Koo Tsai Kee
Singapore
“Sir, I will forward the suggestion from Dr Wan to JTC because the Chinese Garden and the Japanese Garden are currently managed by the Singapore Leisure Industries Pte Ltd, which is a subsidiary of JTC. The National Parks Board manages a wide variety of public parks to meet the recreational needs of all Singaporeans.”
“Over the years, BCD has made sure that planning approvals have been speeded up. On building defects, this is something that the management corporations must sort out with the developers. If we ask developers to deposit more money with the Government, then this cost will be passed on to the home buyers.”
“Anything that stands on HDB land belongs to HDB. You are not supposed to remove, paint or vandalise it. But it is a small incident. We have to enforce it legally. Otherwise, it will become a precedent. If he wants to put up any signboard, he can just write to HDB.”
“Unless I have not done so, he can seek clarification. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Mr Koo Tsai Kee]. Bill considered in Committee. [Mr Deputy Speaker in the Chair] Clause 1 -”
“Sir, if Mr Chiam has any suggestion, we will be happy to look at it. SENIOR CITIZENS' CONCESSIONARY TRAVEL ON PUBLIC TRANSPORT 13. Mr Yeo Guat Kwang asked the Minister for Communications if he will consider lengthening the period for senior citizens' concessionary travel on public transport which is 10 am to 4 pm in the day time to 9 am t…”
“Sir, I think we are going off tangent here. These are upgraders. Your sympathy should lie with the first-timers, should you not? If we encourage upgraders to upgrade all the time, then the first-timers will be left behind. So we are talking about people who have already taken the first bite of the subsidy cherry.”
The complete record
Every one of 314 lines we hold for Koo Tsai Kee, in date order, each linked to its source. Free to read, in full, without an account. Page 6 of 7.
“Sir, it was three years ago that the Ministry first encouraged private companies to raise the retirement age from 55 to 60 years old. But three years have gone past and the results are disappointing. I think only 5% of the private companies with non-unionised workers have responded enthusiastically. I understand that the Retirement Age Bill is coming. I would like to commend the Minister for introducing this Bill. I have no questions.”
“This means that workers who are about to retire today only benefited from the higher CPF when they were already aged 30 and 40. If the Government were to penalise this group of pioneers who had worked hard, sacrificed, only to see the fruits of their labour - the retirement benefits - diminished, it appears to me a trifle unfair. 3.45 pm But what the Minister has said about retirement benefits being a potential loophole is, indeed, valid. Some companies and employees might exploit it. So it must be plugged. But how to solve it is tricky. I think we can go back to the three basics of taxation: simplicity, equity and efficiency. Sir, I suggest an independent and progressive system for taxing retirement benefits - one decoupled from the present income tax system. Under this system, we could exempt retirement benefits below a certain amount. How much is up to the Minister to decide. He can judiciously design it such that genuine retirees will not be penalised. By looking at the amount and looking at when the retiree started work, one can know whether the retirement benefit is reasonable and whether it was designed to escape the tax net. I would say, consider this as reward for sweating it out in the impoverished days of the 50s and 60s, and then, apply different tax rates for different amounts of taxes. Sir, when the working cohorts of the late 70s and 80s, people like myself, reach retirement age, this transitional system should be abolished. I would like to ask the Minister if his Ministry would consider my suggestion.”
“Sir, the Minister for Finance has announced that retirement benefits received from private employers, including gratuities and pensions, will be taxable in the Year of Assessment 1994. The rationale given by the Minister was that since Government already provides a tax-free benefit of 40% in compulsory contributions to CPF, further exemptions can be exploited and abused. I agree to the why, but I differ in the how and when. Sir, the 40% CPF has not always been so high. True, it had been higher, but only for a very brief period, I believe, in the eighties. Workers who are retiring now began their work careers in the 1950s and the 1960s. Then CPF rates were very, very low. In fact, many were not even in the CPF net. This remained true for all of the 60s and most of the 70s. Salaries, however, began to move up in the late 70s and 1980s. Companies hoping to retain staff began to restructure their wages and promised retirement benefits as rewards for company loyalty. Therefore, retirement benefits agreed to in collective agreements between the unions and employers during that period were never designed for tax purposes. In fact, the employers representing the petrochemical group (Shell, Mobil, SPC, Caltex, SRC, BP, Esso, Castrol) claim that they structure their retirement benefit system roughly basing it on the Government retirement benefit system. Since the Government has exempted Government employees' retirement benefits from taxes, perhaps the Government could consider granting retirement benefits of private sector employees who started working during the 1950s and 1960s from taxes. Salaries did not move up until 1979, when the NWC deliberately recommended higher wages to phase out low wage industries.”
“Some of these policies are well known including pollution charges and tradeable permits to price and control pollution. I think part of it is implemented in Singapore, the CFC quotas. Others include the retail disposal charges to account for the different costs of waste disposal and some others like the deposit refund system for efficient promotion of hazardous waste disposal, which I think has yet to be implemented. Could the Minister advise if these, or at least some of these, market-based environmental policies are on his Ministry's future environmental blueprint? [Mr Deputy Speaker (Mr Abdullah Tarmugi) in the Chair] 4.05 pm”
“Sir, as Singapore becomes more developed, we become more conscious that the quality of life is shaped by our environment. The price many countries had to pay to transform itself from a developing country to a NIE is pollution and environmental degradation. Taiwan and South Korea are two countries which have paid heavily for the neglect of their environment. Fortunately, Singapore went "green" long before the colour became a cry for environmental protection. Singapore's effort at preserving our air, water and parks deserves commendation. Clearly, our existing environmental policies have served us well. As I understand it, the existing policies are regulatory in nature. I think in the jargon, it is known as the command-and-control method. The Ministry sets standards and then you mobilise your resources to ensure compliance of those standards. This method has been effective but it comes at a price. The regulatory method, or the command-and-control method, tends to force all businesses to adopt the same measures and practices for pollution control. Usually they fall into two categories: either technology-based or performance-based. These policies are rigid because it gives no incentives for businesses to exceed their control targets and both types contain a bias against experimentation with new technologies. I would like to suggest a gradual switch from the command-and-control policies to some market-based policies. These policies are already well documented in environmental economics. Essentially, in market-based policies, the Government establishes financial incentives, like the incentives mentioned by Dr Chen in the use of energy in Japanese buildings. The idea is to encourage businesses to experiment with new technology to find ways to meet these environmental targets.”
“I thank the Minister for his reply. I beg leave to withdraw my amendment. Amendment, by leave, withdrawn. The Chairman: Amendment No. (6). Mr Chew is not here. Mr Tong, you have all the time until 3.55 pm.”
“I would like to ask the Minister whether R&D programme or at least public R&D programme in Singapore is audited.”
“These are the ones powering Taiwan into the rank of the OECD countries. The Taiwan model destroys the argument put forward by Ho Kwon Ping that, because of our competitive school system, we have a dearth of entrepreneurs. In fact, by comparison, our school system is not even as competitive as Taiwan's or Hong Kong's. But in Hong Kong and Taiwan, they have no dearth of entrepreneurs. Sir, R&D holds the key to a nation's future wealth. If the expenditure on R&D is one indicator of how serious an effort is made to create future wealth, then Singapore appears dead serious. In 1991, we spent about 1.1% of our GDP, or $756 million, on R&D. This trend is moving up to 2%, putting us roughly at the same proportion as Japan and Germany. Sir, if we compare this amount, it is quite a lot. But if we compare it to the amounts spent by, let us say, IBM, in 1991 alone, IBM spent US$6 billion. So our R&D expenditure appears to be a drop in the ocean. The example of General Motors is also instructive. GM has long outspent anybody on this planet on R&D, yet much of the money appears to have gone down the drain. So my message is that GM and IBM R&D experts have a message for us, that is, R&D in Singapore must never be done for its own glorification. People who do R&D cannot be totally oblivious to the market needs. 3.45 pm We must have an auditing system on public R&D expenditures to ensure that R&D does not become an end in itself. Public R&D expenditures are presently performed mostly in the tertiary institutions - the polytechnics and universities. In these places, there is a natural tendency for R&D to become a vehicle for generating publications to secure tenureship and promotions. Sir, there is nothing wrong in this, except that this must be moderated.”
