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Chee Hong Tat: International studies may not fully reflect Singapore’s wealth inequality

In response to an MP’s question on a report highlighting Singapore’s rising wealth inequality, Second Minister for Finance Mr Chee Hong Tat stated that wealth inequality is difficult to measure accurately. He noted that international studies rely on assumptions, while outlining government initiatives, including CPF, HDB schemes, and wealth taxes, to address the issue.

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SINGAPORE: Wealth inequality is challenging to measure accurately due to difficulties in obtaining comprehensive wealth data, which comes in various forms that are often hard to value, said Second Minister for Finance, Mr Chee Hong Tat.

He noted that financial wealth is highly mobile across borders, and bank deposit data in Singapore is protected by the Banking Act.

“Many countries and international organisations face similar data challenges in measuring wealth inequality accurately. ”

Mr Chee also defended that international studies, such as UBS’ Global Wealth Report, rely on assumptions that may not fully capture Singapore’s wealth inequality due to differences in methodology and data limitations.

Mr Chee was responding to Parliamentary question filed by Mr Yip Hon Weng, Member of Parliament for Yio Chu Kang SMC,  who inquired the Government on its actions to address wealth inequality.

His inquiry came in light of a July report highlighting that while Singapore’s average wealth has risen, so has wealth inequality.

Mr Yip specifically asked the Prime Minister and the Minister for Finance what additional measures the Government is taking beyond existing handouts and Central Provident Fund (CPF) top-ups.

He also questioned whether there is a need to enhance the Progressive Wage Model (PWM) to ensure that salaries for lower- and middle-income workers rise more rapidly, potentially narrowing the wealth gap.

Mr Chee in a written reply on 14 October 2024 emphasised that the Government is working to improve data collection on both income and wealth to better assess inequality.

On the measures being implemented, Mr Chee highlighted several key initiatives aimed at addressing wealth inequality. He pointed to the CPF and the Housing and Development Board (HDB) home ownership scheme, both of which enable Singaporeans to accumulate substantial assets over their lifetimes.

The Government provides significant housing grants of up to S$120,000 for lower-income Singaporeans to assist with home ownership.

These grants, announced at the National Day Rally 2024, are designed to make home ownership more accessible, complementing the discounted prices of new flats.

Mr Chee further elaborated on the progressive nature of Singapore’s tax system. Wealth taxes, including stamp duties, property taxes, and the Additional Registration Fee for motor vehicles, have been made more progressive over time.

Recent Budgets have introduced higher marginal stamp duty rates on high-value properties, and increased property tax rates for non-owner-occupied residential properties. The Government’s transfer schemes, which are means-tested, also factor in wealth proxies such as home ownership and property value.

In the realm of education, Mr Chee underscored the Government’s commitment to providing equitable opportunities for all Singaporeans. The education system, which is heavily subsidised, offers multiple pathways to success, regardless of socio-economic background.

On average, the Government invests more than S$250,000 per child from pre-school to post-secondary education. This investment prepares students for their careers and supports their long-term wealth accumulation.

For lower-wage workers, Mr Chee cited the success of the Progressive Wage Model (PWM) in driving wage growth. Between 2013 and 2023, real wages for workers at the 20th percentile grew by 30%, outpacing the median worker’s 22% increase.

The PWM, which links wage increments to skill and productivity gains, has been expanded to sectors such as food services and waste management. The Government has also raised the Local Qualifying Salary to S$1,600 and enhanced the Workfare Income Supplement (WIS) scheme to provide further financial support.

To address the long-term earning potential of young workers, the Government recently introduced the ITE Progression Award. This initiative provides Institute of Technical Education (ITE) graduates with financial incentives to upskill to diploma levels, offering S$5,000 in their Post-Secondary Education Accounts and a S$10,000 CPF top-up upon diploma completion.

The goal is to boost graduates’ starting salaries and future earning potential, while supporting wealth accumulation through home ownership or retirement savings.

“The Government will continue to explore ways to tackle wealth inequality, including by keeping our social support measures progressive and targeted at lower and middle-income households,” Mr Chee said.

The Global Wealth Report 2024 by UBS, published in July, revealed that the number of millionaires in Singapore rose to 333,204 in 2023, a 0.4% increase from 332,000 in 2022.

Total household wealth in Singapore also grew by 5.6% in 2023, reaching over US$2 trillion, compared to the 4.2% global increase in household wealth, following a 3% contraction the previous year.

