Richard Hu Tsu Tau
Singapore
“Sir, I think it is eminently fair, because the proposal really is for the Government to spend money to give shares to Singapore citizens. Either you agree or you do not agree. Or, if you agree, perhaps you consider the amounts insufficient or too much.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time". The purpose of this Bill is to make provision in accordance with Articles 148(2) and 148C(2) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act, 2001.”
“I think the Prime Minister and DPM Lee have already explained it will be based on income levels, with people living in flats as a proxy. So there is no political content in it. It depends on the income level, whether you have served national service or whether you are an elderly person.”
“I really do not understand. I know you are arguing on technicality for which I agree that you may have a point. But, nevertheless, because it is a proposal to share Singapore's surpluses with the population, the distribution is not something which you can argue against.”
“As I said, the estimates will be available around mid-October. I do not think, at this time, I want to give a specific date when the second package will be announced, but it will be done as soon as practicable. IN-PRINCIPLE AGREEMENT WITH MALAYSIA ON OUTSTANDING BILATERAL ISSUES (Assessment) 4.”
“Mr Speaker, Sir, when the $2.2 billion off-Budget package was announced in July this year, we said that the Government would do more to assist Singaporeans if the global economic situation worsened in the coming months.”
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“All things being equal, priority would be given according to the degree of support in the constituency for the Upgrading Programme. A total of 5 batches have been announced under the Interim Upgrading Programme. Batch 5 was just announced on 8th April 1998. All the precincts in Batch 1 and 20 precincts in Batch 2 have completed the upgrading works. Works in the remaining precincts in Batch 2 and 26 precincts in Batch 3 (2 precincts are starting work on 15th April 1998) are in progress whereas works have not started for precincts in Batch 4. As for the Main Upgrading Programme, 13 batches were announced under the Steady State Phase. All the upgrading works in the precincts in Batches 1 and 2, and one precinct in Batch 3 have been completed. Works are in progress for the other precincts for Batches 3 to 7. Works in the precincts in Batches 8 and 9 will commence soon, whilst for Batches 10 and 11, polling has either just been completed or is in progress. The details requested are attached at Appendices A (Cols. 1979-2000) and B. INTERIM UPGRADING PROGRAMME APPENDIX A Precinct Blk Nos No. No.”
“All these changes resulted in revenue loss of $838 million; and e)other offsets comprise increases in the Public Assistance granted to single-person or single-parent households and in the Singapore Allowance granted to pensioners; additional subsidies for health and education; rebates on Service and Conservancy charges for Singapore citizens staying in 1-, 2- and 3-room HDB flats; rental rebates for Singapore citizens staying in 1- and 2-room rental HDB flats; and grants to the Citizens' Consultative Committees. These additional offsets targeted at the lower income groups amounted to $306 million. HOUSING AND DEVELOPMENT BOARD UPGRADING PROGRAMMES 5. Mr Low Thia Khiang asked the Minister for National Development (a) what is the age of the Housing and Development Board flats when they are selected for either the Interim Upgrading Programme or the Main Upgrading Programme since the inception of the steady phase of the upgrading programme till the first quarter of 1998, by each precinct, number of blocks and units in the precinct, location of the precinct and type of upgrading; (b) whether upgrading works have been completed in these precincts and, if so, what were the dates of commencement and completion of these works, or what is the expected date of commencement and completion. Mr Lim Hng Kiang: Generally, flats selected for the Interim Upgrading Programme and Main Upgrading Programme were between 10 and 17 years of age and above 17 years of age respectively. However, age is not the only criterion in the selection of flats for the Upgrading Programmes. Other factors such as geographical spread, cleanliness and people factor are considered as well.”
“When GST was introduced in April 1994, it was accompanied by a comprehensive package of tax cuts and rebates to offset the impact of GST. The package comprises corporate tax reduction, individual income tax offsets, property tax rebates, reduction/suspension of various indirect taxes and other additional rebates and offsets to assist the low income groups. The revenue loss figure is computed from the taxes forgone arising from the tax cuts and rebates, and also additional expenditure incurred by the Government to implement the other offset measures. The figure of $8.2 billion for the revenue loss and GST collection of $6.7 billion for the period FY94-FY97 were estimated from figures available as at early February 1998. Based on the latest available figures, the revised estimates of the revenue loss and GST collection for the period FY94-FY97 should be $7.9 billion and $6.8 billion respectively. The breakdown of the revenue loss figure is as follows : a)the top personal income tax rate was reduced from 33% to 30%, with corresponding reductions in other tax brackets. Personal relief was also increased from $2,000 to $3,000. In addition, an annual rebate on individual income tax of $700 in YA 1994, declining by $50 per year until YA 1998, was also granted. The revenue loss from these changes amounted to $3.91 billion; b) the reduction in corporate tax by 3% resulted in revenue loss of $2.55 billion; c)property tax rebates were granted on a sliding scale for owner-occupied residential properties with annual values less than $10,000. The property tax rebates totalled $310 million; d)duties on motor vehicles and petroleum products, PUB tax and CESS were all reduced, along with the suspension of entertainment duty, film hire duty and Telecom tax.”
“Sir, I beg to move, "That the Bill be now read a third time." Question put, and agreed to. Bill accordingly read a Third time and passed.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The purpose of this Bill is to make final provision in accordance with Articles 148(2) and 148(C)(2) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act, 1997. The additional sum has been presented as Supplementary Estimates which have been considered and approved by the House as Command Paper No. 2 of 1998. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Sir, I beg to move, "That the Bill be now read a third time." Question put, and agreed to. Bill accordingly read a Third time and passed. SUPPLEMENTARY SUPPLY BILL Order for Second and Third Readings read.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." In accordance with Article 148(1) of the Constitution, heads of expenditure to be met from the Consolidated Fund and Development Fund, other than statutory expenditure, have to be included in a Bill to be known as the Supply Bill. The purpose of the Supply Bill before Members is therefore to give legislative approval for the appropriations from the Consolidated Fund and Development Fund to meet expenditures in the financial year 1st April, 1998 to 31st March, 1999. The heads of expenditure and the sums that may be incurred in respect of each head are shown in the schedule to the Bill. These have been approved by the House in the Main and Development Estimates of Expenditure for the financial year 1st April, 1998 to 31st March, 1999, and appear on pages 35 and 36 of Command Paper No. 3 of 1998. The Supply Bill, when approved, will empower me to issue warrants, authorising expenditure up to the amount for each head as shown in the Bill to be paid out from the Consolidated Fund and the Development Fund. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." Question put, and agreed to. Resolutions accordingly agreed to. SUPPLY BILL Order for Second and Third Readings read.”