“Sir, I beg to move, That the sum to be allocated for Head W of the Main Estimates be reduced by $10 in respect of Code WH 3100. Sir, Singapore is now gripped by an entrepreneurship fever. Are entrepreneurs born or are they made, or both? The debate continues. While it is true that the problem of entrepreneurship does not lend itself to an engineered solution, I think it is wrong to say that entrepreneurship exists in a vacuum. The kind of entrepreneur Singapore needs most, I would say, is the technological entrepreneur. This type cannot be born, unless there is an environment of research and development (R&D). Not so long ago, Sir, the way to fabulous riches is through banking, property or trading, at least in Singapore or the rest of Asia. But in the last 10 years, the heroes of the rich and famous belong to people not just with guts but mostly with brains as well. These are the technological entrepreneurs exemplified by Bill Gates of Microsoft in the USA, Stan Shih of Acer in Taiwan, and our home grown Sim Wong Hoo of Creative Technology. Unlike other kinds of entrepreneurs, these people must have technical background, and lots of it. True, Sim and Bill Gates did not receive formal R&D training, but Stan Shih did. In fact, he went through a very conventional path of university study and formal R&D training finishing his Masters at Taiwan's Chengong ( ) University, the MIT of Taiwan. Therefore, contrary to common belief, the technological entrepreneur can be made or is made. In fact, many of the technological entrepreneurs in Taiwan today, including many in Silicon Valley, have excellent academic and scholastic track records. In Taiwan, this has come about because of its gruelling and competitive school system.”
“Thirdly, the Government should also consider participating appropriately in the private sector to strengthen the confidence in our overseas ventures. The participation of the Government in whatever scale will serve to stimulate the confidence of entrepreneurs. Lastly, Sir, we should also encourage the remittance of profits from overseas ventures. I understand that many local entrepreneurs are parking their profits in places with lower corporate tax rates, like Hong Kong. The main reason is that our corporate tax rate is so high that it deters them from remitting their profits back to Singapore. If such a situation continues, then the spreading of our second economic wing will not be realised and Singapore will not benefit from their overseas ventures. So the net result will be that other countries like Hong Kong will continue to enjoy the fruits of our labour. We must have a more favourable and comprehensive plan to attract the remittance of overseas profits back to Singapore. We cannot just sit tight and watch the profits flowing into the hands of other countries. Mr Speaker, Sir, these are the four suggestions that I have to encourage our people to venture overseas. This will ensure that our second economic wing will grow quickly and enable us to soar in the global ocean. EXEMPTED BUSINESS (Motion) Resolved, That the proceedings on the Budget Statement be continued beyond 4.30 pm until 5.30 pm at this day's sitting and be exempted from the provisions of Standing Order No. 1. - [Mr Wong Kan Seng]. 3.39 pm”
“I support the view of Mr Leong Horn Kee that we should consider giving recognition to local entrepreneurs in appreciation of their success. Mr Speaker, Sir, I would like to say that I am also a businessman with overseas ventures. Based on my personal experience as well as the feedback I received from those entrepreneurs who have invested overseas, I hope the Ministry of Finance will consider the following suggestions: Firstly, we must allow the big four local banks to facilitate loans. The banks should grant loans to our local entrepreneurs by accepting their overseas assets, such as factory, property and lease as collateral. This loan will help entrepreneurs to raise enough capital to expand their business overseas without being hampered by cash flow problems. This inability to pit their skill will be a great obstacle to the growth of our second economic wing. Secondly, we should consider setting up an insurance plan for local entrepreneurs who go on ventures overseas. The Government should encourage overseas investments in those regions with big economic potential like China, Vietnam, India and Philippines, etc. But the political climate of these countries is not as good as that in Singapore. There is no assurance that there will not be another "Tiananmen Incident" in China. If such an incident does occur again, then Singaporean entrepreneurs' investment will suffer great losses, get their capital locked up in the country concerned or their investment may all be lost. Therefore, if the Government can set up an investment insurance scheme to enable our local entrepreneurs to put in a wholehearted effort without fear of future losses, then with this kind of life buoy around, more entrepreneurs will be encouraged to swim in the ocean boldly.”
“It is a sincere intention to demonstrate to the citizens of Singapore that the objective of GST is not intended to generate more revenue for the Government. On behalf of the 70% of lower-income group residents in my constituency, I would like to thank the Minister for this. I would welcome the suggestion by the Government on the assistance scheme to be implemented by the Citizens' Consultative Committees in solving the problem of non-HDB residents from the lower income group who are not able to enjoy the tax relief and rebates. On the other hand, the Government is also making a generous offer by sharing the fruits of our economic success with Singaporeans who are above 21, for them to own Singapore Telecom shares. Those who have $500 in their CPF will be able to receive $200 CPF top-up from the Government. This scheme will enable Singaporeans to appreciate the present achievements of Singapore and continue to work harder for a better future. I fully understand Mr Chiam See Tong'sand Mr Low Thia Khiang's worries that once the voters in their constitutencies begin to enjoy these benefits they will cease to support them. Mr Chiam See Tong said that all the money will be locked up in the CPF. Mr Low Thia Khiang also does not endorse the scheme. I fail to understand their objections. They seem to say that if we sell Government shares to the people, it is wrong. If we do not sell the Government shares to the people, it is also wrong. Mr Speaker, Sir, the Government has set up a committee to be chaired by Commodore Teo to promote overseas ventures. The Government's Budget Statement has also provided for various incentives. This is a good idea.”
“The Straits Times, in its Editorial on 1st March, also remarked that "It is difficult to please everyone at the same time but Dr Richard Hu's Budget Statement made a most successful attempt to address the concerns of all Singaporeans, from big businesses to the poorest household in a one-room rental flat". However, the comments made by Dr Chee Soon Juan, Assistant Secretary-General of the SDP on 2nd March in the Straits Times are very vague and ridiculous. This PhD is very different from our PAP's PhD. I believe that because of the dire shortage of talent, it is difficult, if not impossible, for the SDP to have enough talents to realise the dream of Mr Chiam See Tong becoming Prime Minister. So the wisdom of the Minister for Finance has actually dashed Mr Chiam See Tong's political dream to become the Prime Minister. The Budget Statement presented in Parliament by Dr Richard Hu has taken care of all sectors of the population. The proposed change in the tax system will enhance our economic growth. The citizens of Singapore may be used to direct taxation and they would need some time to adjust themselves to the new tax system before they could fully understand and realise the advantages. However, this will be the next boost for our economic growth. It is also the main engine of growth for the growth of our second economic wing. On the face of it, this change in tax system seems to be an additional burden to the non-taxpayers. But the Government is trying to cushion the effects on the lower income group when the GST is to be introduced in 1994 by offering many packages to relieve their difficulties. The various packages of tax rebates for the lower income group to offset the GST are commendable.”
