Lee Hsien Loong
Singapore
“Yes, of course, every time I sell the land, I put money into the Reserves, but I am not putting the money into the Reserves all today. I am putting it in a stream of payments, 30 years apart.”
“Speaker, Sir, I do not think it was a very difficult question to figure out, that when I spoke to MTI, I spoke to the Minister, because Mr Gan Kim Yong is the Minister for Trade and Industry.”
“" I think that would have been unjust because he has not been charged. If there is a case, the case has not been heard, he has not been found guilty or acquitted or whatever. I cannot prejudge a case based on an incomplete investigation – started recently, or a partial investigation, just entered into the formal phase.”
“Mr Speaker, Sir, first, Mr Leong is quibbling over words. In February, Mr Tan Chuan-Jin told me, "I offer to resign". I said, "Yes, sort out your constituency first". In other words, decision taken. The moment to execute it, I will decide. So, it is quite clear. Legally, he has not resigned.”
“Sorry, Mr Speaker, to respond to Ms Poa on why not no pay leave. It is my judgement to make. The Civil Service works in one way; their basis is if you have been convicted, then you are on zero pay and other consequences will follow.”
“I am very happy to note that Assoc Prof Jamus Lim appreciates the second key and is seeking a third. And I hope that it portends a change in your attitude towards the Elected President and his custodial powers. But I think the Brazil example is a very interesting one.”
The complete record
Every one of 1,557 lines we hold for Lee Hsien Loong, in date order, each linked to its source. Free to read, in full, without an account. Page 14 of 32.
“We have also introduced many schemes to help local companies upgrade and expand overseas. In fact over the last five years, 9,000 SMEs have benefited from the Local Enterprises Technical Assistance Scheme, LETAS, to help them upgrade their capabilities, and 12,500 SMEs have obtained $3 billion of Government-facilitated loans. $3 billion - it is bigger than the Progress Package. It is quite a substantial amount. It has gone to a lot of SMEs. There are many, many schemes - too many for me to list here. But I went to the EnterpriseOne Portal yesterday, and I looked at the web pages on Government schemes for SMEs. If you print them out, it will be 10 pages, over 60 schemes - from tax incentives to grants and non-financial assistance measures. We do not lack schemes. Members have the handout. What we need to do is help the SMEs take full advantage of schemes already there, so that they can be guided through this forest of assistance in order to get what they need and what will make a difference for them. But nevertheless, I invite the members to look at these 10 pages. Let me know if you have other ideas, or if you think these ideas can be simplified or improved. We will keep on improving our package and, if need be, add to these web pages, so long as it makes our assistance more effective and does not increase confusion. But I know that SPRING feels a mission to help SMEs. This is not just a business, and those are not just clients. They feel that this is something which is worth doing, which they believe in, and that there is promise and hope - something worth promoting. They are going at it 'heart and soul' and the Government is behind them. We are happy to consider new ideas to help SMEs succeed.”
“Supporting entrepreneurship and enterprise Third, this Budget builds on initiatives taken over the last several years to support entrepreneurship, enterprise and businesses. Of course, in every Budget Debate, there are speeches that not enough has been done for SMEs. But, as with every Budget Debate Round-up Speech, let me try to put this issue in perspective. Help for SMEs Dr Ong Seh Hong, Mr Lawrence Leow and Dr Wang Kai Yuen spoke about the lack of assistance for local enterprises and SMEs. We have to see this Budget not in isolation, but as one of a series. Supporting entrepreneurship and enterprise has always been a key pillar in our efforts to reinvent ourselves. In recent years, we have taken several major initiatives, many of which confer significant benefits to SMEs. We have reduced taxes. We have introduced numerous tax measures that will help SMEs. Our tax burden is already low for start-ups and small companies. In fact, for the first three years, you do not pay tax at all. The tax system provides for cyclical swings in business and in earnings, because you have one year loss carry-back which I introduced last year. If you make a profit this year and next year you make a loss, you can actually go to IRAS and claim back some of the tax you paid the previous year and even out your tax burden - in fact, lighten your tax burden. We have also reduced our regulatory burden. There is an online business-licensing scheme to streamline licensing processes and cut business costs. This year, we are reducing record-keeping requirements for 17 statutes, which I believe has been welcomed by members, and which will be particularly helpful to small companies with not a lot of space, not a lot of staff, and not a lot of money.”
“We want to develop Singaporeans to go into R&D - to become researchers and scientists - but we must get as many foreigners as we can to come here, do good work here, and help us to get the activities moving - better for them to be working with us rather than against us elsewhere. Only by attracting the best talent, foreign or local, can the quality of our R&D be truly world-class. There is no centre in the world which only works with local talent and is world-class. You can go to the Whitehead Institute in MIT, you can go to Weizmann in Israel, you can go to Cambridge, Cavendish Labs - all the world-class institutions gather talent from around the world. No single country, not even the US, not even China, has enough talent and scientists to say: "This is my own national effort - foreigners stay away." The way to do it is to bring everybody in, the talent from wherever you can get them, to cross fertilise, spark off and germinate new ideas. At the same time, we will encourage locals to pursue a career in R&D - get bright people into R&D. We are always enhancing our programmes to grow our local scientists, but we need to find the talent with the potential and interests to do R&D. Not everybody can do it, not even every bright person can do it. You have to have the right mindset to focus, to understand the subject in detail, and to spend a large part of your life researching in-depth in something which may lead to nothing, but which you hope will lead to something big. There are only a finite number of such people in Singapore. So where we can find them, we will deploy them to R&D, remembering that you also need SAF officers, civil servants, MPs, businessmen, entrepreneurs and many other things.”
“Dr John Chen and Mr Ahmad Magad have suggested that funds should focus on supporting commercialisation of R&D. Indeed, economic payoff is the ultimate objective. By commercialising technologies and ideas developed in the universities, research institutes and firms, we will be able to achieve this. But we have to be prepared to invest in the whole continuum of R&D in a balanced sort of way, from upstream research to commercial application. We used to focus just on the very downstream development part. If we want to make further progress, we have to move upstream. But we have to do it in a focused sort of way, in fields where we believe there is a reasonable chance of a good outcome over the medium term. We used to focus on capability building in our first efforts in developing R&D. Now, we are moving into creating new knowledge and commercialising the applications. EDB is already getting companies to set up the R&D centres here, with A*STAR focusing on applied research. EDB and SPRING have a programme called SEEDS, Start-up Enterprise Development Scheme, which also helps to provide equity financing for creative individuals who want to commercialise their business models or products. So far, eleven of them have achieved the million dollar mark and six have won international awards for their products. So, not too bad. We have plans to help existing SMEs develop and commercialise creative ideas too, through the Enterprise Technology Fund. The details of how we will help SMEs to participate will be in the Committee of Supply for MTI. Prof. Low Seow Chay expressed concern that R&D could be dominated by foreigners and that Singaporeans will not benefit from it. I think we should look at it positively.”
“This means we must have robust processes to review and evaluate R&D proposals, using local and foreign experts to help us. We must focus on building up core R&D capabilities and talent, and not just on funding projects. The National Research Foundation (NRF) and the Research, Innovation and Enterprise Council (RIEC), which I chair, have been formed to drive this overall effort. I am glad to tell Members that eminent academics and leading corporate figures have agreed to serve on the RIEC and on the Scientific Advisory Board of the NRF. These include Dr Susan Hockfield, who is President of MIT, Professor Clayton Christensen from the Harvard Business School, Dr Thomas Connelly, Chief Science and Technology Officer at Dupont, and Kenji Fujiyoshi, President of Mitsui Chemicals. They are experienced, very capable people. They know we are taking it seriously, and their participation shows that they have confidence in what we are doing. They will advise us on key areas of development and on how to assess and direct funding for R&D. Prof. Low Seow Chay has recommended a higher private share in total R&D spending. I agree with him that greater private sector participation in R&D is our long-term goal. But to get there, the Government's approach is to use public sector investments to drive, and to seed, private sector investment. We will not just fund projects but we will also encourage collaboration between the wider research community, including the research institutes, universities and the private sector. We are one small country. We cannot have factions and different warring territories in Singapore. We have to bring everybody together and make the most of a national effort.”