“Sir, I beg to report that the Committee of Supply have come to certain resolutions. First Resolution reported - Question, "That the sum of $40,874,281,920 shall be supplied to the Government under the heads of expenditure for the public services shown in the Main Estimates for the Financial Year 1st April 1998 to 31st March 1999 contained in Paper Cmd. 3 of 1998." Second Resolution reported - Question, "That the sum of $28,645,614,600 shall be supplied to the Government under the heads of expenditure for the public services shown in the Development Estimates for the Financial Year 1st April 1998 to 31st March 1999 contained in Paper Cmd. 3 of 1998."”
“Sir, with your permission, I would like to answer the question which I was not able to complete at yesterday's sitting. Mr Inderjit Singh has suggested that the GST exemption threshold should be raised from $1 million to $2 million. He also asked whether GST registered businesses could delay their payment to the Income Tax Department for GST collected by one quarter to help ease their cashflow. We believe that the current GST annual turnover limit of $1 million is already high and excludes, therefore, practically all small businesses. With this $1 million turnover threshold, most businesses such as provision shops, retail shops, hawkers and HDB shopkeepers are exempt from applying GST. Currently, businesses are already allowed to file returns on a monthly or quarterly basis and pay IRAS the GST collected within one month after the returns are filed. The traders who are in a net refund position from Government usually choose to file returns on a monthly basis. Businesses with turnover of less than $1 million but has voluntarily registered for GST purposes are also allowed to file returns on a half yearly basis. As the GST payable is, in fact, money collected from customers, the traders who choose to file quarterly returns have the use of GST collected for two months on average. Since the GST is not a tax on the trader, unlike income tax, there is therefore no basis to allow companies to keep the money which belongs to Government any longer than what is already provided.”
“Mr Deputy Speaker, Sir, I beg to report that the Committee of Supply has made progress in the Main and Development Estimates for fiscal year 1998/1999, and ask leave to sit again tomorrow.”
“And Singaporeans are advised to stay away from any investment schemes which are dubious, particularly if they offer unrealistically high returns. That is probably the best protection that I can offer. Any scheme which offers returns which are unreasonable or even absurd cannot be safe.”
“Sir, Mr Sin Boon Ann has expressed concern over the variety of investment schemes which have been promoted to the public and whether sufficient protection can be offered to them. As a general rule, investment schemes offered by banks, insurance companies and other financial institutions are regulated directly or indirectly by the Monetary Authority of Singapore (MAS) which licenses the institutions. MAS ensures that the institutions are financially sound, that investors' rights are protected under the law. Other investment schemes which fall outside the purview of MAS are subject to the basic anti-fraud provisions contained in the Companies Act and the Penal Code. Members of the public who suspect fraudulent activity of purveyors of these schemes can get in touch with the Commercial Affairs Department or the Police. In addition, the Consumers Association of Singapore helps aggrieved members of the public to seek redress over false or misleading advertising and marketing practices. The Government is re-examining legislation in certain areas. For example, time-share schemes and schemes run by soft commodity brokers. Relevant Government bodies and agency practitioners will be consulted and comparable provisions in other countries' legislation will be adopted if they are found appropriate. This would include the promotion of foreign properties. And we are now considering the establishment of an Estate Agents Bill which will regulate the sale and promotion of foreign properties, although this particular problem is probably no longer an issue now that the market is very quiet. I would like to stress, however, that no regulatory system can completely protect investors from making losses.”
“In the past two days of debate, several Members have spoken on the subject of bond-breaking by public sector scholars. I do not propose to comment on this issue. However, DPM BG Lee will be making a Ministerial Statement on this subject tomorrow after Question Time. Mr Speaker, Sir, let me sum up by emphasising to Members of this House that the Government is fully aware of the extent of the economic slowdown and is carefully monitoring its impact on the population and the different sectors of the economy. The crisis has not run its full course and we must maintain a cool head to anticipate and deal with developments as yet unknown. In this respect, I thank the Members of this House for signposting possible areas of concern. At the same time, we should use the opportunity to improve our competitive weaknesses and position ourselves for the impending recovery of the region. Together, I am confident that we will weather the storm and learn valuable lessons which will stand us in good stead for the challenges of the future. [Applause.] Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1998 to 31st March, 1999. ADJOURNMENT Resolved, That Parliament do now adjourn. - [Mr Wong Kan Seng]. Adjourned accordingly at Seventeen Minutes Past Six o'clock pm. Committee of Supply - ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL 1998 TO 31ST MARCH 1999 (Cols. 843 - 846)”
“The community and social services sector in fact will receive the highest allocation of resources in FY1998. Further, it is incorrect to say that MCD's focus is on taking preventive action while that of MHA is on remedial action. A very significant proportion of the Ministry of Home Affairs' resources has always been devoted to preventive programmes, such as crime prevention, fire safety and drug education. We should see spending in these programmes as complementary to the other programmes in the social and community services sector. Mdm Chiang would also be pleased to know that MCD would be embarking on a national study on the state of our families and another on the impact of maids on childcare. In addition, MCD has increased the number of neighbourhood centres which include childcare centres, youth drop-in programmes and centres for elderly services. MCD will also be looking into the manpower needs for the social service sector and will be working closely with the voluntary organisations in this area. Mr Simon Tay has urged the Government not to neglect building up the softer aspects of life through involvement in charity and the arts, and has suggested that Government maintain its commitment in these areas during these hard times. I would like to assure the Member that sufficient funds have been provided to arts and culture and community development and that there is no cut-back on Government's commitment in these two areas. For the voluntary welfare organisations (VWOs) of the Ministry of Health and the Ministry of Community Development, Government is providing $140 million of grants in FY1998 as compared to $96 million provided in FY1997. As for the Ministry of Information and the Arts, the FY1998 budget is $381 million as compared to $318 million in FY1997.”
