Monday, 23 November 2009

Foreign talent, taxation and Eastern family values

Singapore is a tiny speck on the world map. Many online maps don't bother to even label the island. Yet, billionaires like Bhupendra Kumar Modi are choosing to live in Singapore and not London or New York.
As an international financial centre the city-state has already made its mark.
Daily trading in the foreign exchange markets puts the city in the top five globally. Singapore is a confident new entrant into the big league of private banking centres, propelled by the republic's efficient legal framework and banking privacy laws.

But billionaires don't pick their homes on the basis of FX trading activities or public transport systems. For today's wealthy and globally mobile individuals taxation is a key factor in their choice of legal domicile.
Individuals like Bhupendra Kumar Modi (or Jet Li) scrutinize tax systems carefully before buying penthouses and luxury homes.
Singapore's taxation regime is not often thought off as a competitive strength. But it is.
Yes, the goods and services tax (GST) rate is high but the direct income tax rate is reasonable. Importantly, Singapore's tax regime is liberal in assessing international income.  
Complement the attractive direct taxation regime with world class physical infrastructure, high quality of life and Singapore has the potential of becoming a regional Monte Carlo for the ultra-wealthy.
Wealthy billionaires spend money and pay GST. They hire people and set up offices to manage their global enterprises. Sometimes, as in the case of Mr. Modi, they invest directly in Singapore and the Southeast Asia region.

A Singapore government poster from the 1970s

However, in attracting the ultra-wealthy to Singapore, the city's trump card is its natural embrace of Eastern and Western cultural traditions.
The city has an active nightlife but no drug problem. It has a Hooters restaurant but raunchy cabarets went out of business due to lack of clientele. Homosexuality is tolerated but acceptance of gay marriage is light years away. Public displays of affection are rare but prostitution legal.
Singapore is no longer a city with Victorian values 'recommended' by the government. Nor is it Las Vegas.
Singapore is a city where 'Westernized Easterners' feel comfortable. It is no surprise that many, though not all, of the wealthy who opt to live in Singapore are Asians (Chinese, Indians).
Arguable, Hong Kong has a more attractive taxation regime. It has a more vibrant nightlife. Socially, it is a freer city – one can even join protest marches if that's your thing!
But for most the choice of Singapore (over Hong Kong) is driven by an old fashioned preference for sensible family values. A conservatism which understands that incremental change is typically sustainable and less socially disruptive.
Singapore's foreign talent comes in many forms. Some foreigners build luxury hotels while others pay for the hotels to be built. The people that pay to live in Singapore remind us that Singapore is firmly anchored in the East.

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