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Parliament

MHA Minister declines to disclose stay duration data for newly granted SCs and PRs

In response to WP MP Louis Chua’s request, Minister Shanmugam declined to release specific data on the duration of stay in Singapore for those granted Singapore citizenship and permanent residency in 2023, citing the risk of data misuse to game the system. He assured that application assessments consider various factors, with residency length being just one of them.

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SINGAPORE: Mr K Shanmugam, Minister for Home Affairs and Law, said the government will not release specific data on the duration of stay in Singapore for those granted Singapore citizenship (SCs) and Permanent Residency (PRs) in 2023. This decision comes in response to a data request from Workers’ Party Member of Parliament (MP) Louis Chua.

The minister explained that this decision is motivated by concerns that potential applicants might manipulate their applications to meet perceived benchmarks, thereby “gaming the system.”

He also cautioned that foreign countries could misuse publicly available data to undermine Singapore’s national interests.

Mr Shanmugam was responding to a parliamentary question filed by Mr Chua.

The Sengkang MP asked the Minister with regard to new permanent residencies and new citizenships granted in 2023, what is the 25th percentile, median, average, and 75th percentile of the duration in which adult foreigners have resided in Singapore prior to obtaining permanent residence.

He further queried for the similar data for adult permanent residents who have held their permanent residence prior to obtaining Singapore citizenship.

Minister Shanmugam: Length of Residency is Just One Factor in Application Assessments

In a written reply on 14 October, Mr Shanmugam affirmed that the government publishes the number of PRs and SCs granted each year, along with selected profile indicators such as age group, highest qualifications attained among those aged 20 and over, and region of origin.

He stated that the Immigration & Checkpoints Authority (ICA) assesses each application for Permanent Residency and Singapore Citizenship based on a range of factors.

The applicant’s length of residency is only one of the factors considered.

Other factors include, but are not limited to, the applicant’s family ties to Singaporeans, economic contributions, educational qualifications, age and family profile, the applicant’s ability to integrate into society, and their commitment to establishing roots in Singapore.

Mr Shanmugam further noted that different criteria may apply to different applicants, depending on their background and circumstances.

“For example, an applicant applying as a spouse of a SC will be considered differently from someone applying on the basis of having stayed in Singapore for a period of time, and contributed to employment creation in Singapore.”

While declining Mr Chua’s request for specific data, Mr Shanmugam reiterated that releasing such information could lead to manipulation by potential applicants.

He emphasised the importance of being judicious about the information shared, despite the government publishing some general indicators such as age, education level, and region of origin for PRs and SCs.

“We have to be careful that we do so in a way consistent with our national interests. ”

The latest response from Minister Shanmugam is consistent with his previous statements regarding new PRs and SCs applications.

In 2021, in a response to PAP MP for Choa Chu Kang GRC Mr Zhulkarnain Abdul Rahim’s queries about the reasons for unsuccessful permanent residency applications, Minister Shanmugam reiterated that the Immigration and Checkpoints Authority (ICA) evaluates these applications based on various factors.

He explained that specific reasons for rejections are not disclosed to prevent potential misuse and safeguard Singapore’s national interests.

In February 2023, NCMP Leong Mun Wai inquired about the number of non-citizen brides and grooms who married Singapore citizens and subsequently obtained Singapore citizenship from 2000 to the present. He also requested a breakdown by country of origin and the median duration after marriage before citizenship is granted.

In response, Minister Shanmugam stated that, on average, about 2,700 foreign spouses have become Singapore citizens each year from 2000 to 2022. However, he declined to provide detailed breakdowns by specific country due to concerns about potential bilateral sensitivities.

He noted that foreign spouses must first be Permanent Residents before applying for citizenship, and the time between marriage and obtaining citizenship can vary significantly based on individual circumstances and various factors assessed by the ICA.

23,472 individuals granted citizenship in 2023

The latest National Population and Talent Division (NPTD), published on 24 September, noted that in 2023, 23,472 individuals were granted citizenship, while 34,491 individuals were granted permanent residency.

The average number of new citizenships and permanent residencies granted per year over the last five years was 22,400 citizenships and 32,600 permanent residencies, slightly higher than the preceding five-year period, which recorded averages of 21,600 citizenships and 31,100 permanent residencies.

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Parliament

No GCBs sold to trust companies holding properties for foreign beneficiaries over the past five years

In response to a Parliamentary question from NCMP Leong Mun Wai, Second Minister for Law Edwin Tong clarified that no Good Class Bungalows (GCBs) were sold to trust companies with foreign beneficiaries in the last five years. This followed the S$88 million transfer of a GCB by Mr K Shanmugam to UBS Trustees, sparking speculation about foreign ownership.