“Investing in R&D, becoming a knowledge hub Second, investing in R&D and becoming a knowledge hub. This Budget underscores the Government's commitment to invest in R&D and to become a knowledge hub. We will inject $5 billion into an R&D Trust Fund over the next five years. R&D is about experimentation, taking risks, venturing into uncharted territories - some failures, others successes. It means that we must be ready to support good people, to support good projects, to be hard-headed about what we do with our money, where we spend it, and in assessing whether projects are getting somewhere or whether we are getting nowhere. We have to be patient. We cannot expect results overnight. We have to spend some time. So, I am heartened that MPs like Dr Teo Ho Pin, Dr Ong Chit Chung, and Dr Loo Choon Yong support this effort to secure our long term economic future and have offered many good suggestions which we will follow up on. Prof. Ivan Png has cautioned against being overly driven by a target like raising national expenditure on R&D to 3% of the GDP, which he points out is an input target rather than an output target. His point is well-taken. I fully agree with him that what counts is output, not input, and we must get the appropriate performance measures, because how you measure influences what people will do. But, we do need inputs to get the desired outputs. If you look at countries like Sweden, Finland, US, Japan and Korea, they have shown that high levels of R&D investments are strongly correlated with the level of innovation there - in terms of the high-tech start-ups, new products and processes, patents and finally, dynamism and prosperity. So we do need the money. We will not spend it blindly. We must make sure it is well spent.”
“The senior counter manager for Estee Lauder at Metro, Ms Joanne Liu, was interviewed by CNA and she explained why. She said: "For example, when customers came back for goods exchange before, we were unwilling to do it. But now, we accept the changes and we do it on the spot willingly". It is a mindset change. The Government is fully behind this movement. We are allocating $63 million to support this movement. Fundamentally, what we are trying to do is to achieve a change in behaviour, in social norms, and make Singaporeans focus on courtesy and graciousness. We want to transform our society into one where people who serve do so willingly and with passion, and people who are served show respect and appreciation for those who serve them. It is not going to happen overnight. It will take time. We have to start in the schools, practise in the community and transform the workplace. But we can do it. Over the years, we have changed many aspects of Singaporeans' behaviour - no spitting, no littering, no messing up public toilets, speak English more properly, (that, we are still trying), accept other races and religions, keep fit and so on. So, many efforts, but cumulatively they have made a difference. Singaporeans today - I do not say we are beautiful Singaporeans, but less ugly than we used to be. We must continue to make an effort to be less ugly, not just in Singapore, but when we go overseas. I think the changes with GEMS are within our reach, because deep within each one of us is a desire to be appreciated and to be respected. What we need to do is to develop the habit of putting ourselves in the other person's shoes and 'do unto others as we would like others to do unto us'.”
“But the most valuable training which the WDA can provide is to prepare Singaporean workers for service jobs in general - to know how to serve, to want to serve and to go the extra mile for good service. This is not just about the IRs, it is about all our service industries: tourism, retail, food and beverage, finance, and healthcare. Service quality matters. Even in community centres (CCs), service quality matters - the PA (People's Association) staff running our CCs must provide five-star quality service. It is an outfit which is for the mass market, but the quality of service must be first class. That is critical to Singapore's future, to our ability to earn a living in a competitive world, and it is a national challenge. That is why I got Minister Raymond Lim to spearhead the GEMS Movement, Go-the-Extra-Mile-for-Service. GEMS has created a buzz. A lot of people have written to Mr Raymond Lim to ask to join the movement and we have involved many private sector executives, businessmen, and entrepreneurs in this effort. They have started initiatives, TV and publicity ads to promote great service, training programmes and leadership seminars. They have got service indicators to benchmark our service level with other countries, "Thank You" cards which customers are supposed to give to the service provider to show appreciation - to show that the good service has been noticed and has been recognised with appreciation. I think we are beginning to see a difference. The employers are showing more commitment to service excellence. Metro has reported a doubling of compliments for the staff and a 20% reduction in complaints since it participated in the Customer Centric Initiative.”
“We must build on these strengths to stay ahead of the competition and keep the economy growing, (a) to differentiate ourselves as a trusted centre for quality and service; (b) to invest more in innovation and R&D, and become a key node in the global network of people, ideas and businesses; (c) to support entrepreneurship and enterprise; and (d) to maintain a tax system that is best for business, and will enable us to grow. Let me deal with these one by one. Going the extra mile for service First of all, setting ourselves apart from our competitors through good service. Service excellence is a critical competitive advantage and it is as much about attitudes as it is about skills. If you are sitting on a production line and you scowl at the computer chip, it will not scowl back at you and it will not run away from you nor tell its friends about you. But if you are a shop attendant, an airline attendant, a waitress in a restaurant or a banker, and you scowl at your client or customer, you do not just do yourself harm, but also do the whole business and Singapore's reputation harm. If we think about the IRs (Integrated Resorts), service quality is critical. One of the foreign bidders for the IR at Marina had HR executives who visited WDA (Workforce Development Agency) to find out what schemes we had to train workers and help them to find jobs. WDA asked the executives: "What can we do to help to prepare the workers, help to prepare Singaporeans to support the IR, to take up the jobs there?" These HR executives replied that they will have in-house training to impart specific skills to the workers - how to turn the roulette wheel, how to dish out the cards, how to rake in the chips; these, they will train. There is no need for WDA to do that.”
“Mr Tan Soo Khoon made a very good speech yesterday pointing out that we live in a world where trade and political tensions still exist and will continue to simmer. He listed out the places where there is no level playing field. SIA - you want to open - there is obstruction. Each time you want to move, a new challenge comes up and we have to deal with it. That is the reality of the world. We accept it as it is. But, having come here and having strengthened ourselves, we have now to gird ourselves to tackle all those problems: to deal with a world which is changing at an ever increasing pace, to watch the trends, and to move quickly and decisively to respond to them. The competition in the future is not just going to be about lower cost, but increasingly about higher value. I think we are well-placed for this competition. We have explained this in many ways. We now have one fresh way to present this, that is to look at four core strengths, CORE - (a) Connected. Plugged into the global market, moving around goods, people, and information; through our seaports, through our airports, telecommunications, and our FTAs. (b) We are Open. Open to ideas, capital and talent. Open to enterprise. Set up as a knowledge hub and a land of opportunity. (c) We are Reliable. We enjoy a great reputation for trust, quality and consistency, and generally a very high reputation in Asia and around the world. (d) We are Enterprising. With a flexible mindset and the ability to anticipate, to learn, to adapt, and to move quickly. So CORE competencies.”
“But, to improve lives, to give hope, to provide opportunities, to have schemes which will lead to the objectives which we have set out, and not to the opposite of what we intend, to be affordable over the long term - that is much more difficult. This Budget makes the right long-term commitments so that the Government wins not just the next election, but also the mandate to govern over successive terms. We are not issuing cheques thinking that maybe we will not be here after the elections. This is a Budget which we are taking responsibility for, because we have to answer for the outcomes. Growing the economy The Budget supports our efforts to restructure and upgrade the economy, and sustain economic growth over the long term. The restructuring over the last few years has not been easy. It has been painful. In 1999 and 2000 before the recession, we had about 13,000 retrenchments a year; more or less steady. But over the past few years, the retrenchment numbers went up sharply to as high as 26,000 in one year - 2001. This is real pain because every person in these numbers is a worker with family, with responsibilities, with a future, with worries. The retrenchments are now back down to 10,000. It has been a painful experience but we have become stronger. Overall, we have become much more competitive. We have to press on with our restructuring and not to fear change. If you look at our companies, you can see that. PSA, which restructured and retrenched 600 workers, is now competitive again; able to hold its own, not just against Tanjung Pelepas, but Dubai Port, and many other competitors in the world. SIA, working with unions, has made major changes to cut costs and to operate more flexibly. But, we must never think that we have arrived.”
“Mr Speaker, Sir, I thank all the Members for their views and suggestions, especially all those who have spoken in support of the Budget. I have heard all of them, including Mdm Cynthia Phua, and we will take up their views and act on them wherever it makes sense to do so. The specific issues which they have raised will be dealt with by respective Ministers during the Committee of Supply. In this response, I will just focus on the broad thrusts of the Budget. Let me start by addressing a question which many have asked - some rhetorically, others seriously. "Is this an Election Budget, given its generous package of incentives?" I am glad that many Singaporeans and MPs are happy with this Budget. The provisions and measures, which we have taken, have received wide support. But this is not a Budget merely for the purpose of distributing hongbaos to get votes. It is a Budget with its feet on the ground and with its eye on the future. It is the result of consulting broadly and taking views from many people. We have had many committees - the Low Wage Workers committee, RECORD; Mdm Halimah Yacob and other Members of Parliament have participated in many of these sessions and worked hard to come up with initiatives which will achieve our social objectives, address problems and stand us in good stead for the long term. This is a Budget: (a) to support our ongoing efforts to restructure the economy; (b) to ensure that all Singaporeans can benefit from growth and can manage the impact of globalisation; and (c) that will maintain fiscal prudence and long term sustainability. These schemes and initiatives have to be sound and sustainable. To make promises and to give money away - that is easy.”