“We can see this from the overall statement of Mr Low Thia Khiang when he spoke. On the face of it, they might have raised some objection for their own sake and made some irrelevant criticisms. I believe that they will begin to realise that if a two-party system were to be introduced in Singapore as proposed by the SDP, then could they be able to find another Dr Richard Hu to be their Minister for Finance? Can they bring up a systematic and comprehensive budget like the one before us? Just now, Mr Chiam See Tong referred to the GST and he quoted the remarks of Mr Lee Kuan Yew in 1964. The environment and the social situation then were entirely different from ours in 1993. I believe in 1964, residents of HDB flats in the Bukit Ho Swee area had to share common toilets and kitchens. We do not have such problems now. Even Mr Chiam See Tong himself has changed. Perhaps, he has grown older and more matured. I believe that in Potong Pasir, the Town Council originally decided not to raise the SC & CC charges. But now, with cost going up, they have to raise the SC & CC too. I am not saying it is not right for him to raise the SC & CC. What I am saying is that Mr Chiam See Tong is a very realistic Chairman of the Town Council. I believe that a good government is like a good chairman of the Town Council. The policy cannot remain static. Lianhe Zaobao, in its Editorial comments on 27th February, complimented the Budget Statement as "the share of the harvests and the strive towards success".”
“Sir, lessons of Australia, New Zealand and Canada are very instructive, and they are all late comers to GST, as to when not to implement GST. GST is like a medicine. It is a strong medicine. When it is taken to cure a sick economy, the economy will slip further into sickness before it gets better. This is a masochistic approach to good health. You are sick, you take strong medicine, it knocks you off and after some time you recover. But when the GST is injected into a healthy economy, like ours, it acts as an aphrodisiac, like the Chinese say, che pui [ ], immunising the economy from a host of sickness. I think this is the holistic approach to keeping healthy. This is the Singapore approach to GST. Mr Speaker, before I end my speech I want to raise a point by Mr Chiam See Tong on the remarks made by our Senior Minster, Mr Lee Kuan Yew, in 1964 about not wanting to implement something like the GST. I am not sure in what context he quoted the speech but, in any case, since 1964 until now, times have changed. At that time, the people were unemployed. The economy was bad. If you had heard my speech earlier on, I said that you should never introduce the GST when the economy is sick. We should introduce it when it is strong. I think the GST is a good thing for Singapore. The rate is very acceptable and I support the motion. Mr Peh Chin Hua (Jalan Besar GRC)( In Mandarin): Mr Speaker, Sir, to me this is the most carefully thought out and farsighted Budget Statement I have ever heard since I came into Parliament four years ago. It has the best political and economic vision. I believe that our Opposition Members of Parliament are also secretly admiring the great wisdom of our Minister for Finance, although they may outwardly object for the sake of objecting.”
“The Australian, New Zealand and Canadian GST was designed as an additional revenue source. Ours has been designed to restructure an existing tax system. Because of our accumulated budget surpluses, our Government can afford to offer a comprehensive package of offsets, rebates, income tax reductions and subsidies to cushion the impact of the GST on the lower income and retirees, which the Canadian, Australian and New Zealand governments could not do so because their coffers were empty and they were already borrowing money. So the lesson for us is very clear. GST is a tried and tested tax system that works to encourage investments and create jobs. In all the developed world, not many countries are without an equivalent of the GST. When the rest of the world were taxing factors of production, a lopsided direct income tax was quite adequate. But when our competitors moved into different territories, when they moved into indirect taxation, through consumption, our outmoded tax system puts us at a severe disadvantage. Hence the question for us is not if we should endorse GST. The question is how and when to implement GST? I think the time to implement it is now. Why now? Because employment is full, inflation is low and our reserves healthy. How to implement it should actually be discussed in detail in the Second Reading of the GST Bill. But we have heard quite a lot of it today and I think that most of us welcome the Bill in principle. I want to ask Mr Chiam whether he actually agrees to the GST, in principle. He talks about the GST, he throws out a whole list of queries and he seems quite satisfied, but I am not sure. His only worry seems to be that, after five years, the GST rate might be moved up.”
“The unofficial and real figures are certainly higher. In some places, unemployment is as high as 30% and while the retrenched suffers a loss of esteem, the employed Australians are having nightmares over imminent prospects of retrenchment. Sir, John Hewson's proposed GST is not unwelcome. Why? Because it holds out the promise, however remote, of resuscitating the moribund Australian economy into providing more jobs. So they are not worried about the 15% because they are not paying any tax now. Because they are unemployed, they do not need to pay tax. So they do not mind the 15% if they have jobs, which is the bottomline. Sir, New Zealanders embraced their GST under very similar circumstances some years ahead. New Zealand's economy appears to be on the mend, but the trail of broken homes, despondency and desperation caused by more than a decade of unemployment is something, I hope, will never set foot in Singapore. Some critics point to the hated Canadian GST and tell us that there is a dark story to it and that we should not implement the GST after Canada's failure. But the parallel between GST in Canada and the proposed GST in Singapore is invidious. Ours is only an innocuous 3%, theirs is 7% on top of their extremely high tax rate. Second, Canada made the fatal mistake of introducing a GST when the economy was down and out - one troubled by high unemployment (about 11%, I read recently), high inflation and unbearable deficits. Third, Canada's GST was designed as a weapon to generate additional revenue to complement its income tax. Because there is a high deficit, they need to get money somewhere to top up and they cannot cut welfare. The Singapore GST has been designed as a device to restructure our tax system. I think this is an important point.”
“Barring unforeseen circumstances, NAFTA will come into effect on 1st January 1994, and with it, NAFTA will unite the America, the USA, Canada and Mexico into a borderless trading zone of 370 million people which will account for more than 30% of the world's GDP. Sir, the technological revolution and the political revolution, together with the creation of these two mega trading blocs, will divert trade and investments away from Singapore. I feel strongly that in order to retain the marginal investments, we have to give them a reason to come and one good reason is to give them a higher return on investments. The 30% on paper may still look 30% but because of the formation of barrier blocs within Europe, around Europe and around NAFTA, the 30% figure will drop in real terms. Sir, the experiences in Australia, New Zealand and Canada are instructive. Some Singaporeans, like Mr Chiam and Mr Low, are still unsure of the benefits of GST. But many Australians, I think, most Australians, appear to embrace it. Dr John Hewson, the opposition leader, has been campaigning on a punitive 15% value-added tax (they also call it GST) if his party were returned to power. The election is this Saturday, 13th March. If we believe the polls, he appears to be within grasp of the prime ministership. Sir, why do Australians accept the additional burden of a punitive 15% in consumption tax on top of a crushing income tax of 20% (lowest) to 49% (highest)? These are very punitive, burdensome figures. The reason is simple, because Australians need work. In Singapore, most Singaporeans have work. In fact, we have an over-employment problem. So we do not worry about unemployment. But the Australians need work and they appear to be embracing GST. Officially, 10% of Australians are unemployed.”