“As part of the effort to build up Singapore's global competitiveness, Government has decided to place all manpower planning, development and management issues under the charge of a single Ministry. As a central agency, the new Ministry will be in a better position to coordinate all critical manpower planning and management issues. The new Ministry will also put greater emphasis on collaboration with its partners, which include the private sector, the unions and Government agencies, so that it will be able to align the efforts of all stakeholders to our national manpower vision. Government is committed to the development of manpower and will ensure that sufficient financial resources are made available to MOM. If additional funds are required, my Ministry is prepared to consider such requests. Mdm Claire Chiang has noted that MCD had the second lowest budget and had urged the Government to allocate a larger budget for the community services sector. She further observed that MCD's budget was even lower than that of the Police Division under MHA. Instead of allocating a huge budget to MHA whose focus is on remedial action, resources should be shifted to preventive action undertaken by MCD. But I would like to point out that MCD's budget alone is not representative of the Government's spending on community development. Besides Community Development, Government's spending on Education, Health, Information and the Arts, Environment as well as Public Housing all contribute to the social and community well-being of Singapore. Total Government's spending on social and community services, which include these six named areas, will amount to $10.3 billion or 37.6% of FY1998 Budget.”
“For those who are willing and able to undertake further regional investments, there already exists a comprehensive range of tax and financial incentives to assist them. Incentives such as the Regionalisation Financing Scheme, Local Enterprise Finance Scheme, Overseas Enterprise Incentive and Overseas Investment Incentive have been used extensively. Mrs Yu-Foo Yee Shoon has asked whether Government would consider allowing workers to use a portion of their CPF savings for an unemployment benefits scheme as part of a crisis package to be invoked only when there is a severe economic downturn. There are no plans to set up such a scheme at present. The proposal has to be carefully considered in view of the long-term implications on the labour market and costs of employment. In times of economic recession, the best way to help workers is to help them get jobs and upgrade their skills so that they remain employable. Currently, there are more than 450,000 foreign workers in Singapore. In an extreme situation, we can adjust the dependency ratio to reduce the influx of foreign workers and to assist our own retrenched workers to find alternative employment. These measures would help our workers cope without having to establish an unemployment benefits scheme as a basic safety net. Experience in other countries serves to remind us that the best security net for Singaporeans is not unemployment or welfare benefits but constant growth and manpower development. Mrs Yu-Foo has also commented that as manpower development is critical, the Government should allocate sufficient resources to the new Ministry of Manpower (MOM).”
“I would like to assure Members of this House that our regulatory bodies are vigilant in ensuring that the interests of the consumers are safeguarded. During the transitory period between corporatisation and the introduction of competition, the regulator will monitor the situation closely to keep tab on charges and service quality. A few Members have asked whether Government would freeze utilities charges and other Government fees to reduce the burden on businesses and individuals. Government fees and charges are revised only to keep pace with cost increases. If cost had not increased, fees and charges would also not increase. Our policy has been to revise fees and charges regularly so that the increases can be kept small. The revisions ensure that the Government services are properly priced to guard against misallocation of resources. However, the Government will continue to monitor the situation closely and will review the fees and charges if there is a need to do so. Both Mr Leong Horn Kee and Mr Inderjit Singh have commented on the depreciation of regional currencies against the Singapore dollar and said that it is now an opportune time to escalate the pace of regionalisation and promote the establishment of manufacturing bases in the region. The recent devaluation of regional currencies relative to the Singapore dollar does provide opportunities for our companies to further invest in the region. Whilst the Government can give assistance to our companies by highlighting the opportunities that are available and facilitating the investments, ultimately the companies themselves must assess the risks involved and decide whether it is commercially viable for them to expand their activities in the region.”
“Home buyers should therefore consider their financial position carefully before purchasing a property. Mr Sin Boon Ann has commented that GLCs should be subject to greater accountability to make sure that public money invested in GLCs is well spent and that there should be greater disclosure on their investments as recommended by the Public Accounts Committee. Government is conscious that a considerable amount of public money has been invested in our GLCs. I would therefore like to assure Members of the House that our GLCs have been profitable and represent good investments of public money. Although some of the investments made by our GLCs have not turned out as expected, we should not over react. Many are public listed companies and their accounts are open to public scrutiny. Most of these have performed well over the years and have contributed substantially to public coffers. Dr Vasoo has asked whether greater efficiency has been achieved as a result of the corporatisation of Government agencies and whether the interest of the consumers have been protected. The objective of the corporatisation programme is to enable the service provider to operate as a business entity so that it will be efficient, bottom-line driven and be responsive to changes in a competitive environment and the demands of its customers. Towards this end, Government has been liberalising the telecommunication industry in a gradual manner and we have clearly seen and experienced the benefits in terms of more competitive pricing and greater consumer choice. However, in situations where there is a corporatised monopoly, as in the case of Singapore Power, the Government regulatory body, in this case, PUB, would play a critical role in regulating tariff charges to ensure that the charges are fair.”
“Hence, Government introduced anti-speculation measures in May 1996 to prick the speculative bubble and to cool down the residential property market. Similarly, in the present downturn, attributable to the regional economic turmoil, Government has adjusted its land sale programme to avoid exacerbating an over-supply situation. It is not the Government's intention to ensure that developers make a profit. Like any other businesses, they will have to assess business risks and face the consequences. Mr Sinnakaruppan has commented that many younger Singaporeans who are graduates find that they still cannot meet the 20% cash payment for the purchase of private property despite the falling property prices. He suggested that the Government should allow for a reduced 10% cash payment for first-time owners of private property. Mr Choo Wee Khiang and Mr Zulkifli both suggested allowing the use of CPF for the down-payment. The 80% limit on bank financing of property purchases is a prudential measure to ensure that the banking sector is not over-exposed to the property sector and that home owners are not heavily geared and hence vulnerable to a fall in property prices. In countries such as Hong Kong and Malaysia, even stricter limits are imposed on banks in financing property purchases. It would not be prudent to relax the 80% limit, even selectively for first-time buyers. To do so would reduce the buffer which banks have in the event of default where the pledged properties have to be disposed of at lower prices. CPF savings cannot be used as the buffer because they go back to the buyer's CPF account if the property is resold. Furthermore, any concession to be granted to only a select group of buyers could easily be subject to abuse.”