“We must build on these strengths, upgrade our economy, and equip our workers with new skills. We must differentiate ourselves from others by competing not just on cost but also on service, quality and innovation. As we become a key node in a global network of people, ideas, and businesses, we will create opportunities that extend beyond the shores of an island of just four million people. Growing our economy is only one aspect of making Singapore our best home. We must extend a helping hand to those who face difficulty coping with globalisation and change. We must help low-income households to improve their prospects, and older Singaporeans to live full and active lives. And we must invest in our young, who are the hope for our future. This will strengthen our bonds, and assure every Singaporean of a brighter future, as we create our best home in Singapore. Mr Speaker, Sir, I beg to move. [Applause.]”
“Notification letters will be sent out in late March to all Singaporeans informing them of the total amount that they can expect under the Progress Package. To accept this Package, all they need to do is to sign up through ATMs, the website or hard copy forms. Singaporeans can look forward to receiving their Growth Dividends, Workfare Bonus and 40th Anniversary NS Bonus, and the CPF top-ups on 1st May 2006. In total, the Government will share $2.6 billion with Singaporeans under the Progress Package. Every citizen will benefit. This package will help us achieve our social objectives of helping the lower-income groups, looking after the elderly, investing in the young and recognising the efforts of our NSmen. PART V - CONCLUSION FY06 Budget position Mr Speaker, Sir, before factoring in Special Transfers, we expect a surplus of $0.7 billion for FY2006. Taking into account the Progress Package, the top-ups to the endowment funds and our investments in R&D, we are left with a budget deficit of $2.9 billion. The Government is able to finance this from funds accumulated in its current term and will not need to draw on past reserves. More details on our fiscal position can be found in Annex E* and the Budget Highlights. * Cols. 113-116. Singapore - Our best home Mr Speaker, Sir, this Budget aims to build a vibrant economy where opportunities abound, and an inclusive society where no one is left behind. The prospects for Singapore are excellent. Asia is on the rise, powered by the booming economies of China and India. Globalisation has made knowledge and networks key sources of competitive advantage. We are well-placed to ride these trends. We have a competitive environment for enterprise. We have a hard working labour force. We have a reputation for trust and credibility.”
“First, when NSmen complete their ORNS cycle in future, they will receive an ORNS Completion Award of $300. Additional tax relief for NS key command and staff appointment holders Second, RECORD IV has recommended doing more for NS key appointment holders. They occupy critical command and staff posts. They bear heavier responsibilities in leading their units, keeping the SAF operationally ready, and transforming the SAF into a third-generation fighting force. They are called up for more In-Camp Trainings (ICTs) and serve longer during each ICT than other NSmen. I have therefore decided to grant NS key appointment holders an additional tax relief of $2,000 over and above the tax relief that they would normally receive as NSmen. Changes to the assessment period for NSmen tax relief Third, to align the recognition given to NSmen with their contributions in the work year, we will change the basis period for NSmen Tax Relief from the preceding calendar year to the preceding work year. This will take effect from Year of Assessment 2007. This will be fairer to NSmen who are called up for NS activities in two work years but within the same calendar year. How the Progress Package will help typical families Let me illustrate how the Progress Package will benefit some typical Singaporean families. An elderly couple in their 60s, retired with no children and living in a 3-room flat, will receive $3,300. A family of four living in a 4-room flat, with two parents in their 50s, the father an ex-national serviceman earning $1,500 a month, the mother a housewife, the son serving National Service and the daughter in secondary school, will receive a total of $3,780. The daughter will also benefit from her school's Opportunity Fund, through subsidised enrichment activities.”
“They can then do more to help children from low-income families. Recognise the contributions of our NSmen Finally, I want to recognise the many contributions of our national servicemen, and the heavy sacrifices that they have made. They safeguard Singapore's survival and security, which are the pre-conditions for our economic success and growth. In the past, we have recognised their contributions through the recommendations of the RECORD committees. We have also given NSmen more in surplus sharing exercises, such as in CPF top-ups and the allocation of New Singapore Shares and Economic Restructuring Shares. NSmen and their parents and spouses are also eligible for tax reliefs. 40th Anniversary NS Bonus The Fourth RECORD committee chaired by Minister Ng Eng Hen has recommended that we give more to NSmen in this year's surplus-sharing exercise. The 40th Anniversary of National Service is approaching. One and a half generations of male Singaporeans have served NS. 400,000 have completed their full time and Operationally Ready National Service (ORNS) training cycle, and handed on their duties to the current batches of NSmen. To show our gratitude to these ex-NSmen and NSmen who have completed their ORNS training cycle, we will give them a 40th Anniversary NS Bonus of $400. National servicemen who are still serving, either in the full time or ORNS units, and have not yet completed their ORNS training cycle, will receive a 40th Anniversary NS Bonus of $100. The 40th Anniversary NS Bonus will be paid on 1st May 2006. It will cost the Government $200 million. ORNS Completion Award Beyond this one-off package, the RECORD IV committee has also recommended several permanent schemes.”
“But instead of making equal top-ups into every student's Edusave account, MOE will create Opportunity Funds in every school. The schools can use these Funds to provide more curricular and enrichment opportunities for needy students. We will set up Opportunity Funds in all the MOE schools, Junior Colleges/Centralised Institutes, ITEs and Special Education (SPED) schools. Neighbourhood schools have many good programmes and offer a quality of education that few other countries can match. They can go further to expand the boundaries of their students' learning, and help all students take advantage of the opportunities they provide regardless of family income. It is how we level up. We will give each school a grant for this purpose, with neighbourhood schools getting double the grant per capita compared to independent and autonomous schools. A typical primary school will receive a grant of $118,000 while a typical neighbourhood secondary school will receive a grant of $150,000. MOE will not dictate what exactly the schools should spend the Opportunity Funds on. But schools should seek to provide students with opportunities to learn beyond the classroom and to build firm foundations for learning. For example, schools can provide subsidies to help poor students purchase personal computers to use for project work, or they can subsidise study trips to regional countries, to help broaden students' horizons and make learning come alive. The self-help groups, namely CDAC, MENDAKI, SINDA and the Eurasian Association, all play an important part in reaching out to students from lower- income households. I will therefore set aside a total of $2 million for these self-help groups to set up their own Opportunity Funds, on the basis of matching donations from their communities.”
“Help the elderly meet retirement and healthcare needs Top-ups to Eldercare Fund and Medifund To help elderly and low-income Singaporeans cope with their healthcare needs, I will top up the Eldercare Fund and Medifund by $100 million each. Top-ups to CPF Special/Retirement and Medisave accounts For Singaporeans aged 50 and above - which includes not a few Members of this House - I will top-up their CPF Special or Retirement and Medisave accounts. These top-ups will be tiered by age and Annual Value (AV). Those aged 60 and above who live in a property with an AV of $6,000 and below will get the largest top-up of $800. Those aged between 50 and 59 staying in properties with AV above $10,000 will receive the lowest amount of $100. We will divide the top-ups equally between the CPF Special or Retirement Account and the Medisave Account to cater to both retirement and healthcare needs. The top-ups will be made on 1st May 2006. They are expected to cost the Government $500 million. Table 4: Top-ups to CPF Special/Retirement account and Medisave account Age Annual Value of Home $6,000 or less Annual Value of Home more than $6,000 and up to $10,000 Annual Value of Home more than $10,000 50-59 $600 $400 $100 60 & above $800 $600 $200 Invest in the next generation Opportunity Funds In last year's Budget, I topped up the Edusave account of every primary and secondary school student by $100, to fund education enrichment activities. Our schools today offer a wide range of enrichment activities, from educational tours to music and sports. It is no wonder that the education industry is thriving! This year, I have put aside $50 million for education as part of the Progress Package.”
