Tuesday, February 24, 2015

Budget 2015: A high earner example

Read some of the most inane comments which came with this item. To me Anthony Fok is quite clever. Prospective tutees will conclude this fellow must be very good at what he is teaching. ST just provided him free and the most credible advertising. What is paying more tax?

He is in a very sweet spot. The money folks are most allergic to taxes because it is the big killer for the magic of compounding returns. On the other hand this guy gladly and understandbly pays his share. Unfortunately many high income earners would really look askance at the additional 2% extra tax. The MOF must have worked the numbers and types that would be hit rigorously to be confident about this measure. Obviously the really rich do not so much raise their income as increase their wealth.

You see the government is careful to tax income and not wealth. Tax the latter and overnight you will have an exodus of the very rich out of here.

It is impossible to close the wealth gap, but we are ready to do something about the income gap. How much progress we can make here will depend on the external environment.

More than taxation, what the ultra wealthy fear is confiscation of their wealth. It is absolutely vital that to be a wealth management centre they must have total confidence this is a safe place to park wealth. Perhaps at the right time we can raise our taxes on them and they would also be happy enough to pay for that peace of mind.

But this is really hard to pull off. Unlike Switzerland we are geopolitically too exposed. Perhaps we can only be opportunistic but Switzerland will endure. Well the SNB wasn't very clever. Our MAS is much smarter.

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