“Since January this year, IRAS has been actively reviewing properties with a view to reducing their annual values, where warranted. To-date, IRAS has reviewed some 22,000 cases and reduced the annual rental values by more than $78 million. This reduction in annual values came from 37% of the cases reviewed. 63% had their annual values retained and only 1% of the cases had their annual values increased based on market evidence. IRAS will continue to further reduce the annual values where the market warrants it. Property owners who have reduced their rentals could also inform IRAS so that IRAS could initiate a review and reduce the annual values promptly and accordingly. Mr Inderjit Singh has commented that there is too much Government intervention in the property market. He commented that Government should just set the overall framework to guard against asset inflation and leave the market to just find its own level. Mr Singh, Mr Simon Tay and Mr Chuang Shaw Peng also echoed the sentiment that too much may have been given to developers which are still expected to make reasonable profits even after making loss provisions on unsold units. The Government's long-term strategy is to supply sufficient land at a steady pace to meet the aspirations of Singaporeans to own private residential properties. However, given the cyclical nature of the property market, it is inevitable that property prices will rise and fall. The Government will not intervene in the property market except when it is necessary to avoid excessive market volatility. This is because extreme ups and downs in the property market could have a severe and long lasting impact on the real economy.”
“To guard against these, elaborate tax rules would be needed, which will lead to higher tax compliance cost. Having a low tax rate may also not help smaller companies in their start-up phase anyway, since they will not be paying much taxes in the first place during their start-up phase. Dr Teo Ho Pin has asked why the property tax rebate was extended only to industrial and commercial properties, but not residential properties. The property tax rebate was granted to ease the cost of business. In the case of individuals and households, it is more meaningful to extend income tax rebate and rebates on service and conservancy charges and rental charges. Home owners are already taxed at a lower concessionary tax rate of 4% on the annual value of their properties. Further, with the property tax rebates given since 1994 to offset GST, currently the majority of HDB households living in 1- to 4-room flats do not pay any property tax. Dr Teo also spoke on the unhappiness of house owners in having to resolve disputes over their annual value of properties with IRAS. It is the duty of the Chief Assessor to ensure that the annual value conforms to the statutory definition of being the estimated annual rental that the property can fetch in the market. Home owners can object to any adjustments of their annual value within 21 days of the notice to adjust the value. Home owners simply need to complete a one-page form stating their grounds of objection. The Chief Assessor will review and adjust annual values accordingly if there are valid grounds of objection. If home owners disagree with the valuation, they can appeal to an independent Valuation Review Board. Mr Tay Beng Chuan and Dr Wang Kai Yuen expressed concern over the recent upward revision on the annual values of some properties.”
“Dr Vasoo has asked for rebates or concessions to be given to promote savings. As a general rule, we do not want to distinguish between different types of income for tax purposes, as it could otherwise result in economic distortions, for example, it could skew investment decisions if interest income was favoured over, say, dividend income. There is also the question of equity. Generally, those who derive the same income should pay the same amount of taxes. If we were to selectively exempt certain types of income, we could have an anomaly of high income earners paying very little taxes if their income is mainly from tax-exempt sources. Mr Leong Horn Kee and Mr Ravindran have suggested that we provide relief for mortgage loans, similar to what Hong Kong did in its FY98 budget. I should point out that in Hong Kong, most people live in privately owned housing which is very expensive. Because of Hong Kong dollar's peg to the US dollar, interest rates are also much higher than in Singapore. Hong Kong home owners, therefore, pay hefty mortgage rates, hence mortgage relief is needed. In the case of Singapore, more than 85% of our population live in HDB flats and they already enjoy subsidies, not only on the purchase price of their flats, but also on the low mortgage interest payments. Therefore, there is no need to provide further tax reliefs on mortgage loans. Mr Ahmad Magad has asked that a multi-tier corporate tax system, with lower tax rates for smaller companies, be adopted. This was raised in last year's Budget debate and I would like to reiterate that a multi-tier tax system will create opportunities for tax planning, such as a breaking-up of companies to pay less tax.”
“A few Members have also expressed concern that the Budget had not offered much assistance to the retail and tourism sectors, and that the reduction in personal income tax rebate to 5% would, in fact, withdraw greater liquidity and further dampen the retail sector. As I have said earlier, the personal income tax rebate is a reward for good economic performance. Moreover, given the current cautious consumer spending mood, I do not think that a higher income tax rebate would offer much help to the retail sector. Government already has various programmes in place which provide assistance in funding for both the retail and tourism sectors. For instance, Government has been enhancing retail infrastructure and providing upgrading in areas such as stock control, shop management and staff retraining to improve the competitiveness and resilience of our retailers. For the tourism sector, the Singapore Tourism Board also helps industry members to obtain financial and manpower training assistance from schemes such as the Innovation Development Scheme and Initiatives for New Technology (INTECH) Scheme. In addition, approved tourism projects can also qualify for Industrial Building Allowances, Investment Allowances on approved expenditure as well as property tax concessions. Mr Lim Swee Say has asked whether more funds could be allocated to the EDB and other economic agencies, to enable them to take the opportunity to attract more investments into Singapore. I would like to assure Mr Lim that the Government is always open to opportunities to attract investments into Singapore. In FY98, $176 million will be provided for EDAS grants, compared with $131 million in FY97, a 34% increase. We are prepared to increase the funding if this should prove necessary.”
“Mr Chiam See Tong has berated the Government for stopping transfers to Edusave and Medifund in this year's Budget. I would like to remind Mr Chiam that in FY97, the Government made its final contribution of $500 million to the Edusave Endowment Fund to reach the targeted fund total of $5 billion. Mr Chiam should congratulate the Government for the early fulfilment of its commitment. As for the Medical Endowment Fund, I have already informed the House in my Budget Statement that there is more than adequate income from this fund to meet projected disbursements in FY98. Hence, there will be no curtailment in disbursements from both the Edusave and Medical Endowment Funds this year for lack of funds. Mr Chiam has also suggested that the Government allow retrenched workers to draw parts of their CPF. Mr Chiam must be aware that the CPF savings are meant for members' retirement needs. Allowing withdrawals of CPF savings for short-term needs will severely affect the retirement needs of Singaporeans in the long run. Easy withdrawal of CPF may also undermine the incentive for workers to seek alternative employment or undergo training and upgrading in the event of unemployment. Mr Chiam has also accused the Government of not keeping to its electoral promise of continuing with the Main Upgrading Programme. I would also like to remind Mr Chiam that the Government has always said that the pace of the Main Upgrading Programme will be determined by the size of the budget surplus. With slower economic growth and lower budget surpluses, the MUP programmes have been adjusted downwards, but Mr Chiam should note that the Government will continue to spend a substantial $480 million for the Main and Interim Upgrading Programmes in this year's Budget.”