“So SEM confers privilege and access to members, while non-members, like Singapore, will suffer the pain of denial. Sir, on a level playing field, Singapore has a fighting chance. At a time when Japan and the world were shrinking its world-wide direct investments, Singapore continued to attract quality investments and technology. Translated, this means we have more and better paying jobs for us, for our children, from which we can help the less fortunate. Last year, the $3.5 billion worth of inward investments was a record. But why the flood of investments? Principally, because we offered very good risk of returns. According to the US Department of Commerce statistics, American companies investing in Singapore enjoyed a 30% return on investments, which is very high. This is more than double the average of 14% recorded for US foreign direct investments in all countries and above that of the G7 industrialised countries. Incidentally, it is 20.6% for UK, 15.9% for France, 15% for Germany, 10.1% for Japan. Singapore is 30%, which is very high. But the creation of the SEM will begin to divert marginal investments away from Singapore to Europe in the years to come, even though Dr Richard Hu has said that the 3% corporate tax cut will be enough to attract quality investments. I hope he is right. Sir, with the new SEM rules on indigenous labour and the use of local contents, I fear that some manufacturers, some marginal high-tech ones, will begin to move away from Singapore. As if one SEM is not enough, Sir, you have another monster lurking behind us. The US, Canada and Mexico are finalising the final paragraphs of the North American Free Trade Area (NAFTA) agreement.”
“Sir, while excited Singaporeans were counting down the minutes to midnight on 31st December last year, 1992, to ring in the new year, a trade bloc bearing the name of the Single European Market (SEM) was only seven hours away from becoming a functional entity in Brussels. The newspaper report did not pick it up. The newspaper report on 1st January 1993 did not pick up as its headline or even as the main story the formation of the Single European Market. Instead, it focused on all the parties, the fun. But the SEM in a way is an evil trade empire. It is a frontier free trading zone of the EC-12. Together, this vast market corners something like 30% of the world's GDP, with a vast catchment of 350 million people of the world's richest population. In a few years' time when the EC-12 eventually embraces the EFTA-6 (probably Switzerland will come out), the enlarged European Economic Area will be the most powerful and most affluent trading bloc in the world. In an issue of Economist two weeks ago, one Economist writer asked rhetorically why is it that Japanese companies are now going to Britain to invest because Britain does not offer the cheapest labour cost. It also asked why is it that it is going to Britain in increasing numbers because Britain does not offer the best management. The answer obviously is that they need a base to avoid the new ruling of local content, indigenous labour. They need to fight the trade war within the EC, so they need Britain. And because Britain uses the English Language, it becomes a natural advantage. Sir, SEM is still in its infancy but it is really bad news for Singapore because white barriers within the SEM have fallen, barriers for non-SEM members, like Singapore, remain.”
“At the same time, the political revolution caused by the collapse of communism and the rush for free markets by Latin America, Eastern Europe and China, has released to the developed world a seemingly endless supply of cheap labour that the technological revolution makes easily accessible. In short, unless we adapt to this New World Order - a world where investments have no loyalty, and where cheap labour is in plentiful supply - things will go quickly wrong with Singapore. This 1993 Budget is a watershed, Sir, because it is about adapting Singapore to this changing world order, the changing world of technological revolution and political revolution. Jack Welch, one of the few CEOs that is not being chopped recently in America, the CEO of General Electric, and author of the best selling book "Control your Destiny or Someone Else Will", puts it succinctly and eloquently. "Change", he said, "has no constituency. People like the status quo. Because they like the way it was". The GST is about making changes to our way of life. It is about making Singapore relevant to the third aspect of the New World Order which Friedman did not pick up. It is a world organised not according to free competition but according to geographic groupings; a world of trade blocs. The GST is about postponing, for as long as possible, our next recession which Singaporeans seem to think will never come. Mainly, the GST is about three things, Sir. It is about jobs, jobs and jobs. It was Marx, after all, who said, "Man is what he does".”
“It has been said by Dr Johnson, the lexicographer, that the "decent provision for the poor is the real test of civilisation". By that yardstick, I think we have passed our compassion test. Unfortunately, the most compassionate and important reason for implementing the GST got the least attention. Mr Speaker, Sir, it is important, in fact imperative, that we re-focus on the big picture. Singaporeans are worrying about the problems of full employment, things like how much will my bowl of laksa cost or how much will my cup of coffee cost. I think these are problems of the PAP - the Peace and Plenty syndrome. I think under SDP, if unfortunately it becomes SDP, it might be a different story. Sir, prolonged full employment has lulled us into a false sense of security, that is, we will never be unemployed. Many think that Singapore is immune from recession. Cushioning the lower income and retirees is indeed important, but it is more important to provide jobs for our people. At a time of full employment, retrenchment is a remote thought. In fact, the prospect of unemployment is very real. Recent events in the West have proved that an economy can grow, and co-exist, with rising unemployment. Milton Friedman, the Nobel prize laureate, and now fellow at the Hoover Institution, attributes this strange phenomenon to the alliance of two powerful forces: one, technological; and second, politics. In Friedman's words, "the technology revolution makes it possible to produce a product anywhere, using resources anywhere, by a company located anywhere, to be sold anywhere". In other words, there is no need to come to Singapore.”
“It equates getting some more with either past participation, that means, you have accumulated money in the past, or present participation when you have earned cash today, or you can borrow from your children, future participation. I understand that the scheme is to allow Singapore citizens who have participated in nation building to buy, in the first instance, Singapore Telecom shares and maybe other shares at a discount. These shares are not going to increase in value overnight. It will take some time, maybe two years, maybe three years. So it is fair to lock this money inside. For those people who have already retired, within three years I think Telecom shares, or whatever shares, would have gone up. Then it is time to cash it in. For those people who are still below 55, not yet retired, they will probably have their $500. For those people who cannot afford the $500, in the first instance, I think their children can help, their friends can help. I am sure the banks will be quite keen to help, or at least some banks, with the understanding that they are going to buy equity. Mr Speaker, Sir, I endorse this Budget because it lays the foundation for further growth with minimal inequity. I use my words carefully - minimal inequity. Everyone will be richer because of the fundamental restructuring of the tax system. This budget re-focuses the perspective. It shifts taxes from direct income to consumption. This budget will encourage savings, promote investments and entrepreneurship. And the Goods and Services Tax, or the GST, lies at the heart of this tax restructuring programme. Newspaper headlines and most dialogues and seminars have so far focused on the GST debate, principally, on how it will impact on the lower income and retirees. I think this is right.”
“Aggrieved Singaporeans, fanned by the Opposition's diatribe that the Government only helps the rich and ignores the poor, should listen to the voice of the reformed Communists. The Chinese people have been through economic hell, and here our Opposition are tempting us to enter where even Communists fear to tread. The key test of a budget, Mr Speaker, is not whether who gets richer. The real test is whether we will all get richer. The World Bank uses the percentage of people living below subsistence level as a test of equity. It recognises that the real test of equity is whether a society allows mobility among different classes. And it concludes that Singapore has almost nobody living beyond the poverty line. You look at Chart 2, and you see the countries with the percentage of people living below subsistence level, corrected for cost of living within the country. You see Singapore is not there. Why? Because nobody is living below poverty. You look at our neighbours - Malaysia, 2% below poverty; South Korea, 5%; China, 10%; Thailand, 16%, Indonesia, 15%, Philippines, 21%. The figures in the chart are for 1970, 1980 and 1990. If we compare our success rate by combining economic growth and achieving income equity with the NIEs and the ASEAN neighbours, we will begin to understand why they would love to have our problems. So in fact we have no problems. The Opposition keep telling us and they are worried about the $500 equity topping-up with an extra $200. I think the scheme is fair because we cannot give money frivolously away. This money has been accumulated over years of prudent management combined with the diligence of Singaporeans. In order to get something, it is fair that they put in an equity participation. $500 is one suggestion, and I think it is a fair one.”