“If they continue to work for at least six consecutive months in 2006, they will be paid the second portion of the bonus on 1st May 2007. The bonus for each year will depend on their average monthly income for the period they had worked in that year. We will have similar arrangements for the self- employed. The Government will set aside $400 million for the Workfare Bonus. Table 3: Structure of Workfare Bonus Average Monthly Income Bonus to be paid on 1st May, 2006 and 2007* $400 and below 1.5 months salary with minimum bonus of $75 Above $400 to $900 $600 Above $900 to $1,200 $400 Above $1,200 to $1,500 $200 * Bonus to be paid in 2006 for working at least 6 continuous months in 2005 and to be paid in 2007 for working at least 6 continuous months in 2006. Help lower-income households Utilities-Save Scheme Third, to help lower-income households cope with living expenses, I have decided to extend the Utilities-Save rebates for another year. Households in 1- and 2-room HDB flats will continue to enjoy $200 in rebates in FY2006; those living in 3-room HDB flats will get $100 in rebates; those living in 4-room HDB flats $80; and those living in 5-room HDB flats $60. The rebates will cost the Government $60 million. These are the same amounts which they received last year. Rebates for Service & Conservancy Charges and rent HDB households will also continue to benefit from the S&CC and rental rebates that were given out as part of a five-year package in FY02. In FY06 and FY07, households will receive between half a month to four months of S&CC waivers, with more for those living in 1-, 2- and 3-room flats. In addition, those living in 1- and 2-room HDB flats will also enjoy between one to three months of rental waivers.”
“Reward low-wage workers for work Workfare Bonus Second, I will give a one-off Workfare Bonus to older, lower-income workers. As recommended by the Low Wage Workers Committee, the Workfare Bonus will target the lowest 20% of income earners aged 40 and above. But to be fair to those who earn slightly more, the Government has decided to give the Bonus also to those up to the 30th income percentile, or a monthly income of up to $1,500, provided they live in properties with Annual Value (AV) of not more than $10,000. This will cover most older low-wage workers living in HDB flats. Between 300,000 and 400,000 Singaporeans will benefit from the Workfare Bonus. The Bonus quantum will depend on an individual's income. The Committee had recommended a one- month bonus for those earning up to $900 and half a month bonus for those earning more than $900 up to $1,200. I have decided to be a bit more generous. Nearly all full-time workers earn more than $400. Those earning more than $400 and up to $900 will therefore receive $1,200. Those earning more than $900 to $1,200 will get a bonus of $800, while those earning more than $1,200 to $1,500 will get $400. There may be a few regular workers who earn $400 or less a month. These exceptional cases will receive a bonus of three months of their income. To help workers save for their longer-term healthcare needs, 10% of the Workfare Bonus will be set aside and credited into the Medisave account. The Workfare Bonus is a reward for regular and productive work. The Bonus will be split into two portions. Eligible workers who have worked continuously for at least six months in 2005 will receive the first portion of the Bonus on 1st May 2006.”
“We will use what IRAS calls Assessable Income (AI). Those earning not more than $24,000 per year will get more. I have decided on $24,000 as the cut-off as this is roughly the median income for Singaporean workers. I will use the Annual Value (AV) of his property, as assessed by IRAS, as a proxy for his wealth. Those living in properties with AV less than or equal to $6,000 will get more. $6,000 will cover all those who live in 1, 2, and 3-room HDB flats and almost everyone who lives in a 4-room HDB flat. At the top end, those living in properties with AV of more than $10,000, which are the larger private properties, will get a smaller amount. Table 2: Structure of Growth Dividends Annual Value of Home $6,000 or less Annual Value of Home more than $6,000 and up to $10,000 Annual Value of Home more than $10,000 Annual Assessable Income $24,000 or less $800 $600 $200 Annual Assessable Income more than $24,000 $600 $400 If your property has an AV of $6,000 or less and you earn $24,000 or less a year, you will qualify for the largest quantum of $800. If you live in a property with AV more than $10,000, you will get $200. From time to time lower-middle income Singaporeans remind me that they too need a helping hand, as they earn only slightly more than the lower-income groups but often just miss out on our social safety nets and the cut-off points. I understand their concerns. This is why the highest quantum of $800 will cover 45% of the population, not just the lower-income but also the lower-middle income earners. Singaporeans can look forward to receiving their Growth Dividends on 1st May 2006. The Growth Dividends are expected to cost the Government $1.4 billion.”
“Low-wage workers will receive more, to reward them for their efforts and encourage them to be self-reliant. I will also give more to older workers and retirees; they are most affected by the dislocation and uncertainty of economic restructuring, and most worried about medical costs and retirement expenses. They have made significant contributions to building today's Singapore; we must not forget their efforts. I will set aside something for education, because children are our hope for the future. And finally, we must also remember the sacrifices of the generations of NSmen who have safeguarded our security over the past 40 years, and enabled us to build a stable and prosperous Singapore. Share the fruits of growth with all Singaporeans Growth Dividends First, I will distribute Growth Dividends to all adult citizens. The Growth Dividends differ from previous surplus sharing schemes like the New Singapore Shares (NSS) and Economic Restructuring Shares (ERS) in two respects. Previously, we gave NSS and ERS in the form of shares, on which Singaporeans could earn dividends over time if they did not encash their shares. Many chose to encash their shares early instead of waiting for the dividends, despite the attractive interest rates. In fact, the most recent dividend, as you would have seen in the papers today, is 9.4%. But since Singaporeans prefer it immediately, I have therefore decided to distribute the Growth Dividends in the form of cash which can be collected immediately upon allotment. Second, those who are less well-off will receive more Growth Dividends. The amount that a person receives will depend on two factors: his income and his wealth. His income will be assessed by the Inland Revenue Authority of Singapore (IRAS).”
“And in difficult times, we have cushioned the impact on lower-income Singaporeans through rebates and assistance measures. We have also made many CPF top-ups to help older Singaporeans meet their retirement and healthcare needs. Taking all these measures together, the Government has shared nearly $8 billion of surpluses with Singaporean individuals and households in the past five years (FY01-FY05). We will continue to share surpluses in an equitable way so that all citizens benefit from the nation's progress. After the last general election in 2001, we ran budget deficits for several years, and Singaporeans had quite a tough time for several years. We now have a modest budget surplus in FY2005 and project another surplus (before Special Transfers) for FY2006. We also have some capital receipts from our Statutory Boards, as well as investment income from the transition year of 2001, a portion of which accrued to the current Government when it took office. Thus we have managed to accumulate some reserves over this term of Government. In view of the good economic performance last year and the positive outlook, I have decided to share part of these surpluses with Singaporeans this year. I will call this surplus sharing initiative the Progress Package (Providing Opportunities through Growth, Remaking Singapore for Success). This is a package for everyone, but it aims to achieve specific social objectives. It will benefit all Singaporeans, because everyone contributed to our economic restructuring efforts and should now share in the fruits of growth. However, I will weight it more towards the lower-income groups, in line with our philosophy that we should progress together as one people.”
“Table 1: Additional CPF Housing Grant for first-timer lower-income households Monthly household income Grant Not exceeding $1,500 $20,000 $1,501 - 2,000 $15,000 $2,001 - 2,500 $10,000 $2,501 - 3,000 $5,000 Affordable housing options Our objective is to enable 90% of households to own their own homes. While most Singaporeans can afford at least a 3-room flat, and should aim to own a 3-room flat, there is a small group earning around $1,000 per month who have difficulties doing so, and therefore cannot benefit fully from the home ownership subsidies. The 2-room flats to be built for sale will provide more affordable housing options for this group of low-wage workers. MND will release more details during the Committee of Supply. Sharing in the nation's progress Finally, the Low Wage Workers Committee has recommended that we give more to lower-income Singaporeans when we share the fruits of the nation's progress because they face greater challenges coping with the rising cost of living and will appreciate special help during periods of economic downturn. The Government accepts the recommendation and I will now elaborate on what I will do in this Budget. PART IV - A PROGRESS PACKAGE Mr Speaker, Sir, we want to make Singapore the best home for all Singaporeans. This is a home where everyone has a place and a purpose, where opportunities abound, and where growth and prosperity is for all to share. The Government has made a practice of periodically sharing its budget surpluses with Singaporeans. In 2001, we distributed New Singapore Shares (NSS) to every citizen. In 2003, we gave Economic Restructuring Shares (ERS) to offset the increase in the Goods and Services Tax (GST).”
