Outdated provisions must evolve to meet the demands of the digital age and emerging industries.
Property tax, originating as a municipal levy in the 19th century, often goes unnoticed by modern fiscal strategists, especially amid discussions of global tax reform under frameworks like the OECD/G20’s BEPS 2.0. While the focus in Singapore has shifted to issues like climate change, international tax fairness, and ageing demographics, property tax has recently gained attention as a progressive wealth tax. However, the existing system still relies on provisions from the Victorian era that don’t reflect the needs of the future economy, which is now embracing Industry 4.0.
The property tax system in Singapore traces its roots to the early 1800s, designed to fund public services like street lighting and fire protection. At the time, it was practical to use the rental value of immovable property as the tax base. But this system has become outdated, particularly in how it treats machinery. The colonial authorities exempted machinery used for manufacturing from the tax, but this carve-out was intended for industries of the past, not the technologically advanced sectors of today.
Today, the outdated language of the Property Tax Act, particularly Section 2(2), is a barrier for industries that rely on cutting-edge technologies. Modern machinery used for sectors such as agritech, aerospace, and sustainable energy is unfairly taxed because it doesn’t align with the 19th-century definitions of “making, altering, or adapting articles for sale.” Cold chain technologies for vaccine storage, robotics in logistics, and photovoltaic systems all face higher property taxes, even though they play crucial roles in the future economy.
Other jurisdictions with similar property tax systems have adapted their laws to exclude machinery used in modern trade and manufacturing processes. In these places, investments in leading-edge machinery are no longer penalised with property taxes, providing a more supportive environment for technological advancement.
Updating Singapore’s property tax system would not only address inequalities but also align fiscal policies with the needs of a future economy driven by automation and innovation. Encouraging investments in green technologies and deep tech, as well as providing tax rebates for environmentally sustainable properties, could create a more conducive environment for future growth.
To remain competitive and ready for the challenges ahead, Singapore’s property tax system needs a comprehensive overhaul that reflects the evolving demands of the digital age and modern industries.