“According to the study, exempting food as a whole from GST will benefit the high income households 3.5 times as much as from the lower income households, and exempting health expenses or education from GST will benefit high income households eight times as much as the lower income households. Mr Jeyaretnam also asked whether there was a need to continue with the water conservation tax now that there is no longer any threat that our water supply will be cut off. He also asked what the $2.3 billion of "Other Taxes" meant. Water is, and will always remain, an important strategic resource for Singapore. The water conservation tax was intended to promote water conservation and slow down the growth in water consumption. The objectives of the tax remain relevant and there is no reason to abolish it. The "Other Taxes" which Mr Jeyaretnam referred to is mainly foreign workers' levy. Mr Low Thia Khiang has said that rebates to individuals are not significant and that the assistance to businesses also did little to reduce their fixed operating costs. On personal income tax rebates to individuals, I would like to remind Mr Low that the 5% rebate given is at the same level of that which was given between the years 1990 and 1994. It was only in recent years that we have given a rebate of 10%. A 5% income tax rebate is not insignificant. And as I have said, the Government is prepared to increase the rebate if this was found to be necessary. Likewise, for assistance to companies, the Government will provide more relief measures, if these are needed. But Mr Low is correct that there are certain costs faced by companies over which the Government can do little. These include wage costs and interest costs which are determined by market forces.”
“On the claim that the Government had introduced GST to raise additional revenue, I would like to point out that GST has remained revenue negative every year since its introduction in 1994 because of the accompanying cuts in direct and indirect taxes and the generous GST offset package introduced. In the four years between FY94 and FY97, total GST collections were $6.7 billion. But the total revenue loss in the same period was $8.2 billion. The net revenue loss to Government was $1.5 billion in the last four years. If we were to suspend GST, it would result in a further revenue loss of $2 billion a year. Even if we need to stimulate the economy by $2 billion, suspending GST across the board may not be the best way to do it. We would do better to adopt a more targeted approach and apply the money judiciously to specific areas and groups which are more in need of help from the Government. As for Mr Jeyaretnam's suggestion to exempt basic necessities from GST, the matter has been discussed at length before the implementation of GST. But I will repeat the basic considerations here for his benefit. The GST is designed to be comprehensive to keep the GST system simple, thereby the cost of administration low. To single out items for exemption would complicate the entire GST system and increase the cost of administration of the tax. This has been the experience of other countries where such exemptions are allowed. It is also not an effective way to help the lower income households. A survey on the expenditure of households conducted prior to the introduction of GST showed that exempting food and other necessities from GST will benefit the more well-off much more than the lower income households.”
“But when times are bad, we are prepared to run a budget deficit and draw down on reserves, as we did during the 1985 recession. Over the years, we have also lowered our tax rates progressively to ensure that they remain competitive. Our current tax regime is still competitive. We have a wide range of tax incentives, which means that the actual average rate of tax is lower than the corporate tax rate of 26%. Our extensive network of tax treaties also help to lighten the burden of companies operating in Singapore. We have been consistent in maintaining a competitive tax regime and will not hesitate to adjust the corporate tax rate if there is a need to strengthen our competitiveness. I will now turn to specific concerns raised by other Members. But first, I will deal with some misplaced suggestions from the NCMP and the Opposition Members. Both Mr Low Thia Khiang and Mr Jeyaretnam have asked that the GST be suspended. Mr Jeyaretnam claimed that GST would raise prices significantly but that Government had nonetheless introduced the tax because it would generate significant revenue. He also suggested that basic necessities be exempted from GST. Mr Jeyaretnam may like to know that the Cost Review Committee had in 1996 studied the impact of GST on the cost of living of Singaporeans. The Committee concluded that GST did not cause prices to shoot up. Instead, it resulted in only a one-off rise in the CPI in 1994 of less than one percentage point. Inflation in that year also remained low at 3.1%.”
“A Job Redesign Programme is also being redeveloped to help companies restructure their jobs and processes for greater productivity. PSB will provide training and consultancy to companies interested in the programme with funding from the SDF. Currently, the SDF provides between 50% and 80% funding for the course fees of the programmes it supports. Total grant commitments made by SDF in the fiscal year 1996 rose to $72 million compared to $68 million in FY 1995. Should there be a dip in the pace of training over the next one or two years because of the economic slowdown, SDF is also prepared to increase its support level selectively in critical areas of training. Government will also consider supplementing SDF with additional funding, if necessary. But before I move on to address other concerns by Members, allow me to restate the basic tenets of the Government's fiscal policy. In years of strong economic growth, our aim is to run budget surpluses to augment our foreign reserves. The reserves are a buffer against unforeseen shocks to our economy. Members will have seen how important financial reserves are in instilling confidence among investors in our economy. If not for our large stockpile of reserves, we would have been buffeted much more by the regional turmoil. The accumulation of reserves, however, is not achieved at the expense of heavy taxes that burden the economy. This is in line with another basic tenet of our fiscal policy, which is to maintain a competitive tax regime which taxes the factors of production as lightly as possible. Our fiscal policy has served us well. When times are not so good, as is now, we will be prudent and target for a reduced surplus.”