“Additional CPF Housing Grant Through the Government's home ownership scheme, we have helped many Singaporeans to become homeowners, and to have a valuable asset which can help see them through their retirement. Currently, all families who buy similar flats enjoy the same subsidy, regardless of whether they are well off or poor. But other things being equal, lower-income families buying a flat should receive bigger subsidies. We will do so in two ways - by giving them an additional CPF Housing Grant, and providing them with more affordable housing options. The additional housing grant will be paid into the CPF Ordinary Accounts of HDB flat buyers. The grant will be on top of existing housing subsidies. In line with the Workfare principle, at least one of the flat buyers must have been working for two years prior to the flat purchase to qualify for the grant. First-timer citizen households with monthly incomes of up to $3,000 will be eligible, whether they are buying new or resale HDB flats. The grant ranges from $5,000 to $20,000. Households with a monthly income of up to $1,500 will receive the maximum grant of $20,000. We will extend the grant to households earning between $1,500 and $3,000, but at a lower quantum. This will cover 40% of first-time buyers, or an estimated 6,000 households annually. $20,000 is a substantial sum. It is 20% of the selling price of a 3-room flat, purchased from HDB. It will be an even larger fraction of the price of a 2-room flat, which the Low Wage Workers Committee has recommended that HDB build for sale. The additional CPF Housing Grant will cost the Government $75 million a year.”
“Raise income threshold for Edusave Merit Bursary The Edusave Merit Bursary is targeted at students from lower middle-income families who have performed in the top 25% of their level and stream. Since 1995, we have maintained the household income threshold at $3,000. I have decided to increase the income threshold to $4,000 so that an additional 17,000 students can benefit from the bursary. Invest in vocational training To help our youth acquire employable skills, we will invest more in vocational training. As a start, MOE and ITE will enhance and upgrade the programme at the Vocational Training Centre to customise it to students' learning styles, and help equip them with relevant skills for life-long learning. More details will be announced at the Committee of Supply. Expand HOPE The Home Ownership Plus Education (HOPE) scheme encourages young, low-income families to limit themselves to at most two children, so as to give these children the best chance of success. Presently, HOPE is only open to couples if both have no more than two 'O' level passes. We will relax this to include parents without post-secondary qualifications, and also slightly older couples who despite having post-secondary education, still earn low incomes after working for some years. However, we will maintain the rule that the couple must have no more than two children to be eligible for HOPE. Rewarding work Our fifth strategy is to reward work, so that everyone is encouraged to continue working, rather than rely on state welfare. Some of our assistance to low- income earners should therefore depend on their efforts to work. The Low Wage Workers Committee has recommended a Workfare Bonus for older and lower- income workers. I will elaborate on such a scheme later.”
“This will help the family become more self-sufficient, and impart to the children the right social values on the importance of work. Work support MCYS will put in place a new Work Support programme, which will include assistance, such as higher childcare and student care subsidies. There are many items. Further details will be announced at the Committee of Supply. Creating hope for the future Our fourth strategy is to create hope for the future, to ensure that the children do better than their parents, and can help lift their parents out of poverty instead of inheriting their problems or multiplying them. We will invest more in the education of children from low-income families, to help them become school-ready and work-ready. Raise income thresholds for Financial Assistance Scheme First, we will ensure that education remains affordable for all, even the poorest. Currently, about 15,000 students benefit from our Financial Assistance Scheme. Their school fees and 50% of their standard miscellaneous fees are waived. They also receive free textbooks at the primary and secondary level and a bursary at the Junior College/Centralised Institute level. We will raise the household income thresholds for this scheme, and also enhance the benefits it offers. More support for kindergarten and childcare Next, we will provide more support for kindergarten and childcare, to help children from needy families to become "school-ready". The Kindergarten Financial Assistance Scheme will help with the start-up cost of sending their child to kindergarten. We will also enhance childcare subsidies for the first and second child under the Centre-based Financial Assistance for Childcare scheme.”
“These include adopting employment practices that do not discriminate by age, moving away from seniority-based wage structures, and re-employing retiring workers. WDA will set aside $30 million over two years for this scheme. Higher skills for better jobs Our second strategy is to equip low-wage workers with the necessary skills to take on better and higher-paying jobs. Workforce Skills Qualifications System The Workforce Skills Qualifications (WSQ) system, developed by WDA, will provide training and skills progression pathways for workers, enabling them to progress from a certificate, to an advanced certificate, to a professional diploma, and maybe even graduate certificates or diplomas. WDA will allocate $100 million over three years to develop the WSQ system for the major industry sectors. The system will include setting up institutions that deliver high quality adult worker training. The first such institution, the Singapore Institute of Retail Studies, has been jointly set up by WDA and Nanyang Polytechnic. We will invest another $30 million over three years as part of WSQ to help 45,000 low wage workers improve generic skills, such as problem-solving and communication, as well as English, numeracy and IT literacy, to make them more employable. We will also provide an additional $4 million every year to make training more accessible to SMEs and workers involved in contract or sub-contract employment arrangements. Top-up to Lifelong Learning Fund To ensure adequate support for our workers to re-train and re-skill themselves, I have also decided to top up the Lifelong Learning Fund by $100 million to $2.1 billion. Social support to enable work Our third strategy is to provide more social support for low-income families so that the parents can go out to work.”
“The most major recommendations were from the Ministerial Committee on Low Wage Workers, chaired by Minister Ng Eng Hen, which proposed a comprehensive plan to help this group of workers, comprising six pillars. The overarching principle guiding the Committee's approach is Workfare rather than Welfare. The best way to help people is to help them to find work, so that they can take care of themselves and their families. The Government fully endorses this principle. Let me now outline the Government's response to each of the six pillars. Expand job opportunities Our first priority is to expand job opportunities, so that low wage workers can find better and higher-paying jobs which they are able to do. Job Re-creation Programme We will step up the Job Re-creation Programme (JRP) to cover more sectors and more workers. NTUC and WDA have already made good progress in re-designing jobs and creating viable career progression paths for low wage workers. We have seen good results in sectors like landscaping, security, cleaning, healthcare, education, shipbuilding, public transport, and retail. Last year, 7,200 jobs were targeted for job re-creation, and 4,600 job seekers were matched to these re-created jobs. WDA and NTUC will ramp up the JRP. They target to re-create 10,000 jobs a year. To support these efforts, the Government will allocate $40 million over three years. ADVANTAGE! We will give extra help to older workers who find it harder to learn new skills and find jobs, through the ADVANTAGE! scheme. This was a recommendation of the Tripartite Committee, but it complements the proposals of the Low Wage Workers Committee. The ADVANTAGE! scheme will help employers adopt practices which will maximise the strengths of older workers.”
“Instead, we should experiment with new schemes, see how they work out, and adjust and improve as we gain experience. Fourth, we must always maintain fiscal discipline. We must ensure we have the resources to fund the schemes we introduce, and not make reckless commitments without considering how to pay for them. This prudence is what has distinguished Singapore from many other countries which spent on social programmes beyond their means, resulting in heavy debt burdens, high inflation, and loss of confidence in the currency and in the Government's economic management. We must never allow this to happen here. Finally, we need to involve the community and grassroots network in this social effort. They know the ground well and can assess where the needs are greatest. The schemes launched under ComCare are a good example of how community leaders can help us to target and deliver assistance for the needy. ComCare supports a wide range of schemes and projects carried out by grassroots organisations and voluntary welfare organisations (VWOs), and in the year since it was launched, has helped thousands of needy households. As ComCare activities are growing, I have decided to top up the ComCare Fund by another $100 million, increasing the capital sum of the Fund from $500 million to $600 million. Consistent with this framework, we have set up many panels and committees to brainstorm ideas on how to provide greater help to the needy and vulnerable. These include the Ministerial Committee on Low Wage Workers, the Tripartite Committee on Employability of Older Workers and the Committee on Ageing Issues, which have all published their reports. The Government accepts their recommendations and will work with all partners and stakeholders to implement them.”
“Slowing down is not a solution, as the economy will stagnate and incomes will fall across the board, worsening our problems. Instead, we must continue restructuring, adapting to the global economy and taking full advantage of market forces to grow our own economy and generate the resources to help those affected by globalisation. But our measures to help this group must be targeted, sustainable, and supportive of our work ethic. Let me elaborate on this approach. First, we will focus our assistance more closely on the lower-income groups, so as to make a difference to those whose needs are greatest. When there are surpluses to share, we will also give more to these groups. We have already been doing this with schemes, such as the Service & Conservancy Charge (S&CC) rebates, rental rebates, and Utilities-Save rebates. But we will do more, in a more systematic way. Second, we will design assistance measures to encourage recipients to work and get ahead through their own efforts, rather than free-ride on state support. We must avoid the pitfalls of Western-style state welfare. It is expensive, wasteful, and ultimately unsustainable. But more damagingly, it creates a mindset of entitlement and dependency, erodes the work ethic, and saps economic vitality. Third, as we introduce new schemes, we must experiment, adapt and feel our way forward. Whatever scheme we introduce, over time people will adapt their behaviour to gain maximum advantage from it, leading to unforeseen and unintended consequences. We have seen this happening even when the amounts involved are quite modest, such as with the Economic Downturn Relief Scheme a few years ago. So, we should avoid creating permanent schemes and entitlements unless we are very confident of how they will work.”