“If we design budget after budget to make everybody equal, then there will be equality of poverty and misery for everybody. Why? Because we will be sharing a diminishing amount of a smaller national pie. Poor and deprived citizens of the former mighty Soviet Empire swallowed the lethal cocktail of ignorance and naivety, believing that a Utopia was an equal system. In a cruel twist of fate, they found their Utopia. They are now all equally poor and equally miserable. We can learn from the Communist Chinese. The quick thinking Communist Chinese reversed course. They saw that economic growth could only be achieved through a free market. So they liberalised the coastal cities, establishing pockets of affluence. But the clever Communists astounded our smart capitalists. They went one step further. At a time when western political economists were wrestling with the moral question of income inequity, the Chinese accepted it. They have reconciled themselves to the fact that if they were to grow rich, and rid themselves of chronic poverty, some will have to grow richer than others. Only then, the Communists concluded, from the central committee right down to the peasants, that only when everybody becomes richer, the richer among the richer ones can help the poor ones. Mr Jiang Zemin, the Chinese Communist Party Secretary-General, made this profound and seemingly heretical statement at the 14th National Congress of the Chinese Communist Party. I quote him. He says: " ... pay according to one's work". [But] "simultaneous prosperity for everyone is impossible." He carries on: [So for the sake of efficiency,], "we should widen differences in personal income ...". This was quoted in The Economist, page 23, 17th October 1992.”
“Mr Speaker, Sir, can I request the Clerk of Parliament to distribute Charts 1 and 2, please? Mr Speaker, Sir, I rise to support this Budget. Sir, every year at Budget time, Members of Parliament dissect the Budget speech, sometimes wrongly by the Opposition, and we share our hopes, our fears, our dreams and aspirations with the nation. All these speeches have two basic objectives. First, to ensure that the Budget provides a conducive environment for continued economic growth. Second, that this growth can be achieved with equity. Yet, all over the developed world, economic growth has always been achieved with growing income inequities. Please refer to Chart 1. You see that in spite of all the efforts over the years, in the three countries (the United States, France and Japan), the top 10% has always earned more than the bottom 10%, and the gap appears to be widening. You look at France from the period, 1978 to about 1984, the gap appears to be constant, and it is not widening. That is because during that period, when France was under the Mitterand years, France was undergoing severe recession. In other words, if we want to close the pay gap, then we would have to suffer the pain of recession. It is clear that income growth and income equity pull in opposite directions. Even Japan cannot escape the malaise of diverging income inequity even though it is, by world standard, the nation with a remarkable degree of economic homogeneity. There is a lesson in these statistics, that is, if we want everybody to grow richer, then some of us will inevitably be richer than others. And I hope that Mr Chiam sends these charts to his Assistant Secretary-General, so that he can take a look at these figures closely. What is the alternative? The collapse of communism points the way.”
“Another point raised by Mr Low is that any patient who satisfies the condition for the use of this Fund should be automatically granted this assistance. I think for everything we do, there should be a proper procedure. We should let the Ministry of Community Development, the grassroots leaders and the relevant officers from the Ministry of Health to come in and investigate, examine and check whether the patient who is making the application is truly a deserving case. If we do that, we would be able to check any misuse of this Fund and, at the same time, we would be able to understand the needs of these people: what is their medical condition and how much help they need. Finally, Mr Low asked what would happen to the outstanding medical bill left behind by these patients who have passed away. If the family of the deceased has the means, I think they should pay up all the outstanding medical bills. However, for those families which do not have the means, I hope the Ministry of Health will adopt a sympathetic attitude and waive all the medical expenses left behind by the patient concerned. I support this Bill.”
“45 pm Mr Choo Wee Khiang (Jalan Besar GRC)( In Mandarin): Mr Speaker, Sir, I fully support the Medical Endowment Scheme Bill introduced by the Minister for Health. However, having heard the speeches by so many Members of Parliament, I am rather puzzled by what Mr Low Thia Khiang has said. He suggested that Medifund should also be extended to cover patients who stay in private hospitals and also those in wards A and B1. He seems to suggest that this fund should be made available to everybody. Everyone should be entitled to apply for the use of this Fund. This is not consistent with what the Minister has proposed and it is contrary to the primary objective of this Scheme, that is, to help those Singaporeans who are poor and destitute. If what he said is true, then I think it will not be necessary for us to have this Medifund. We might just as well have a Singapore Fund! Since it is inevitable that everybody will one day become old and fall sick, then would it not be better if we just give everyone a sum of money, so long as he or she is a Singaporean? Why should we go through all the trouble of setting up Medifund? Therefore, the use of Medifund should be selective. Only those Singaporeans who are poor, who do not have a Medisave Account and who truly deserve our help should be allowed to make use of this Fund. If everybody is entitled to apply, then as the Chinese saying goes: the gruel is meagre and the monks are many - there will not be enough to go round. The Fund will not be sufficient to cater for the needs of all those Singaporeans who really deserve our help. So I believe that Mr Low Thia Khiang should clarify his point.”
“I will repeat myself, I was interrupted. I am sorry. I am not sure if Mr Low Thia Khiang will allow people to go into Mount Elizabeth Hospital and turn to the fund, because he is for the poor. I think we must learn from the experience of other countries like Australia or the UK. They also have the equivalent of Medifund, but it is funded out of general taxation. It is for everybody. This means that the people who really need medical services have to queue up for years. By the time they reach the hospital bed, many of them do not need the cure any more. I just came back from China. I talked to some of the Chinese officials. The Chinese officials are now telling the Chinese that free medical health care is bad because if everybody goes for free medical health services, then the queue will be lengthened unnecessarily long and people will go for all kinds of services when they do not need one. So they are also thinking of a scheme where they will only allow the people who really need it, the people who cannot afford to pay, to tap into the services. I share the concern of Dr Soin and Mr Walter Woon. But let us get first thing first. This scheme is meant to help Singapore citizens. I think what they are referring to is mainly immigration problems. We must help our citizens, many of whom live in my area, the Tanjong Pagar GRC. Many of these san shui po [ ] came from China. They have worked hard, but they were caught in a time warp, they have no savings. Now they are destitute in the sense that they do not want help but they need help. These are our citizens. I think we help these people, the people who really need our help, instead of trying to dilute the fund, which is limited in the first place, to helping potential beneficiaries. 3.”
“Mr Speaker, Sir, I rise to support the Medical Endowment Scheme Bill. Mr Speaker, Sir, the Prime Minister once said, "this Government does not believe in welfarism." But that is not to say that there is no welfare for our people. This Medifund scheme would allow the very poor among us, the destitute, to tap into our medical services and get at least basic health care. But the catchwords must be "the poor and the destitute". Because if this Medical Endowment Fund is to fund for everybody - you, me, the rich - then the very poor who needs this fund most will be deprived. If a person is very poor, he or she will not be asked to be sent to Mount Elizabeth or Gleneagles Hospitals. Because if you allow people to go to Mount Elizabeth or Gleneagles Hospitals and allow him or her to use this Medifund, the next step will be he may want to go to St Vincent in Sydney or he may want to go to Mt Sinai in America. I think we must tell the poor, "Look, you cannot help yourself. Yes, we look at your circumstances. We ask the community leaders to vet you. If you deserve help, then you should go to SGH, which I think is the best hospital in Singapore." There is no need to extend the fund to outside non-authorised hospitals. I am not sure if Mr Low Thia Khiang really is in favour of allowing everybody to get--”
“I have already concluded my speech, Sir.”