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Former property of Minister for Home Affairs and Law, K Shanmugam which he sold for S$88 million (Photo in 2018: Google Maps)

On 14 October 2024, during a Parliamentary session, Non-Constituency Member of Parliament Mr Leong Mun Wai raised concerns regarding the acquisition of Good Class Bungalows (GCBs) by trust companies, particularly with respect to foreign beneficiaries.

He posed three questions to the Minister for Law: what percentage of GCBs have been sold to trust companies in the last five years, how many of these trust companies have foreign beneficiaries, and how many clearance certificate applications by such companies have been rejected.

Second Minister for Law Edwin Tong, in a written response, clarified that no GCBs had been sold to trust companies holding properties for foreign beneficiaries over the past five years.

Foreign individuals, including Permanent Residents (PRs), and foreign entities must seek approval under the Residential Property Act (RPA) to acquire any landed residential property, including GCBs. This applies whether the purchase is direct or through trust companies.

Singaporean citizens, however, are exempt from this requirement if the property is not held for foreign beneficiaries.

The Singapore Land Authority (SLA) tracks all applications for foreign purchases under the RPA, and Mr Tong confirmed that, from 2019 to 2023, no approvals were granted to trust companies where the beneficiaries were foreign.

Moreover, no approvals have been issued to foreigners, including PRs, for the purchase of GCBs since 2021. Between 2012 and 2021, only five such approvals were granted, two of which were inheritance cases.

Mr Tong emphasised the government’s strict stance on limiting foreign ownership of GCBs and other landed properties in Singapore.

These properties, often seen as prime real estate in affluent districts, are closely monitored to ensure compliance with the RPA, preventing foreign buyers from acquiring such assets without approval. This strict approach aligns with the government’s broader efforts to ensure that GCBs remain accessible primarily to Singaporeans or individuals with a strong nexus to Singapore.

Sale of GCB by Home Affairs and Law Minister in 2023 for S$88 million

This parliamentary clarification comes against the backdrop of a high-profile property transaction involving Mr Shanmugam, the Minister for Home Affairs and Law, who transferred his GCB at Astrid Hill to UBS Trustees (Singapore) Ltd for S$88 million in August 2023.

The transfer raised public interest due to the speculation that the beneficiary of the trust may be a foreigner, despite the stringent rules laid out under the RPA.

UBS Trustees, a licensed trust company under the Trust Companies Act 2005, acted as the trustee for The Jasmine Villa Settlement, in this transaction.

Trust structures such as this are commonly used for estate planning and asset management.

The lack of clarity regarding the identity of the beneficiary has led to public speculation, with some questioning whether the trust could involve a foreign beneficiary. However, based on Mr Tong’s response, this seems impossible unless the beneficiary is a new Singaporean citizen.

Mr Shanmugam purchased the Astrid Hill GCB in December 2003 for S$7.95 million. By the time of its transfer in 2023, its value had risen significantly to S$88 million, in line with the rising prices of GCBs in Singapore’s prime District 10, known for its exclusive residential estates. The transaction was facilitated by Allen & Gledhill, with Ms Ho Sheau Farn representing UBS Trustees and Mr Ho Kin San acting on behalf of Mr Shanmugam.

The property’s transfer was not recorded in the Urban Redevelopment Authority’s (URA) Private Residential Property Transactions database, likely due to its nature as a trust-related transaction rather than a conventional sale. This lack of public visibility has further fuelled speculation regarding the identity of the trust’s beneficiary.

Significant stamp duties were also involved in the transfer. Based on current rates, the Buyer’s Stamp Duty (BSD) amounted to approximately S$5.2 million.

In addition, a 65% Additional Buyer’s Stamp Duty (ABSD), applicable for such transactions, would result in a further S$57.2 million, bringing the total cost to around S$150.4 million. However, UBS Trustees may have been eligible for remission of the 65% ABSD under certain conditions. Specifically, if the trust is held for identifiable individual beneficiaries who are Singaporean citizens, part or all of the ABSD may be refunded.

This transfer followed shortly after Mr Shanmugam’s ministerial statement in July 2023, where he addressed questions from Members of Parliament regarding his rental of a state-owned black-and-white colonial bungalow at 26 Ridout Road.

In that statement, he explained that as he approached his 60s, he reassessed his financial situation and decided to place his Astrid Hill property on the market while moving into a rental home. This restructuring was part of his broader financial planning, and he clarified that the decision was not driven by financial need but by prudent management of his assets.

The timing of the GCB transfer, just weeks after his statement in Parliament, raised further questions, particularly given the substantial value of the transaction.

As of the time of publication, no official comment has been received from Mr Shanmugam over the sale of his property.

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