“Mr Speaker, Sir, this Government's approach has consistently been to grow the economy and ensure that all citizens enjoy the fruits of growth. As Singapore prospered, incomes went up across the board. At the same time, the Government has heavily subsidised public housing, education and basic healthcare, to ensure that even the poorest citizens get a fair start in life, and a stake in Singapore's success. Our Home Ownership Scheme has made Singapore a home-owning society. Even the lowest 20% of the population have substantial home equity - an average of $138,000 per household. Home equity means the value of the house less the amount that is owed, not yet paid in a mortgage. This is no small achievement, unimaginable in any other country. Our schools and post-secondary institutions provide high quality education to all. Every student has the opportunity to do well and rise to the top, regardless of family background, and many have done so. Our healthcare system delivers good and affordable medical care to rich and poor alike. Moving ahead, we will need to augment this broad-based approach with a more targeted one. We can be confident that our economy will do well, and that incomes of skilled and knowledge workers will continue to rise. But the incomes of unskilled workers will be under pressure. Globalisation is stretching out our income distribution. This is happening in countries all over the world, as hundreds of millions of workers from India and China enter the global workforce. It is happening even in India and China, between the cities and villages and within the cities themselves. We can either slow down our upgrading and restructuring by erecting barriers to protect our companies and workers, or we can press on with restructuring.”
“First, the Centre for Shared Services (CSS) will be up and running by May 2006, to deliver selected human resources and finance processing activities to Government agencies. It will help us achieve greater efficiency through economies of scale and streamlining of procedures. I expect annual cost savings of 15% in operating expenditure on these services when operations have stabilised. Second, we will continue to exercise tight control on headcounts in the public sector, and ensure that every post is fully justified. Since the introduction of the Manpower Management Framework (MMF) in July 2004, we have achieved an overall 2.9% reduction in headcount, mainly through re-organising existing functions, with some help from natural attrition. I have decided to continue with the MMF cuts until FY06, followed by a headcount freeze for three years. But we will continue to make exceptions for new functions so that agencies can meet emerging needs.”
“This turnover is estimated based on the amount of coins in the cashbox. So we restrict machines to paying a maximum of 200 coins per win, in order that there will be more coins in the cashbox when we count them and therefore more taxes to collect! These rules were put in place in the 1950s but slot machine technology has clearly moved on since then, as has the theory of taxation. I will therefore change the basis of taxation to 12% of actual turnover (which is equivalent to 30% of deemed turnover), and remove the 200 coin payout limit. I should add that I discovered this one day upon visiting NTUC Downtown East where I made a detour to inspect the jackpot room. The operators told me that there was this problem; so I looked into the matter and struck jackpot. Fiscal sustainability Up till 2001, we enjoyed regular budget surpluses due to strong and stable economic growth, buoyant revenues, and favourable demographics. The environment has changed. Economic growth has become tougher and more volatile, we have lowered our tax rates substantially, and new spending priorities have emerged. Our operating revenues alone are no longer able to meet total expenditures. But with Net Investment Income Contribution, we are able to balance the budget, with a bit to spare, over the business cycle. Our major taxes are at about the right levels. Going forward, I do not foresee major changes on the revenue front. However, new spending needs, in the areas of healthcare, education and training, and R&D, will put pressure on our public finances. We must, therefore, continue to keep Government lean, so that we can fund new spending priorities. I will highlight two measures we are taking in this area.”
“More fundamentally, even if we fix these specific weaknesses, we cannot stop people from avoiding estate duty through creative estate planning. And Singaporeans probably know a lot more about estate planning after the Straits Times published an article on "6 best ways to avoid death tax"! Several jurisdictions have abolished estate duty in recent years, including Australia, Malaysia, New Zealand and Hong Kong, which has just passed its legislation a few days ago. In Singapore, any change must preserve our tax revenue and maintain the principle of taxing wealth. The Ministry of Finance is studying the matter carefully, in the context of our overall regime of assets taxes. We should reach a conclusion by the next Budget. Other taxes Additional Registration Fee (ARF) Let me briefly touch on some of the other major taxes. First, there will be no further reduction in ARF in this Budget. We have significantly lowered the upfront cost of owning cars. Today, a medium-sized car costs about half of what it did eight years ago. Congestion is under control, with the help of the ERP system, which I hope Members will continue to support. We will continue to monitor the situation, but for now there is no need to reduce ARF further. Tobacco and liquor duties I seriously considered raising tobacco duties, but have reluctantly decided against it because we are already seeing revenues declining, not because people are smoking less but because smuggling has gone up. The incentive is too great. On liquor duties, there will be no changes for now because we have largely rationalised them. Slot machine taxes There will be no changes to our gambling taxes. But I will change the basis of slot machine taxes. Hitherto, slot machines have been taxed at 30% of deemed turnover.”
“This was introduced in 1974 to discourage foreigners from owning landed properties. It is no longer needed as we now regulate property ownership by foreigners through the Residential Property Act and most of these foreign-owned landed properties have been divested. This change will take effect on 1st July 2006. There has been a lively debate on estate duty, with Singaporeans speaking up on both sides of the issue. One recent letter to the Straits Times' Forum set out cogently the rationale for the estate duty. I quote: "Many feel that estate duty is, in fact, the most moral of taxes. The individual himself is not affected by the tax, by definition - he is dead when it is levied. Thus, its impact during the wealth-development phase of an individual's life is less distorting than other forms of taxation. The development of wealthy dynastic elites carries with it the risk that meritocracy will degenerate into oligarchy as the elites define and control the measures of merit." Indeed, this is the reason why we have retained estate duty all these years. We want every citizen to succeed in life because he has worked for it, and not because he has inherited wealth. An intergenerational tax levied upon those who inherit wealth helps to re-balance opportunities with each passing generation. Against these merits, we must weigh the shortcomings of our estate duty system, which critics have highlighted. The exemption limit of $9 million for residential properties is much higher than the $600,000 limit for all other assets. This biases investment choices and results in very narrow coverage, with only the top 3% of estates paying estate duty. The collection is modest - on average about $70 million per year, though no Finance Minister will sniff at this sum.”
“This will help attract new investors and grow the financial and other industries. To capture the true value-added of insurance services and reduce the business costs of general insurers, I am allowing them GST claims in two circumstances. First, insurers will be able to claim GST based on the tax fraction of the cash indemnities paid to non-GST registered policyholders under contracts that are subject to GST. Second, insurers will be allowed to claim GST on expenses incurred on their policyholders' passenger cars, for example, repairs. These changes will be effective from 1st January 2007 onwards. Goods and Services Tax The GST is an important and stable source of revenue. At 5%, our GST rate is among the lowest in the world. Because we have minimal exemptions, we have kept the overall rate low and spread the tax burden widely and fairly among the different goods and services consumed in Singapore. The result is low compliance costs, minimal economic distortions, and sustained revenues. Some have suggested lowering GST rates on particular classes of goods or services, such as food. The purpose is ostensibly to help the poor, but this is not an effective way to do so. Most of the revenue lost from such concessions goes to higher income households, who spend much more on most items than poorer households, including necessities like food. A better approach to help the poor is through focused programmes targeted at them, such as rebates on Service & Conservancy Charges (S&CC), rentals, or utility charges. This indeed is the Government's approach. I will elaborate on this later. Assets taxes Our two major assets taxes are property tax and estate duty. For property tax, I have decided to remove the property tax surcharge.”