“Because for everyone who is not paying taxes, the tax burden shifts to somebody else, or else total Government expenditure must drop, because inputs drop, meaning a drop in the quality of service, and by extension, a drop in the quality of life. If everybody pays taxes, then the tax burden will be spread over a wider base, and it will never become too heavy for any one individual. I think we must work on the principle that everybody who receives services from the Government should pay taxes, and those who have not been paying taxes, should be dragged into the tax net. My principal concern in supporting this IRAS Bill is the welfare of the existing civil servants in the IRD. I have, however, been assured that their welfare has been carefully considered. I am told, and in fact the Minister has just reinforced that, that everybody will be given a choice to either stay in the civil service or be transferred or seconded to the new statutory board. And the salary of those transferred will be no less favourable than those enjoyed by the same officers in the civil service. My advice to the existing civil servants in the IRD is to quickly join the IRAS before they close the door. Mr Speaker, Sir, I really cannot think of any rational being who might wish to oppose this Bill. But then perhaps I could be wrong. Clearly, it is not in the interest of those who have cheated on the IRD or who wish to cheat the IRD, to want the IRAS to be more efficient than the IRD. These people might oppose the Bill. But since none of these people is represented in this House, I should think that the Minister will get unanimous support from the hon. Members in this Chamber. Mr Speaker, Sir, I support this Bill.”
“In short, it can hire and fire, and be more accountable to the public in terms of cost and efficiency. This ties in very nicely with the President's Address of January 1992. In that Address, the President advised that Government departments should, whenever possible, be subject to the market discipline as private companies do, but not amounting to what Mr Chiam has understood to be listed in the Stock Exchange. Presently, the efficiency of taxation is not transparent because it does not undertake its own staff recruitment, it does not pay for its services rendered by other agencies, neither does it pay for rental for office space. The proposed IRAS Act will force the full cost of tax collection to be totally transparent. But, first to increase efficiency, I believe the IRAS must recruit competent and motivated staff. I understand that the turnover of staff in the IRD is presently very high, higher than most civil service departments. This is not surprising because the nature of the job makes them very marketable and valuable. Yet at the same time, the administering of tax collection and the enforcing of tax payments are an arduous task not designed for the feeble-minded. IRD officers are often at the sharp end of public fury. Why? Because few people like to pay taxes, and those who pay taxes, most of them think that they have been over-assessed. So they scream over the telephone, they bang tables at the counter at the IRD. I support the proposal to pay the IRAS officers competitive market salaries because what we pay them will be more than returned to us when tax efficiency rises. The more efficiently our IRD officers collect taxes, the less all of us need to pay taxes.”
“Mr Speaker, Sir, I rise to support the Bill. First, a few clarifications on Mr Chiam's points. I believe that the IRAS is not going to be a private company to be listed in the Stock Exchange. Perhaps that is his hope. But, as I understand it, the IRAS is going to be a statutory board. So I think he is extending his imagination too far. Besides, Singapore Telecom is not a private company yet. He continues to talk about how Singaporeans are paying onerous and burdensome tax. The fact is that while the tax paid in Singapore is wide, not many people pay a lot of taxes. Most people in Singapore pay less than $500 in taxes or thereabouts. If you factor in the benefits, I think most Singaporeans will agree that what they pay is value for money. So I think his arguments are totally groundless, totally irrelevant. I think he has a high sense of drama and he exaggerates minor things, and he has a flair for hyperbole. The functions of the proposed Inland Revenue Authority of Singapore (IRAS) are now being competently performed by the Inland Revenue Department (IRD). This includes administering, assessing, collecting and enforcing payment of taxes on behalf of the Government. It also carries out non-revenue functions like negotiating with other countries for the avoidance of double taxation, registering and supervising charities and providing advice on property valuations. While these functions are being competently performed by the IRD, I believe that by allowing the IRD to become a statutory board, it can do its job better. How? I think some of the reasons have been elucidated by the Minister and Mr Leong. Basically, by becoming a statutory board, the IRAS will have the flexibility to formulate its own personnel and financial policies.”
“With their confrontational and adversarial style of politics, it is very difficult, Sir. Who has tried it? In the 50s, Sri Lanka and India, following Kaldor's advice, tried it, but they failed. They failed for reasons that they were totally different from what Singapore is now; their economy was not sophisticated, not monetised and their tax office was not computerised. Whereas our system is quite different. Our tax office is as computerised as it can be. Can the expenditure tax be implemented? The British and the American economists of every political stripe and persuasion say they can, uniting both Keynesian and non-Keynesian. The Meade Committee thinks it can. The American Treasury in a report in 1977 thinks it can.”
“If Britain were under an expenditure tax system, as it nearly did in 1986 under Margaret Thatcher and Nigel Lawson; John Major and Norman Lamont need never agonize so difficult over a tax cut, because in a recession, like they are facing now, the savings rate will rise with a corresponding fall in expenditure. Tax receipts will, therefore, fall correspondingly under this system. So there is no need to bribe the voters with a tax cut. You do not have to bribe them in any way because your expenditure is already coming down. But if the expenditure tax is so superior, the Minister may rightly ask: why is it that no developed country has tried it? To this question, I like to pose a model question: since when have we in Singapore waited for a good idea to be implemented overseas before we convert ourselves to it? Because if we did, there will be no Area Licensing Scheme, there will be no COEs. Indeed, our economic strategy of riding on the back of MNCs in the early 60s was largely untested. But then the Minister may say, "This is a big scheme, it affects everybody." As far as the taxpayer is concerned, he is concerned whether he is paying more or not. As far as the Government is concerned, it wants to reflect aggregate demand. Under an expenditure tax system, the majority of Singaporeans would still not pay more taxes than they are now. Today, 60% pay 6%. Under the expenditure tax system, maybe 60% would still pay more or less 5% or 6%. It depends on how you structure it. Coming back to the first question on why is it that most developed countries have toyed about it, talked about it, but did not implement it, like Britain, Sweden and America. The short answer is that they do not have the political system, the vision and the courage to go for it.”
“Savings are penalised and expenditures are encouraged. Indeed, the malice now afflicting the developed countries comes from a spending culture which income tax explicitly and implicitly promotes and encourages. Over the last decade, savings have fallen in every country - in America, as a percentage of GNP, from 9% in the 60s to 3% in the 80s; in Japan, the thriftiest nation on earth, experienced similar decline from 26% in the 60s to 20% in the 80s, a sharp drop of 6% over a period of about 20 years. The appetite for more consumption in Singapore is also on the rise. It is quite clear and evident. The second reason why we should move against the present income tax system, Sir, is that income itself is hard to measure. Wages and salaries are easy to measure. But ask an accountant, an economist and a taxman to agree on fringe benefits and the task becomes a little more difficult; ask them and the consensus view on income from profits, from businesses and investment transactions becomes even more difficult to achieve. Sir, the Government's intention to introduce consumption tax is a move in the right direction. Consumption tax shifts the burden of taxation from direct to indirect taxes. Clearly, the receipts from sales tax or the value-added tax would better reflect aggregate demand than receipts of income tax which tend to lag behind according to changes in employment. But, Sir, to my mind, a better system is to shift the burden of income tax from the source of income to that of expenditure, in other words, from income that is saved to that which is spent. For companies, we should tax their "cash flows".”
