The city-state has just announced that those taking home more than S$320,000 ($235,294) will pay a top tax rate of 22 per cent from 2017, up from 20 per cent today. Smaller increases will apply to earnings over S$160,000.
Singapore's departure from three decades of progressively lower taxes for the wealthy is a nod to French economist Thomas Piketty's polemic on inequality. It's also a bet that the rich value clean air and social stability as well as money.
The government estimates the hike will bring in an extra S$400 million a year. State investor Temasek will also contribute by handing over as much as half of the expected real returns on its S$223 billion investment portfolio. The two measures combined are expected to boost revenue by the equivalent of 1 per cent of GDP annually over the next five years. This should cover a planned ramp-up of investment that includes more hospital beds for an ageing population, as well as a new airport terminal.
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What's more, Singapore's rich don't have many attractive alternatives. Even at the higher rate, someone earning S$1.5 million will still pay less than 20 per cent of their overall income in tax. Hong Kong takes an even smaller slice. But the rival financial centre has worse pollution and faces increased social unrest caused by China's tightening grip.
The bet is that Singapore's wealthy will sacrifice a few extra percent of their income for what remains a stable and safe low-tax haven. In a vastly unequal society, the elite could hardly have hoped for a less strenuous marriage of Piketty and pragmatism.