“As our economy continually restructures to move into more higher value-added activities, constant upgrading of the skills of our workforce is paramount. I will touch briefly on a number of new training schemes launched recently or are under consideration. The NTUC first launched the Skills Redevelopment Programme (SRP) in 1996 to equip lower educated workers with the relevant skills needed to enhance their employability. The programme is supported by PSB, EDB and ITE. The SDF provides up to 80% of the course fee and EDB defrays up to 70% of the absentee payroll through its INTECH grant scheme. Some 50 companies, mainly in the electronics industry, have signed up about 5,000 workers for the SRP. Around 1,000 workers have started training. More than 50% of the trainees are aged 40 and above. The expansion of the SRP into a national programme is now being considered. A "People Developer" Scheme was launched in December 1997 to recognise companies with comprehensive systems for developing staff. SDF is providing 80% of the consultancy cost for implementing the scheme. A new National Skills Recognition System will be piloted in the second half of 1998. The system will certify worker skills and provide a progression path for the workforce, thereby encouraging workers to raise their skills base and help employers reward skill attainments. PSB is also working on a Critical Enabling Skills Programme (CREST) to prepare the workforce for a knowledge-based economy. The programme aims to equip 50% of the workforce with competency in key skill areas such as learning-to-learn, group effectiveness, organisation effectiveness and leadership by the Year 2005. It is expected to be launched in the second half of 1998.”
“In the FY 1998 Budget, I have announced that the scope of the Local Enterprise Finance Scheme has been extended to make short term loans even more accessible to SMEs to help them cope with the unexpected economic downturn. Altogether, $1.1 billion has been set aside for this purpose. Other forms of assistance are also available, such as the Local Enterprise Upgrading Centre, which is a first-stop centre to assist SMEs in their development programmes. Since its establishment two years ago, the Centre has handled more than 6,000 cases of assistance. There is also a host of training programmes specially tailored to meet the needs of SMEs. A great deal of effort has been made to promote these training programmes, such as providing simplified bilingual application forms and holding of seminars, conferences and the distribution of brochures and so forth. As a result of these efforts, more than 9,500 SMEs have benefited from the training programmes funded by the Skills Development Fund in fiscal year 1996. Several Members were disappointed that JTC and HDB are only freezing posted rentals and moderating rental adjustments for existing tenants. They would have liked to see JTC and HDB rentals reduced. I would like to assure Members of the House that JTC and HDB rental reductions are not precluded if conditions warrant it. For the present, the freezing of posted rentals and the moderation of rental adjustments where existing rates are below the posted rates is considered sufficient. Many Members have also spoken on the need to give greater support to training and retraining. Let me reiterate that the Government fully recognises the importance of training and retraining.”
“There already exists a plethora of tax incentives and assistance schemes created for both manufacturing and the SMEs over the years. Pioneer tax exemption, concessionary tax rates and other tax incentives which are only now being extended to new areas in financial services and cyber trading have long existed for the manufacturing sector and the SMEs. All these incentives have worked very well for the two sectors. To illustrate, the various tax incentives granted to the manufacturing sector has resulted in revenue loss of more than $500 million in Year of Assessment 1996. To help companies in their business development and skills upgrading, a block vote of $1.3 billion for grants and $3.3 billion for loans have been set aside under the Economic Development Assistance Scheme. In 1994, we also started the $2 billion Cluster Development Fund to enable EDB to go into business partnerships with companies that are venturing into promising new areas of business. To-date, a total of $794 million from the Cluster Development Fund has been committed to various projects, of which $780 million was for the manufacturing sector. The SMEs have long enjoyed Government support. There are currently more than 60 programmes to assist SMEs at different stages of development. The two flag ship programmes are the Local Enterprise Finance Scheme and the Local Enterprise Technical Assistance Scheme. In 1997, applications under the two schemes increased by 13% to about 2,000 compared to 1,700 applications in 1996. To-date, a typical SME applicant has received, on average, about $800,000 in loans and $41,000 in grants.”
“Instead, we would do well to wait for developments to unfold and then act decisively and purposefully to offset the impact on the economy. Some Members have asked if there is a threshold GDP growth rate which must be reached before the Government would act. In other words, would the Government intervene only if there were a recession. I can say that the Government does not have a particular or absolute threshold GDP figure in mind. As I have mentioned earlier, the impact of the regional problems on the economy is expected to be uneven. If the situation for certain sectors should deteriorate rapidly, we do not have to wait for the whole economy to be similarly affected before taking action. Further, while we would want to base our actions on some hard numbers, instead of relying just on anecdotal evidence, we do not have to wait for all the hard numbers to come in if the feedback from the business community corroborates the available economic indicators. In deciding what additional off-Budget measures to introduce and when to introduce them, we will have to be guided by both qualitative and quantitative factors. The Government will keep in close touch with the business community and will not hesitate to respond quickly with the appropriate measures as and when necessary. I will now deal specifically with the concerns of the manufacturing sector and the SMEs over the absence of new incentives for these two sectors. The perception is that the FY 1998 Budget continues to favour the financial sector and that not enough has been done for the other two groups. The reason for the Government's focus on the financial sector and its seeming neglect of the manufacturing and SME sectors is straightforward.”
“I have therefore taken pains in my Budget Statement to stress that the package of measures is based on current assessment of the economic situation. If there should be a significant and sudden downturn, the Government will not hesitate to respond with off-Budget measures. I want to reiterate that the Government has ample resources and is ready to implement further relief measures where necessary. A number of Members have asked what these additional measures would be. These could take the form of deeper income tax and property tax rebates as well as other measures implemented during the 1985 recession. There could even be new measures tailored to meet the specific needs of particular sectors of the economy. We will closely monitor the indicators for any signs of deterioration and are prepared to step in quickly to cushion the economy from any sudden shocks. Some Members have also said that the remedial actions taken by Government may come too late. They prefer Government to take a more proactive approach and do more now, rather than react passively to developments. But the Government has been proactive in putting together the current relief package. We would have taken further actions if, by themselves, they could have prevented a deterioration of the external economic environment. We must remember that, unlike the 1985 recession, we are not trying to correct structural weaknesses within our economy which require immediate adjustments on our part. The problems we are facing are externally imposed and beyond our control. Given the nature of the problem, we should not over-react and direct our resources aimlessly now to mitigate problems that have yet to arise.”