“It says, "It is too late for Norman Lamont to use his budget to revive the economy before the election [which will be held on 9th April], but he still has time to bribe the voters." Bribing the voters, of course, is nothing new. And John Major must be inspired by the American President. In the 1988 election, President Bush turned the tide against Michael Dukakis largely perhaps, maybe, and I think definitely, because of his, "Read my lips, no new taxes" bribe. Views necessarily differ, Sir, but I concur with the school of economic thought which subscribes to the philosophy that for the long-term health of the nation, of the economy, fiscal tools like income tax rates must never be used as a counter-cyclical measure, unless the structure of public spending has changed, and that no increase in taxes will be needed when the economy recovers. In fact, indeed, in Singapore for the last 25 years the tax rates have come down because the structure of public spending has changed and I hope that, as we corporatise more, the tax rate can come down further. 1.30 pm But cutting tax rate is the most powerful political tool, especially in an election year, like Britain and America are facing now. It is also the cheapest legal political bribe available to politicians, perfectly legal. So long as the PAP is in power, I am convinced that this would not be a weapon here. But like the reasons for instituting the Elected President, we must also institute fundamental reforms in taxation so that we will dull this fiscal tool, make it less attractive. Why? I would explain later. Apart from this possible abuse of income tax rates, there are other defects to the present system. First, it sends money in the wrong direction, into spending instead of saving.”
“Sir, Singapore inherited the income tax system from Britain and for very good reasons. In the 19th century, Britain was the leading industrialised nation. She led the world with its taxation reforms. The three principles embodied by the British income tax system -- equity, simplicity and efficiency -- became the hallmark of all good income tax systems worldwide. Her system flashed across the Atlantic, the Washington people lapped it up and incorporated it into their income tax system, Europe incorporated much of the British system. But, Sir, the world today is very different from the world of the 19th century. It is far more complex. And the system that was good for the 19th century is now difficult to service the needs of the 20th century and increasingly the needs of the 21st century. All governments -- Britain, Sweden, America -- realise this problem. So they develop various techniques, basically a hybrid of the wealth, income and the consumption tax system. Sir, the present system has defects. But Chancellors, Finance Ministers and Treasurers in every country are trapped and are unable, sometimes unwilling, to institute fundamental tax reforms. So what do they do? They tinker here and there; a rebate here, a relief there, an increase here, and a removal there. No matter how they tinker, the pressure for tax cuts is ever present. There is a saying in America, "There is always a good time for tax cuts." Norman Lamont delivered his budget on 10th March 1992, two days ago. He was under great pressure to cut taxes. He did, but did not cut it enough to please enough people, even though cutting of taxes is against the grain of most economists in the city of London. The Economist magazine cuts a sharp remark.”
“I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. The sum of $3,758,986,750 for Head K ordered to stand part of the Main Estimates. The sum of $350,000,000 for Head K ordered to stand part of the Development Estimates.”
“I urge my fellow reservists to treat the relief not as a salary but as a form of recognition, and I think we should be happy that MINDEF has empathised with us. Sir, I want to make a protest here that some time earlier in the week, the Member for Potong Pasir said that reliefs like that will make reservists like us mercenaries. I think he does not understand what a mercenary is. A mercenary is somebody who fights somebody else's cause. So we are not mercenaries. A mercenary is not covered under the Geneva Convention. He is totally confused. He knows nothing about Army terminology and he comes here and claims to talk about Army terms - Switzerland, Basic Military Training. I think as the unofficial Leader of the Opposition, if he cannot say what he means, then he would not mean what he says. I think perhaps he meant that we are not mercenaries, but maybe mercenary in attitude. So I think he should brush up on his language. If he cannot say what he means, he would not mean what he says.”
“Sir, first, I must protest that there is not much time left for me and Dr Ho. I think we should not allow the Member for Potong Pasir to speak in the first place. Sir, I beg to move, That the sum to be allocated for Head K be reduced by $10 in respect of Code KA 1500 of the Main Estimates. Sir, I am a reservist. I have lost count of how many reservist training I have done. Maybe nine, 10, maybe 11. In fact, next week I will be going back for in-camp training again. I remember clearly my first few in-camp training. We were all trying to adjust to the rigours of being a citizen soldier. There was no question that reservist training affected our civilian life. But we all knew that reservist training was, and is still necessary. So like good soldiers we soldiered on, and hoped that our work would be recognised. Fortunately, MINDEF understood our problems and recognised our efforts. The bigger problem, however, Sir, was how to convince employers that there was a meaning to our sacrifice. So MINDEF blazed the trail in public education through various campaigns, formal and informal, and the public became more aware of our contribution to nation building. This year, the Minister for Finance has very generously allowed a tax relief of $1,000 and $500 respectively for active and non-active reservists for the Year of Assessment 1993. But sadly, Sir, no sooner than this financial incentive was granted when some (I say some) reservists complained that this relief is too little. I think this should not be the case for a start. The relief is not small. Compounded over a period of time, for a single earning $12,000 per year, the relief translates to 23% per year. So you compound it over a period of time, it becomes quite significant.”
“Unlike external factors, which are beyond our control, Government can work out and implement measures to check domestic sources of inflation and, particularly, profiteering. I would like to ask the Minister to outline what measures his Ministry has to check the rise in the cost of living. Sir, although our inflation rate is low, compared to other countries, our current rate is high, compared to the average rate for the last five years. We saw lower rates of inflation in 1987 to 1989. Many increases which led to high inflation in 1991 were introduced in 1990, for example, the increases in the cost of transport, MRT fares, bus fares, and so on. And for 1992, there are new levies. I think Members of the House have spoken on many of these new levies. There is also this increase in the water conservation tax on domestic customers. Have we considered how much it will add to inflation? After all, we use water daily and many products also use water. Sir, I agree that we must do all we can to discourage high and wasteful consumption. We import our water. However, instead of a tax which can lead to an increase in cost, we should consider incentives like a rebate for those who reduce water consumption. Sir, urgent measures are necessary to monitor and check inflation and especially to counter profiteering. The Minister has just stated that we must moderate demands on wages, and I think stability in cost of living can help to do this.”
“Along the corridors of their research laboratory, hundreds of high-tech wizards are peering into telescopes looking for tomorrow's solutions, apparently forgetting today's needs. Sir, can we afford the IBM model? If we cannot, are we looking elsewhere? I suggest if we are looking elsewhere, we look at Japan's Sony - the world's most inventive and creative company. How they do R&D and how they motivate their R&D staff should be an inspiration for Singapore for three reasons. First, their R&D is market-driven and success means the ability to translate an idea into commercial success. In other words, there is a return on investment. Second, the technology level in Singapore is closer to Sony's than to IBM's. And third, to me, the most important, Sony's expenditure in R&D is something we can achieve. Last year, Sony spent US$1.5 billion, 5.7% of their revenue or about 3.5% of Singapore's GDP. Those figures are realistic for us, within the short term reach of Singapore's R&D plan. Sony's achievement is remarkable. Fortune magazine calls Sony's R&D engineers "the world's most prolific and innovative". Every day, they turn out four new products. Sir, I think there is a lesson in Sony's R&D that we can learn, and that the best auditing tool for R&D lies in the market. That is why Sony succeeds, and IBM has not succeeded so well. I wonder if the Minister for Trade and Industry agrees. Encik Othman bin Haron Eusofe (Marine Parade GRC): Sir, my subject is Measures to Check Inflation. Sir, workers are generally very anxious about increases in cost of living. As stated in the Economic Survey of Singapore 1991, most of the inflation in 1991 was due to domestic factors.”