“Further details can be sought from the EDB who will administer this scheme. We will also continue to provide more clarity and certainty in our tax rules. We have introduced an Advanced Ruling system, with effect from 1st January this year, which allows taxpayers to seek binding rulings from IRAS. We will provide businesses with more guidance on transfer pricing issues. Tax authorities around the world are stepping up efforts to combat companies' efforts to shift profits through transfer pricing. As more of our companies expand overseas, they must be aware of these transfer pricing risks. To help them, IRAS will provide guidance on applying the arms-length principle, and assistance in resolving disputes with foreign tax authorities on transfer pricing issues. More details will be released by IRAS next week. We will also rationalise the administrative conditions for businesses to claim Industrial Building Allowances (IBA). Details of these changes, to be implemented for buildings purchased on or after 1st January 2006, are summarised in Annex D*. * Cols. 111-112. To make our business environment more flexible, we introduced the Limited Liability Partnership (or LLP) business structure. To date, more than 1,000 LLPs have been formed. We have received suggestions to extend to these partnerships the incentive schemes that are currently available to companies. As a principle, we award tax incentives based on whether the business brings in new activities or creates new value for Singapore, regardless of its business structure. Hence, I am prepared to allow tax incentives to be awarded also to partnerships. We will start on a scheme by scheme basis, and consider broader-based implementation after further study.”
“We are currently in negotiations with several other countries, including China, and will keep up efforts to expand and update our present network of tax treaties. In Budget 2003, I introduced the foreign-sourced income tax exemption (or FSIE) regime to facilitate repatriation of income and investments into Singapore. Some companies which engaged in substantial economic activities overseas have found themselves unable to meet the qualifying rules for this tax exemption. To encourage companies to remit their foreign income, I will grant tax exemption on foreign income that is disqualified from the FSIE regime, if they are remitted under specific scenarios or circumstances. IRAS will be releasing details. To facilitate share-based compensation schemes, I will grant deductions to employee stock options granted through treasury shares. As we move to a more flexible wage system, companies are increasingly linking employee remuneration to the performance of the company by granting stock options or direct share awards. In some cases, companies may incur costs to buy back their own shares which are then held as "treasury shares" before being used to fulfil the stock option or share award obligations. Since share-based compensation also forms a part of staff costs, I have decided to grant a tax deduction to companies that have incurred actual outlay for the employee stock options and other share-based compensations. This will take effect from Year of Assessment 2007. To encourage more MNCs to locate their holding functions in Singapore, I have decided with immediate effect to exempt from tax any gains by approved holding companies on the disposal of shares in subsidiaries, if they own at least 50% of the shares for a period of not less than 18 months.”
“Ireland has adopted a two-tier tax rate system: 12.5% for trading income, and 25% for non-trading income. Many Central and Eastern European economies, hungry for foreign investments, have flat taxes which are around 20%. Some are even lower - Slovakia and Poland have cut their rates to 19%, and Hungary has reduced its rate to 16%. * Cols. 109-110. Our headline corporate tax rate at 20% is one of the lowest in the region, coupled with what is effectively only a 5% rate for the first $10,000 of chargeable income, and 10% for the next $90,000, as well as zero tax for start-ups for the first three years of incorporation. Even more importantly, our effective corporate tax rate is highly competitive. Recently, a Canadian think-tank, the C.D. Howe Institute, carried out a cross-country study of the effective tax rate, ie, the tax payable as a percentage of the pre-tax return on capital. Of the 36 countries surveyed, Singapore had the lowest effective tax rate, even below Ireland and Hong Kong. Our effective tax rates for the manufacturing and services sectors are 5.8% and 6.6% respectively. For now, therefore, I see no need to reduce the corporate tax rate further. Tax rates form just one part of a competitive tax infrastructure. Our wide network of Agreements for the Avoidance of Double Taxation (DTAs) also gives companies based in Singapore a strong advantage. We currently have 50 tax treaties, covering almost all our major economic partners. Last year, we secured favourable capital gains tax provisions from India under the Singapore-India DTA. Together with the Comprehensive Economic Cooperation Agreement (CECA) with India, this makes Singapore a very attractive springboard for investments into India.”
“We are much more reliant than they are on foreign investments and talent. We must compete for these against many other countries, in the region and beyond. Our own people and businesses are also more mobile; they speak English and they can easily move out of Singapore in search of lower taxes elsewhere. Our policy choices are therefore much more tightly constrained. Our strategy therefore is to pursue low taxes and tight expenditures. A light, predictable, and efficient tax regime will promote growth, which in turn will boost revenues and ensure sufficient resources for our needs. After the major tax restructuring in the last five years, our main taxes are at about the right levels, although this does not mean that we will never need to adjust our taxes or increase spending. I will touch on each of our main taxes in turn. Personal taxes Our personal income tax rates are already lower than those in most other countries. The top rate is 21%, reducing to 20% from Year of Assessment 2007. As announced in my Budget Statement last year, the marginal tax rates for the other income brackets will also be reduced, so that all taxpayers will benefit. Besides lowering the rates, we have made significant changes in our personal income tax system to attract talent. In Budget 2002, I accepted the Economic Review Committee's recommendation to create a new class of taxpayers called the "Not-Ordinarily Resident" taxpayers. The response has been encouraging. Over 2002 and 2003, there were 2,800 successful applicants for NOR status. We will review the scheme periodically to ensure that it remains effective. Corporate taxes We have also reduced our corporate tax rate significantly. Corporate taxes are coming down in many countries (Chart 1*), particularly in Europe.”
“We are opening up more curriculum options for them, including new 'O' and 'A' levels subjects, and Elective Modules for those in the Normal courses. A new school for the Arts is being set up, adding to our specialised schools in sports, and science and mathematics. Our students have more choices than ever before. A sizeable number of our students go to the polytechnics, including many who have done well enough to qualify for places in the junior colleges. Our secondary schools will do more to cater to students who can benefit from some exposure to applied education while still in secondary schools. Some schools will partner our polytechnics to introduce new applied subjects such as electronics and digital media as electives. We will also allow students to be directly admitted into polytechnics based on their talents and abilities, just as we have allowed direct admission into junior colleges and secondary schools. We are also investing more in our universities. The Government aims to have 25% of each primary one cohort enrolled in publicly-funded universities by 2010, up from the 21% in 2002. To fund the additional places and invest in new physical infrastructure, MOE will allocate an additional $2 billion to the university sector over the next five years, or an average of $400 million each year. By then, Government investment in our three publicly-funded universities is expected to reach $1.9 billion annually, or 1% of GDP. Maintain a competitive tax environment Finally, we must continue to keep our taxes low, to keep our business environment competitive, and spur enterprise and entrepreneurship. Singapore cannot have a high tax, high spending model. The Scandinavian countries do this, but in quite different circumstances.”
“I have decided to reduce the record-keeping period in 17 statutes, generally to five years. The details can be found in Annex C*. * Cols. 105-108. Grow our human capital To become a knowledge hub and a centre for enterprise, we must continue to attract global talent. Management guru, Peter Drucker, has called knowledge workers "the single biggest factor for competitive advantage in the next 25 years." 2 Google, one of the most innovative firms in the world, takes Drucker's words to heart. To generate a continuous stream of new ideas, it systematically looks for the most talented programmers and computer scientists in the world, knowing that smart businesses must - to use Drucker's words - "strip away everything that gets in their knowledge workers' way". 2 Google: Ten Golden Rules, Newsweek, 2nd December 2005. Singapore must be a place where global talent with diverse backgrounds and cultures want to live, work and play. George Lucas set up Lucasfilms' first and only studio outside US in Singapore partly because of our cosmopolitan appeal. When the studio opened in October last year, its first batch of 35 animators came from 19 nations, including Panama and Ecuador. We will continue to develop new attractions, such as the Integrated Resorts and the Singapore Flyer, to make ours an interesting, lively and fun "City-in-a-Garden". Besides attracting talent, we are also investing in our own people. We are providing our students with opportunities, from the primary up to tertiary level. Our schools are striving to develop critical thinking skills and creativity in our students. We are reshaping the education landscape to allow greater diversity and bring out the best in every young Singaporean.”
“One measure to help SMEs is EnterpriseOne, a multi-agency initiative which will be launched later this month. The EnterpriseOne Portal is the primary channel to provide business information and Government e-services. The portal is supported by a hotline and Enterprise Development Centres (EDCs), such as the Association of Small and Medium Enterprises (ASME), offering business advisory services. Customised initiatives, such as the Local Enterprise and Association Development (LEAD) programme, will encourage industry associations to take the lead in developing enterprise competitiveness in their respective industries. MTI will elaborate on these schemes in the Committee of Supply. Reduce the regulatory burden on local enterprises One way to help entrepreneurs and businesses is to reduce the weight of regulation. Regulations raise invisible but damaging costs. Many laws require individuals, businesses and other private entities to retain records for substantial periods. I see Prof. Ivan Png nodding his head. He has raised it in Parliament. For example, the Companies Act and the Income Tax Act require records to be kept for seven years. I regularly hear requests to shorten these record-keeping requirements, as businesses find them burdensome and costly. We have valid reasons to require records to be kept for a sufficiently long period. They may be useful as evidence in civil and criminal cases. Sometimes, international treaties oblige us to require the retention of documents for certain periods. Nevertheless, we should seek to lighten the burden on businesses wherever possible. An inter-ministry team has reviewed the record-keeping requirements prescribed in our many pieces of legislation.”
