some individuals will game the system? But rather than go through the exhaustive appeal route which in the long run, ultimately, would not matter if we give them an extra month. In the end, it eases some of these short-term appeal considerations, but in the long run, ultimately, it is still going to be progressive.
Sir, I think what Assoc Prof Jamus Lim raised is different from what Mr Lim Biow Chuan raised. Mr Lim is not asking about the duration. We do provide some time in the conditions that the OTP is exercised on or before 7 March, or within the validity period, whichever is earlier. So, it is not that there is no grace period provided.
But what Mr Lim Biow Chuan asked is a slightly different thing. He is asking if there is a variation to the OTP that has been signed.
As I explained, we do need to cater to a range of scenarios and possibilities, so we state the conditions upfront, so we do allow appeals and IRAS has approved the majority of appeals it has received so far.
Mr Lim Biow Chuan, perhaps a short supplementary question.
I am so grateful, Sir. I am still not very sure how it works. Supposing parties agree to complete on certain date, but the buyer cannot get his financing on time and ask for one extra month, so, what does he do? They have to write to IRAS – because they have already paid the stamp duty when they exercised option, but he cannot complete the transaction because he cannot get his funds on time, he then has to write to IRAS about that increase in stamp duty or can parties negotiate on their own? How does IRAS expect them to solve this?
Sir, I think I have explained this several times. The appeal process is to consider the circumstances of each transaction case by case. I hope the Members, both Assoc Prof Jamus Lim and Mr Lim Biow Chuan understand why it is very difficult for us to spell out upfront what are all the detailed situations, because it is going to be case by case. But as I had given Mr Lim the assurance, if there are genuine cases and the changes are not major, they are minor changes, do surface to IRAS and IRAS will consider if there are justifications to provide flexibility.
PAPERCUTS