SINGAPORE - Workers' Party MP Jamus Lim (Sengkang GRC) has proposed imposing a wealth tax of 0.5 per cent to 2 per cent on the most wealthy here, saying that it could help diversify Singapore's revenue sources and also reduce income and wealth inequality.

While Singapore's overall tax system may be progressive - with the rich taxed much more than the poor - a quarter of the taxes imposed are regressive, noted the Essec Business School Associate Professor of Economics.

He cited the goods and services tax (GST), which he said affects lower-middle and middle-income families disproportionately, even after taking into account the current GST voucher scheme. The rich account for about 11 per cent of revenue from GST, he added.

Urging Parliament on Monday (Nov 1) not to be "content that the system happens to be progressive overall", he said introducing a wealth tax could help minimise the number of regressive components in the overall tax regime.

Prof Lim proposed a tax of 0.5 per cent on net wealth in excess of $10 million, rising to 1 per cent for wealth above $50 million and 2 per cent for wealth above $1 billion, during a motion titled "Taxation for a Dynamic and Fair 21st Century Economy".

He also said that the returns on wealth in any given year would typically significantly exceed the tax rates he proposed, so the ultra-rich should generally not expect any decrease in the principal of their assets.