“Singapore talents and enterprises are also making their mark abroad. Eric Khoo's film "Be With Me" has won critical acclaim at numerous prestigious international Film Festivals. Singapore's first 3D animated film, "Zodiac, the Race Begins" has been sold to 22 countries after it was showcased at Cannes. To encourage creative talents, I have decided to include industrial design, interactive and digital media as new fields qualifying for the existing tax concessions that exempt 90% of the royalties earned by these creative individuals. Support entrepreneurship and enterprise The third area of focus is to support entrepreneurship, help local enterprises grow into global players and ease regulatory restrictions so as to promote enterprise. Our efforts to encourage entrepreneurship are seeing some results. According to the 2005 Global Entrepreneurship Monitor report, Total Entrepreneurial Activity (TEA)1 in Singapore increased from 5% in 2004 to 7% in 2005. EDB wanted me to say that it is a 40% increase! But it is not bad. It is still modest but encouraging. More budding entrepreneurs - be it from the ITEs, polytechnics or universities - are taking the plunge to start their own businesses. For example, ten years ago Crestar Education Group first ventured into China and set up a nursery school for the expatriate community in Suzhou, where Singapore was helping to build an industrial park. Today, Crestar has 19 kindergarten centres throughout China, including Shanghai, Beijing, Shenzhen, Changzhou and Dalian. Support local enterprises going global Local enterprises aspiring to become international players can tap on a range of assistance to realise their potential for growth and internationalisation.”
“Third, to lower the compliance cost for traders enjoying the 10% concessionary tax rate under the Global Trader Programme, I will remove the need for companies to show that the derivative trades are incidental to the physical trades before such income can be treated as qualifying income. And finally, I will allow automatic GST suspension for goods removed from Zero-GST warehouses by all those who qualify under the Major Exporter Scheme and Approved Third Party Logistics Company Scheme. This will give them greater flexibility to conduct their business via logistics and warehousing companies. Build up new services Beyond our traditional services industries like finance and logistics, we will continue to grow new services industries like education, healthcare, and the creative industries. Our efforts are showing results. In education, we have brought in 16 leading international universities including INSEAD, Duke University, MIT and University of Chicago Graduate School of Business. We have also attracted the first private foreign comprehensive university, the University of New South Wales, which is expected to reach an enrolment of 15,000 students in 15 to 20 years' time. In healthcare, foreign patient numbers are growing rapidly - on average 20% per year. In 2005, about 374,000 foreign patients sought medical treatment in Singapore. They come not only from Indonesia and Malaysia, our traditional markets, but increasingly from the rest of Asia, particularly the Middle East. They seek treatment both at private and public sector institutions, attracted by our high medical standards, and reputation for quality and reliability. In the creative industries, Singapore is attracting international design companies such as BMW Designworks, digital media firms and media funds.”
“To support the growth of the captive insurance industry, which contributes to Singapore's position as an insurance hub, I will grant income tax exemption for approved captive insurance companies, for a period of 10 years. 1 Total Entrepreneurial Activity is the sum of those individuals who are involved in the start-up process and those individuals who are active as owner-managers of firms less than 42 months old. A brief description of all the tax changes for the financial sector can be found in Annex A*. MAS will release the details shortly. * Cols. 77-98. Grow dynamic maritime and logistics industries In the maritime and logistics industries, our business infrastructure and connectivity are key strengths. We must attract more international ship-owning and ship-operating companies to set up operations in Singapore. This must be supported by a comprehensive range of services which covers the entire maritime and logistics value chain, including financing. To support growth in these areas, I am introducing four changes in this Budget. Details can be found in Annex B*. * Cols. 99-104. First, to encourage the development of ship financing activities in Singapore, I will introduce a Maritime Finance Incentive to grant tax exemption for qualifying income of ship investment vehicles and a 10% concessionary tax rate for qualifying income of ship investment managers. Second, to entrench shipping companies in Singapore, I will enhance the Approved International Shipping incentive by allowing companies to renew their incentives for a third period of 10 years, lengthening the maximum period of incentive from 20 years to 30 years.”
“Third, the scope of the Approved Trustee Company scheme and the tax exemption scheme for foreign trusts will be expanded to include a wider range of settlors and beneficiaries of the trusts. Lastly, I will introduce a new tax incentive scheme which exempts from tax resident funds with foreign investors. To encourage the development of our capital market and treasury activities, I will make the following tax changes: I will grant tax exemption on foreign-sourced interest and trust distributions received by REITs listed on SGX (known as S-REITs). For S-REITs and their special purpose companies (SPCs) set up to hold overseas non-residential properties, I will also allow recovery of GST incurred on the setting up of SPCs and the acquisition and holding of overseas non-residential properties by SPCs. I will expand the Qualifying Debt Securities ("QDS") scheme to cover discount debt securities with tenure of more than one year. I will expand the scope of activities qualifying for the Finance and Treasury Centre incentive to include trading and arranging of derivative products, subject to counter-party restrictions. I will introduce a 5% concessionary tax rate on clearing income for qualifying clearing members of a Singapore Over-The-Counter (OTC) derivatives clearing facility for five years. This will reinforce our position as a major oil-trading, ship-broking and financial hub. To further promote Islamic Financing activities, I will harmonise the tax treatment of four Shariah-compliant financial products with the conventional products to ensure a level playing field with respect to tax.”
“Singapore is also home to a strong base of third party contract manufacturers like UMC and Chartered Semiconductor. Presently, tools bought on behalf of their overseas clients but used in Singapore for the manufacturing process attract GST; this is often added to the invoice, making us less cost competitive. To put our contract manufacturers on an equal footing with their counterparts in Taiwan or UK, I will allow the supply of tools used in the manufacture of goods for export to be zero-rated for GST. This change will take effect from 1st April 2006. IRAS will release details later. Develop a full-service global financial centre In financial services, we are steadily becoming a full-service global financial centre. The Banker magazine has ranked Singapore first as "financial centre of the future". I will take further measures to promote our wealth management, capital market and treasury activities. I will just highlight the key changes. A critical mass of asset managers and advisors is located here, with assets under management fast approaching $1 trillion. To further support growth in the asset and wealth management industries, I will make the following changes: First, the Designated Unit Trust scheme will be enhanced to allow other types of funds, such as Restricted Authorised Schemes, to qualify for the DUT status. Second, qualifying domestic trusts and their underlying holding companies will be exempt from tax on their locally-sourced investment income as well as foreign-sourced income, to the extent that it mirrors the tax exemption enjoyed by individuals. Beneficiaries will also enjoy tax exemption on trust distributions made from such income.”
“These include the development of service competency standards and assessment tools, a national quality scheme to accredit organisations that provide good service, as well as certification and training programmes. The Government will invest $63 million over three years in these programmes. Manufacturing as a key engine of growth Manufacturing remains a key part of our economy, accounting for about a quarter of our GDP. We aim to double our manufacturing output and value added by 2018. We must support it with R&D, create value through innovation, and become a global leader in niche areas. Advanced economies like Japan have shown how to sustain their manufacturing edge through higher productivity and innovation. Canon is an example. Canon continues to manufacture cameras in Japan. It replaced its long conveyor belt assembly system with a cell system, where small teams of workers work in cells to assemble a product from start to finish. This is more efficient, because it allows for flexibility in production and workers can see the production process ahead of them. With the cell system, a worker can assemble a digital camera much more quickly. This is how Japanese workers remain competitive. We too must upgrade our manufacturing sector. We have made good progress. For example, Seagate, the world's largest hard disk drive company, has vertically integrated its R&D, manufacturing and headquarters functions including intellectual property management in Singapore. Its automated "factory of the future" manufactures various hard disk drives here. Seagate develops and produces its latest generation of 1-inch hard disk drives here. These are used in advanced electronics products such as Creative's Zen MP3 players.”