Myth 174 - No Estate Duty
We have just scrapped Estate Duty and the super rich are all popping their champagne. I am going to argue that this is another Singapore myth. What is Estate Duty? In brief it is a tax on a citizen's life long accummulation of wealth, his properties and money. With the scrapping of the Estate Duty, this is gone. For the average Singaporean, his life long accummulated wealth is his HDB flat and the money in his CPF. These are his material assets. All he has. HDB flat is safe, but not his CPF. In a way the Estate Duty now comes in another form. It has transformed to tax the estate of a citizen in advance. You guess it, the Minimum Sum and the Medisave are Estate Duty taxed in advance. No they will tell you that they are different and for different objectives. And they will be returned to you at the appropriate time when they decide to. So for 40, 50 or 60 years, maybe more, the citizens will be dumping real money into the CPF and in return they will get an IOU chit from the CPF saying how much it owes the citizen. And only the CPF has the authority to decide when to give it back to the citizen and at its terms. Still not really like Estate Duty leh. True. Let's take an extreme case where a citizen only has a little Minimum Sum and his Medisave. And he dies without any surviving relations. Where does the money go to? This is as good as it gets to being an Estate Duty Tax. And it is 100% tax! Whether this is equivalent or far from what Estate Duty is, it all depends on one's perception and definition. (Check with Matilah) Now who does not pay this transformed Estate Duty? Those on pension scheme and the super rich who are able to work around the CPF ruling and not contributing to it. Even they do so, it is less than the smallest peanuts in relations to their wealth.