“The rebates should be seen for what they are - bonuses given in good years. Although we expect much slower growth in 1998, nonetheless a rebate has been given this year, but more as a measure of relief to individuals. In a period of economic downturn, we should expect some belt tightening all round. Some Members felt that the rebates should have been higher, citing wage cuts and retrenchments as reasons. But we have yet to see across-the-board wage cuts and widespread retrenchments. There have been some lay-offs, but the retrenched workers have found alternative jobs without too much difficulty. There is therefore no need for significant additional rebates at this time. I have said that the Government is prepared to increase the rebates at a later stage if it is necessary. As for the suggestion that the rebates be based on per capita household income of HDB households rather than by flat size, I agree that rebates based on per capita income would be more equitable, but the administrative cost of ascertaining the household income of every HDB household will be prohibitive. We have therefore opted for the simpler method of going by flat size as a proxy for household income. HDB's survey results have shown that the per capita household income generally increases with the flat size. The package of relief measures announced in the Budget should be adequate if the economy does indeed grow between 2.5% and 4.5% this year, especially if the actual growth is near the upper end of the range. However, the Government also recognises that the economic outlook is very uncertain. If economic conditions should deteriorate sharply, further relief measures would obviously be called for.”
“There is therefore little evidence at this point in time to suggest that the economy will go into negative growth in 1998. It is against this backdrop that we have come up with the current package of relief measures for companies and individuals. For businesses in general, which are expected to continue to grow, albeit at a slower rate, we have provided some relief in the form of property tax rebate, abolition of stamp duty on most instruments and rental concessions by JTC and HDB. For the property sector and SMEs which have been more badly hit, we have implemented additional measures to address their specific concerns. These include scaling back the release of Government land and reinstating the property tax exemption for land under development. We have also significantly enhanced the Local Enterprise Finance Scheme to address the SMEs' difficulties in obtaining working capital. For individuals and households, despite slower revenue growth, we have continued with the income tax rebate and the S&C rental and utilities rebates. Many MPs have expressed the view that the tax and non-tax rebates should not have been revised downwards from the last Budget, especially when they are most needed by people in these more difficult times. There is also a suggestion that the rebates should be based on per capita income. Tax and non-tax rebates were given in the past for good economic performance and when budget surpluses were healthy. They were like bonuses given out by companies in good years. Generally, in difficult years, no bonuses will be given. These rebates should not therefore be taken for granted as a permanent feature of our budget. Even without the rebates, our personal income tax rates are already amongst the lowest in the world.”
“Relevant statistics on the economic performance of the OECD countries and the regional economies are also being closely monitored to ensure early assessment of changes in the economic climate. MTI's assessment is that while the overall economy is expected to slow down significantly this year, the impact will be uneven across sectors and businesses. Businesses servicing the region will be affected the most. Those with revenues in regional currencies will experience exchange losses. However, multi-national companies and businesses servicing the OECD markets in the West will not be affected as much. Those with revenues in US dollars may in fact have gained from the appreciation of the US dollar. As many SMEs service the regional countries, they have felt the brunt of the regional crisis almost immediately. It is therefore not surprising that feedback from local businesses is that they are already feeling the impact of regional economic problems. However, many MNCs and their supporting companies which are servicing the US and EU markets are still enjoying healthy growth. The US and EU economies are expected to grow between 2.5% and 3% respectively this year. With about half of our non-oil domestic exports destined for these markets, the current assessment is that overall economic growth this year would remain positive, although significantly lower. According to MTI, although the January trade and production figures were weak, that was partly statistical, as there were less working days this year due to the festive period. Preliminary estimates for the two months of January and February this year indicate that non-oil domestic exports grew 11.6% compared to the same period last year.”
“Mr Speaker, Sir, I would first like to thank all Members of this House who have spoken on the Budget over the last two days. As usual, time will not allow me to respond to all the issues raised. I will therefore focus on the main issues and leave other matters of details which are under the purview of individual Ministries to the Committee of Supply. Some Members have reflected the sentiments of businesses that the economic situation is worse than what the Government had thought, and that more should have been done now to help companies and individuals cope with the difficulties brought about by the regional crisis. There were also comments that the Government should be proactive rather than wait for the economic climate to worsen before reacting. A number of Members have also expressed concerns that the Budget has not offered enough help to the manufacturing sector and the small and medium enterprises, and that there were not enough new initiatives to give a boost to the training and retraining of our workers. I will deal with these issues in turn. Let me first address the concern that the Government does not seem to realise the full extent of the difficulties faced by businesses and that it is overly sanguine about the economic outlook. The Ministry of Trade and Industry's forecast that the economy will grow between 2.5% and 4.5% in 1998 was made against a volatile regional backdrop. It was based on the best available data on business and economic conditions in the future. Besides timely hard data on the overall economy and the major sectors compiled on a monthly and quarterly basis, it has also taken into account the qualitative first-hand feedback from businesses and surveys of business expectations.”
“The policy measures introduced in this budget are based on our assessment of the present state of the Singapore economy and the outlook for the year. They assume that no major changes will occur in the external economic environment which will affect us drastically. But we cannot be certain how the situation will develop. The Government will monitor the regional environment and economic conditions vigilantly, and keep in close touch with the private sector. If the picture changes, we are ready to implement further measures promptly. We have the resources to do so. We cannot totally neutralise the fallout from the regional crisis, but we will do everything possible to offset its impact on Singapore. Businesses and individuals must prepare themselves for a period of slower growth and uncertainty. They must be ready to respond to unanticipated developments, and not flinch from tough measures where warranted. Our best approach is to acknowledge the realities of the situation, however adverse they may be. This maximises our chances of surmounting the problems. It also demonstrates to investors and analysts our preparedness to tackle problems directly rather than evading them. This adds to confidence in Singaporeans and in Singapore. If we stay united in tackling the problems which come our way, we will strengthen our competitiveness, ride out the crisis, and emerge stronger than before.”
“The changes will take effect from 28th February 1998. Details are set forth in Annex III (Cols. 573 - 576). Annex III - INSTRUMENTS WHERE STAMP DUTY IS ABOLISHED (Cols. 573 - 576) Duties on Cigarettes Duties on cigarettes were last increased in February 1993 to discourage smoking. In support of the national effort to discourage smoking, particularly among the younger population, the excise duty on cigarettes will be raised from $115 to $130 per kilogram. Details of the changes are in Annex IV (Cols. 577 - 580). The changes in duties is estimated to increase revenue by about $35 million a year, and will take effect from today. Annex IV (Cols. 577 - 580) Electronic Road Pricing and Vehicle Tax Rationalisation The Ministry of Communications will be introducing the Electronic Road Pricing (ERP) system this year. It will commence on 1st April 1998 on the East Coast Parkway (ECP), and would be phased in to other parts of Singapore over the next two years. In conjunction with the introduction of the ERP, the vehicle tax structure will be rationalised and a package of road tax rebates will be given. The changes in road tax structure and the road tax rebate package will result in a revenue loss of about $1 billion for the Government for the next 5 years. This revenue loss will be partly offset by ERP revenue and additional revenue from the release of more COEs over the next 3-5 years. Overall, the Government expects to achieve revenue neutrality for this exercise in about 8 years. Details of the ERP implementation plan, the road tax rebate package and the new vehicle tax structure will be announced by the Minister for Communications next week. CONCLUSION Mr Speaker, Sir, the events since July 1997 have shown how quickly the regional environment can turn unfavourable.”
