Debated in Parliament on 3 Mar 2023.
Ms Joan Pereira asked the Deputy Prime Minister and Minister for Finance whether the Ministry will consider reducing the property tax rates for owner-occupied private residential properties occupied by elderly retirees who have been unduly affected by the escalating rental of neighbouring units, which disproportionately affects their properties' annual value.
Mr Yip Hon Weng asked the Deputy Prime Minister and Minister for Finance (a) for the past three years, what is the annual average rate of increase of property tax for owner-occupied private properties in both prime and non-prime locations respectively; (b) whether the annual property tax computation is influenced by the use of neighbouring properties for rental income; and (c) whether the Ministry will review the property tax computation for prime locations so that owners of these owner-occupied homes, especially retirees, are not unfairly penalised.
Mr Speaker, may I have your permission to answer Question Nos 3 and 4 together?
Yes, please.
Thank you, Sir. Property tax, or PT, is our primary means of taxing wealth. PT payable is based on the applicable PT rate, applied to the Annual Value, or AV, of the property, where AV is a proxy for the property value and, thus, the owner's wealth.
In line with the wealth tax intent of PT, the PT on residential properties is taxed on a progressive schedule. Properties with AVs of up to $8,000 pay no PT, while properties with higher AVs pay PT at progressively higher rates of taxation. Owner-occupied residential properties enjoy concessionary PT rates and are taxed at rates lower than non-owner-occupied ones.
Sir, over the years, the Government has received feedback, including from Members of both sides of this House, to enhance our wealth taxes. This is what we have been doing.
As announced in Budget 2022, PT rates have been raised for higher-end owner-occupied residential properties, with AVs above $30,000 in 2023 and 2024. The new rates affect less than one in 10 owner-occupied residential properties.
The AV is a proxy of the value of a property and is determined based on the rental transactions for comparable properties with similar attributes, such as location, age and condition. A property that earns more rental income has greater value. And therefore, the AV and the PT payable will be higher.
The median PT for owner-occupied private residential properties in Singapore, grew at a compound annual growth rate (CAGR) of around 7% from 2020 to 2023. The growth rate is similar for owner-occupied private residential properties within and outside the central region.
I understand Members' concerns that some retirees may face financial difficulties. The Government remains committed to supporting retirees.
We do so not by lowering PT rates for residential properties owned by retirees, but by supporting our seniors in other ways. We have various schemes to help retirees, whether living in private residential properties or Housing and Development Board (HDB) flats. For example, through the Assurance Package (AP), seniors living in private properties can receive AP cash, AP MediSave and the cost-of-living special payment.
Mr Yip Hon Weng.
I thank the Senior Minister of State for his reply. How can the Government better help a particular group of retired seniors, who are private home residents but are cash poor, and would like to retire in the home that they have called "home" for decades?
Mr Speaker, I mentioned some examples in my reply earlier. In addition to what I mentioned, we also provide certain assistance and certain help schemes, that are applicable to all households, regardless of housing type.
For example, the $300 Community Development Council (CDC) voucher that was given out in January this year, the Household Utilities Credit that was given out last year. And for seniors who are in the Merdeka Generation or the Pioneer Generation, they can also receive additional MediSave top-ups and healthcare subsidies when they visit the polyclinics, when they go see the general practitioner (GP), when they go to the hospital.
Sir, I think the design of our tax and benefits system is based on a concept of it being fair and progressive. And by that, what we mean is that everybody will contribute, but those who are wealthier and earn a higher income, will contribute more.
As I mentioned in my reply earlier, the PT is a form of wealth tax on immovable assets. And if we look at the retirees who are staying in private properties, especially higher-end private properties with higher AVs, compared to retirees who are staying in rental flats or smaller HDB flats, I think there is a difference in their wealth.
Ms Joan Pereira.
Thank you, Speaker. I have one clarification for the Senior Minister of State.
Mr Speaker, AV is determined based on the rental transactions for comparable properties with similar attributes, such as location, age and condition. The way that IRAS goes about computing AV is that they will, generally, exclude very high and outlier rentals that the properties may fetch. And so, I think this is a way to ensure that the data and the statistics are not skewed by some of these outliers.
Mr Lim Biow Chuan.
Sir, may I ask the Senior Minister of State whether we can relook the definition of wealth tax? For some of these retirees, they do not see themselves as wealthy. I know they have got a property that may be worth quite a bit, but they are retirees with no income. They just had the luck of buying a property at a lower price when they were much younger.
So, how do we want, as a matter of principle, to deal with this group of people who are living in a better property, but with no income? Is it the principle of the Government that we would want to persuade them to sell their property, so that they would not be considered wealthy? I mean, how do we define the term "wealth"? Because I cannot see this group of retirees as being wealthy, except for the fact that they were fortunate enough to buy a property when they were younger.
Sir, I think I had explained this in my response to Mr Yip Hon Weng earlier, and also in my main reply. Property is an asset, and I hope Mr Lim agrees with me on that. An asset is part of your wealth. So, I think we do need to consider that a person's assets are a proxy measurement of the person's wealth.
This does not mean, therefore, that we do not empathise with the situation that I am sure Mr Lim's residents face. I also have residents who are in a similar situation. We do understand that they are retirees, they may not be able to earn a lot of income because they are not working.
So, the way to help them is not to have a lower PT, because that is something that we need to put in place as part of our fair and progressive tax system, but to find other ways of helping them. I mentioned some examples earlier, in AP, and also when we look at certain schemes that we design. In our polyclinics, for example, we do not means test based on your property type, but when you go to a polyclinic, we look at your age and seniors do receive additional subsidies.
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