Stamp Duties (Amendment) Bill – Speech by Louis Chua

Mr Speaker, when I first came across the term stamp duties, I thought to myself, that is a very expensive piece of stamp compared to the twenty to thirty cent ones we stick on envelopes! The second discovery was that much to my disappointment, there was no physical adhesive stamp involved, and all documents chargeable for stamp duty are “stamped” electronically or through the e-Stamping system.

Most adult Singaporeans would have encountered or rather, paid stamp duties at various points in their life, most commonly when buying property. And indeed, stamp duty is a tax on dutiable documents relating to any immovable property in Singapore and any stock or shares. These include the sales and purchase of property, lease or rental of property, mortgage of property and shares and shares transfer.

Beyond a revenue collection tool, stamp duty has also evolved to play a significant role as a macroprudential tool to address risks in the property sector, especially in the past decade or so. This is the case not just in Singapore, but also in other jurisdictions such as Hong Kong and Australia as well.

From a simple Buyer’s Stamp Duty or BSD, this has now evolved to include Additional Buyer’s Stamp Duty or ABSD and Seller’s Stamp Duty or SSD for certain classes of property such as residential and industrial. The differentiated rates of stamp duty have also been adjusted ever so frequently, most recently in the December 2021 round of cooling measures where Singapore Citizens and Permanent Residents buying their second and subsequent property and all foreigners and entities seeing raised ABSD rates of 5-10%.

Nonetheless, as a tax that is levied on the market values of leases, properties and shares, stamp duty receipts are affected by the stages of the market cycle and more importantly, should grow over time in tandem with inflation. From around $1.26 billion in FY2000 stamp duty receipts have grown to $3.28 billion in FY2010 and $3.90 billion in FY2020. What is most impressive about this revenue source is that this growth over the past decade or so is despite a smaller Government Land Sales programme and lower level of property market transactions.

More recently, stamp duty receipts in FY2021 have turned out to be higher than what was initially projected by the Government, from an initial estimate of $4.25 billion in Budget 2021 to the revised estimate of $6.45 billion as of Budget 2022, to actual receipts of $6.76 billion – which I believe is a record high! So, the positive surprise to stamp duty receipts worked out to be around $2.5 billion or 59% higher as compared to what was initially budgeted for in Budget 2021. For FY2022, stamp duty receipts are expected to remain robust at $5.24 billion.

More broadly, I have also observed that actual operating revenue collections for FY2021 have turned out to be higher as compared to what was initially budgeted for in Budget 2021 and even the revised estimate as of Budget 2022 announced earlier this year. Overall operating revenues worked out to be $82.5 billion for FY2021, $5.8 billion higher compared to $76.6 billion as initially budgeted for in Budget 2021 and $2.1 billion higher than the revised estimate of $80.4 billion as of Budget 2022. This would already be more than sufficient to cover the $1.5 billion support package as announced on 21 June last month, so I do agree with the Government that there need not be a further draw from the reserves, as the package can simply be funded from the better-than-expect fiscal outturn in FY2021.

In fact, it also appears that while FY2021 operating revenues are higher by about $2.1 billion compared to the revised estimate presented earlier this year, both operating and development expenditure are lower by a combined $3.6 billion, which I understand is due to lower-than-budgeted spending on COVID-19 response measures as the Omicron variant turned out less severe than anticipated.

Combining higher revenues and lower expenses would mean that the Government’s primary deficit improved by $5.7 billion, which again is more than sufficient to cover the recent $1.5 billion support package. So, I do hope that the Government will stand ready to support Singaporeans should inflation and macroeconomic conditions deteriorate from hereon.

Returning to the proposed amendments to the stamp duty act, I note that this bill introduces the Additional Conveyance Duties for Trust and (b) the stamp duty treatment for renunciation of interest in residential property that is held on a trust. The MOF’s announcement of ACD (Trust) follows closely after the announcement on the introduction of ABSD (Trust) on 8 May 2022, which I recognise plugs a gap in the existing ABSD and ACD regime.

I am reminded of a news article I read on The Business Times late last year, which reported that a certain crypto billionaire, at least back then, was in an early stage of buying a S$48.8 million GCB as trustee for his nearly three-year-old child. The transaction apparently closed in March this year, but I wonder if headlines such as this prompted the MOF to undertake a review of the ABSD regime?

More broadly, the practice of purchasing residential properties via trusts has been well documented since the implementation of the ABSD regime about a decade ago. Not having to pay ABSD for what would have been a multiple property purchase, but with no access to financing were the key features of such purchases, in what some would call a loophole, albeit a well-publicised one. While I recognise that this was borne out of a periodic policy review, will the Minister shed light on what were the considerations and why is the gap only closed now and not years ago? What were the number and dollar value of such transactions which have made use of this gap in the ABSD regime, and was there a material increase in such transactions which prompted the MOF review?

That said, I view this development with a glass-half-full lens, and it could even be seen as a form of wealth tax which has a targeted and narrow scope. With concerns that residential property prices have continued to be firm despite the December cooling measures and amid rising interest rate concerns, was the implementation of the ABSD and ACD Trust meant to achieve a signalling effect to the market, particularly amid news just last month of how an individual acquired 20 units at Canninghill Piers, a luxury condominium along the Singapore River for over S$85 million, despite the recently raised ABSD rates for foreigners in December last year?

With the introduction of ACD (Trust) as included in the bill, I recognise that this will go hand in hand with the policy intent of ABSD (Trust), of which I am supportive. I am again reminded of news from yesteryears, when ACD itself first came into effect in March 2017. Unbeknownst to many, stamp duties on the transfer of shares in a company is only levied on net asset values, and at a mere 0.2%; significantly lower in rate and tax base as compared to buyers’ stamp duties and ABSD levied on the value of the residential properties themselves. Back then, there were several bulk sales of properties by developers via the sale of property holding entities, to avoid extension charges under the qualifying certificate or QC conditions for not completing the sale of residential units by certain deadlines. This loophole was subsequently closed with the introduction of ACD.

While I recognise the policy intent of QC and ABSD in ensuring developers do not hoard inventory, the current ABSD remission rules for developers in particular causes greater cyclicality in the residential market, as it imposes harsh ABSD penalties for failing to complete the sale of all residential units within the prescribed period. This would apply regardless of whether the project has 2,000 units, 200 units or 20 units to begin with and could even have discouraged developers from triggering for what would have been our first master developer site in Kampong Bugis. As part of its periodic policy review, is the MOF looking at reviewing the ABSD remission conditions for property developers to ensure greater stability in the property market?

Finally, I read with interest recent news in Australia, which highlighted that New South Wales is planning to give first time homebuyers a choice of not paying for upfront stamp duty but to replace this with an annual property tax which is paid over a period of time instead.

Stamp duties represent a not insignificant upfront cost for homebuyers even in Singapore. Using the median resale price of a 4-room HDB flat in Sengkang of $510,000 in the first quarter of this year, stamp duties would amount to $9,900. While this may not mean much in percentage terms as compared to the price of the flat, in absolute terms, assuming one saves $500 a month, stamp duties could represent close to 20 months’ worth of savings! Again, as part of a periodic policy review, would the Government consider such a move in reducing upfront property purchase costs, particularly with continuing momentum in increasing HDB resale prices, which are now up a worrying 19% in the last 18 months alone?

Notwithstanding my clarifications, I support the bill.