MONDAY'S commentary suggests that social tension could result from overlooking taxes on the truly wealthy ("Tax the wealthy more, not the high-wage earners").
However, asset taxes on the wealthy could lead to more friction in society.
By definition, shares in a company and investment properties are part of net-worth calculations. Do we tax the asset-rich but cash-poor retiree? How about a cash-strapped start-up entrepreneur whose shares in his company was valued at US$15 million (S$20 million), based on the previous round of funding? Or the owner of a local small and medium-sized enterprise holding on to emergency cash for business use?
Net-worth wealth is vastly different from income wealth. Net-worth wealth is derived from assets, and the value of these assets is often tied to confidence in the asset's ability to generate future value.
High-net-worth people are not necessarily cash rich, even though payment of taxes through equity is still a possible area to be explored.
The current practice of collecting taxes from high-income earners is less disputable since it is, by far, one of the most accurate indicators of a person's earnings.
Asset taxes could possibly lead to large swings in aggregate tax collections, therefore contributing to volatility in tax revenue. This is especially true during economic crises, since equity and other volatile assets that an individual's net worth is tied to will fluctuate wildly in value. Furthermore, there is also a cost to valuing the assets of wealthy individuals.
The wealthy generally have privileged access to tools and resources that would allow them to "beat the system", and this could raise tensions between the working class and the wealthy.
When we implement something, we need to be sure it doesn't lead to greater tension between income groups.
Samuel Han Juan Teng
However, asset taxes on the wealthy could lead to more friction in society.
By definition, shares in a company and investment properties are part of net-worth calculations. Do we tax the asset-rich but cash-poor retiree? How about a cash-strapped start-up entrepreneur whose shares in his company was valued at US$15 million (S$20 million), based on the previous round of funding? Or the owner of a local small and medium-sized enterprise holding on to emergency cash for business use?
Net-worth wealth is vastly different from income wealth. Net-worth wealth is derived from assets, and the value of these assets is often tied to confidence in the asset's ability to generate future value.
High-net-worth people are not necessarily cash rich, even though payment of taxes through equity is still a possible area to be explored.
The current practice of collecting taxes from high-income earners is less disputable since it is, by far, one of the most accurate indicators of a person's earnings.
Asset taxes could possibly lead to large swings in aggregate tax collections, therefore contributing to volatility in tax revenue. This is especially true during economic crises, since equity and other volatile assets that an individual's net worth is tied to will fluctuate wildly in value. Furthermore, there is also a cost to valuing the assets of wealthy individuals.
The wealthy generally have privileged access to tools and resources that would allow them to "beat the system", and this could raise tensions between the working class and the wealthy.
When we implement something, we need to be sure it doesn't lead to greater tension between income groups.
Samuel Han Juan Teng