“Sir, I would like to declare my interest. I am a staff at the Nanyang Technological University (NTU), but the views I express today will entirely be mine. Sir, the Government has already committed to giving more money for R&D, eventually up to 1% of GDP, and in the near future up to 5% of GDP. This money can be a force for jacking up productivity or it may be so much money down the drain. How to measure success and failure in R&D is very subjective. Let me draw two parallels across the Pacific -- IBM in America and Sony in Japan. Both companies are renowned for their industrial prowess. Their empire spans the globe and their names are synonymous with creativity, inventiveness and profitability, until lately of course. Last year, IBM lost money. Their ideas and products did not set the world on fire. Often, they lost the products and ideas coming out from the American research backyards, and that is in spite of the fact that Big Blue spent US$6 billion on R&D, about 14% of Singapore's GDP. I repeat, 14% of Singapore's GDP, and that is on one item, mainly infotech. Can we spend 1% of our GDP and hope to succeed in everything, from bio-medical technology to engineering to botany or chemistry? I think we must find some market niches and not spread our resources too thinly. But I want to ask a deeper question. Is IBM's R&D achievements a success or a failure? Some would say that it is a resounding success. Look at the results. In the 80s, IBM had two Nobel prize winners. She has filed over 33,000 patents and her researchers have published thousands and thousands of academically acclaimed and cited academic papers.”
“Since we are standing at the taxation crossroads, we should look at the evolutionary process of tax systems overseas, how most of them have now mired themselves into a tax sphagetti and how we can avoid stepping into the same shoe in the next century. Sir, the expenditure tax I am proposing is not for next year or the year after. It is for the future, five to ten years from now. Sir, in order to focus our thoughts on this issue, I will move an amendment in the Committee of Supply to map out the reasons for and against the expenditure tax and why we should go where others have feared to tread. Dr Vasoo yesterday said that we should have some schemes to encourage savings. Expenditure tax will encourage savings. He talked about exempting interest from deposits. They have tried in America under the Individual Retiree's Account (IRA). In the United Kingdom, they are trying to put up the Tax for Retiree's Deposit (TRD). In the same period that these schemes were put in place, that is, not to tax interest on savings, personal savings plunge. So I think his scheme will not work. It was George Bernard Shaw who said, "People dream dreams and ask why." "I dream dreams," Shaw said, "and ask why not?" In taxation reforms we should all share a dose of Shaw's dreams and ask ourselves, "Expenditure tax, why not?" Sir, I support the motion moved by the Minister for Finance.”
“But while I support the implementation of the consumption tax in the near term as a supplementary tax source, I would urge the Government to look at the merits of the expenditure tax in the long run. Most people wrongly confuse consumption tax as the same as an expenditure tax. But the Minister knows what I am talking about. The nomenclature of the expenditure tax is unfortunate, but its usage has stuck, so changing it might even add to the confusion. An expenditure tax, in short, is not a consumption tax. An expenditure tax is a tax on expenditure, not income. It operates like a consumption tax, but acts like an income tax. It can be progressive, regressive, it can give reliefs, it can give rebates, as the Minister wishes it to be. In this House, only two Members have spoken out on it. One, Mr Heng Chiang Meng tried in 1986 and then in 1991 to convince the Minister on its merits but without success. Two, DPM Lee Hsien Loong himself made an oblique reference to it when he urged Members of this House in 1986 to read three articles about the expenditure tax in The Economist. Sir, why am I trying to peddle the virtues of the expenditure tax when more eloquent speakers like Mr Heng Chiang Meng before me have found it wanting? Because I think that a good idea is worth selling, worth telling and worth convincing. Like the reserves, you must say it over and over and over again. Because I think that a good idea can never be stale and it is always fresh when different people say it and, hopefully, in the next Budget, somebody else will take over the baton from me as I have taken over from Mr Heng Chiang Meng. There is another reason why I think expenditure tax should be said again.”
“Why? Because while it is true that in terms of subsidies they do not get as much as the majority of Singaporeans, they are getting their returns in kind. What kind? What are these? For the individuals, an excellent environment for professional fulfilment and a quality of life matched by few nations on this planet. For the companies, a first class infrastructure and support system to make even more money. Not forgetting that Hong Kong's budget has just been announced. They raised 1% of the corporate tax. For both citizens and companies, Singapore offers one of the lowest income and corporate tax rates in the world. Perhaps here I would like to ask the Minister to clarify for this House how is it that with a higher personal and corporate tax rate, we are still competitive vis-a-vis Hong Kong -- the country that we compare over and over again. Sir, in six months' time the White Paper on the proposed broad-based consumption tax will be tabled in Parliament. I would like to say from the outset that I support the consumption tax. The evolution of taxes began with wealth tax. They found it not so good, then it moved on to using income as a basis for taxation. And then in the later stages, most countries use indirect taxes, consumption taxes as a supplementary form of taxation. Modern taxation in most countries is now a hybrid of all these three -- wealth, income, direct and indirect taxes. Members of this House have also spoken very eloquently, fiercely, passionately on the consumption tax at considerable length from 1986, when the idea was first mooted, to 1991. I do not want to tread on old ground. The Hansard is overflowing with ideas, comments, criticisms.”
“Now compare this to the bundle of benefits the taxpayer's family gets: subsidised hospitalisation, subsidised education, subsidised housing in HDB flats (and that is life-long, and the Government is putting in more under the refurbishment programme). These benefits run to thousands of dollars a year. Mr Ling said that we are not doing enough for education, we must help them more. I say, it is rubbish. Let me put the Government subsidy into perspective for the middle income taxpayer with one child in a primary school and one child in a secondary school. The total cost to the Government of educating his children is about $5,000 minus his school fees. So, just focusing on education alone, this non-typical taxpayer (non-typical because the average taxpayer pays less than $500) is getting a return on investment of something like 1,000% -- where can he get this anywhere in the world? Talking about refurbishment programmes, my constituents in Tiong Bahru are very happy about the scheme but they are rather impatient, and they want me to ask the Government when they are getting it. They are happy because they know that they will inherit a more valuable asset. They will also inherit a more salubrious environment. They are also happy about this year's Budget, because it is a compassionate budget. In my constituency, more than 80% of the people live in rental and 3-room flats. The Government has committed to paying their December's service and conservancy charges. They are happy. Because they know that when the Government is rich, they are not forgotten, they also get richer. What about the remaining 40% of Singaporeans and companies who are paying something like the bulk of the taxes, over 90%? Shouldn't they be unhappy? I say, no. Quite the contrary, they should also be happy.”
“Sir, my GPC Chairman and my various GPC colleagues have elaborated on the various merits of the tax changes and the reservations of the people and the business community. I want to return to two more fundamental questions on taxation. First, why pay taxes? Because at every budget, people will clamour for tax cuts, very few for tax increases. The simple answer why taxes are raised is that they are raised primarily to pay for public spending. So, first, we agree there is public spending, we need taxes. Second, why do people dislike paying taxes? This is philosophical, because most people doubt that they are getting their money's worth. That is not hard to fathom. After all, it was Edmund Burke, the 18th century British MP, whom I quoted in the President's Address, who said, "To tax and to please, no more than to love and be wise, is not given to man". So rationally, if we think logically, if we pay and we get our money's worth, we should be happy. And if we get more than our money's worth, we should be delirious. Yesterday in this House, Mr Ling made a song and dance about the Government not doing enough, not helping the poor enough. I say a government, such as the PAP that has done as much to help the poor, need never be apologetic about its policies. Let us look at the statistics. About 60% of Singaporeans pay only 6% of our total tax collection. So the poor are not paying a lot. In fact, most of them are paying very little, many are not paying at all. Let us look at the above average income taxpayers (those earning $24,000 a year) with two children. That group pays less than $500, after all the reliefs and deductions.”