“They are estimated to cost the Government more than $100 million per year. OTHER TAX CHANGES Property Tax Rebate To help ease cost pressure on companies, I have decided to give a 15% rebate for commercial and industrial properties for the year commencing July 1998. The revenue loss to Government is estimated to be $145 million. HDB, JTC and other Government agencies owning properties will pass on most of this rebate to their tenants. The Government also strongly encourages landlords to do likewise, and pass on at least half of the rebate to their tenants. Property Tax Exemption for Land Under Development Between 1986 and 1995, land under development was exempted from property tax. The exemption was introduced to help developers tide over the economic downturn during the recession years. It was subsequently withdrawn after the economy and the property market had shown strong recovery. In view of the current difficulties faced by the property sector, I have decided to reinstate the property tax exemption for land under development. The exemption will be for a period of up to 5 years, and will apply from the time construction begins to the time the Temporary Occupation Permit is granted. The exemption will take immediate effect. The estimated revenue loss from this measure is $200 million a year. Stamp Duties Currently, stamp duty is levied on a variety of instruments specified in the First Schedule of the Stamp Duties Act. In the 1996 Budget, stamp duty was abolished on 13 types of instruments. To further reduce costs and inconvenience to businesses and members of the public, stamp duty will be abolished on all instruments, except for those which relate to stock and shares, and immovable properties. The estimated revenue loss from these changes is $33 million.”
“250,000 senior citizens qualify for this scheme and the total cost of this, if fully taken up, is $70 million. Revision of CPF Interest Rates for Special and Retirement Accounts & Voluntary Transfer of CPF Savings from Ordinary Account to Special Account Currently, the CPF Special Account and Retirement Account both receive an interest rate premium of 1.25% over and above the Ordinary Account. From 1st July 1998, the Government will raise the interest rate premium for these two accounts by a quarter percentage point, to 1.5%, above the Ordinary Account interest rate. This is to enable CPF members to achieve a higher rate of saving in these two accounts. In addition, from 1st July 1998, CPF members will be given the option of transferring their savings from the Ordinary Account to the Special Account. These transfers will be on a voluntary basis. The amount that can be transferred will be subject to a cap of $40,000 in the Special Account, that is, a CPF member can only transfer up to the difference between $40,000 and his Special Account balance at the time of the transfer. The $40,000 limit is equal to the eventual cash component of the CPF Minimum Sum. The transferred funds will form part of the Special Account and will enjoy the higher interest rate applicable to the account. However, the transferred funds will be subject to all existing CPF rules on the Special Account, including the restrictions on the use and withdrawal of funds from the account. Also, all such transfers from the Ordinary Account to the Special Account will not be reversible. CPF members should therefore consider carefully before making such transfers to the Special Account to earn higher interest. These two changes to the CPF will help CPF members enhance their retirement cash savings.”
“50 per month for 3-room flats, and $4 per month for 4-room flats. The monthly grant, which started from July 1997, will continue until June 1999. The utilities rebates and S&C grant will cost the Government about $72 million. Those lower income households who do not live in HDB flats and hence are unable to benefit from the utilities rebate and S&C grant can obtain help from the Citizens Consultative Committees Assistance Scheme. Pre-Medisave Top-Up Scheme The Pre-Medisave Top-Up Scheme was introduced in 1996 to help older Singaporeans who retired before or soon after the introduction of Medisave to build up their Medisave accounts. The first three instalments under the Scheme had been paid in January 1996, January 1997, and January 1998. The last instalment is to be paid in January 1999, subject to the state of the economy. Notwithstanding the expected slowdown in the economy, I am pleased to confirm that the Government will pay the final instalment of the Pre-Medisave Top-Up Scheme in January 1999 as scheduled. The top-up will be paid into the CPF Medisave accounts of eligible Singaporeans who are 64 years or older on 1st April 1998. As with the third instalment, the co-payment required will only be $20, instead of $50 for the first two instalments. The lower co-payment is to help as many elderly Singaporeans as possible to benefit from the scheme while maintaining the principle that health care should be a joint responsibility between the individuals, their families and the Government. Eligible recipients will have to make the co-payment of $20 between 1st July 1998 and 31st December 1998 into their CPF Medisave Account. The Government will match this $20 with a contribution of $100 to $350 depending on the age group.”
“The rental and S&C rebates will be made on 1st June and 1st December this year. (b) Two-Room Flats One month's net rent and two months' net S&C charges, after deduction of the GST offset rebates and S&C grant to be given. The rental rebate will be made on 1st December, and the S&C rebates on 1st June and 1st December this year. (c) Three-Room Flats One and a half months' net S&C charges, after deduction of the GST offset rebates and S&C grant to be given. The S&C rebate will be made on 1st June and 1st December this year. (d) Four-Room Flats Three quarter month's net S&C charges, after deduction of the S&C grant to be given. The S&C rebate will be made on 1st December this year. (e) Five-Room Flats Half a month's net S&C charges, to be made on 1st December this year. The estimated cost of these rental and S&C rebates is $29 million. Rebates for Revisions in Utilities Rates Last year, utilities rebates and monthly S&C grants were given to citizens living in 1 to 4-room HDB flats to offset the utilities rates increases for the lower income households. I announced that the Government would grant the same utilities rebates and monthly S&C grants in 1998. I am happy to confirm that the same utilities rebates and S&C grants will be given this year. The utilities rebate will be $100 for 1-, 2-, and 3-room HDB flats, and $50 for 4-room HDB flats. The rebates will be credited against the utilities bills of eligible households for the month of September which are payable in October. Households with smaller bills which are unable to use up the rebate within the month can carry over the balance of the rebate until it is fully used up. The S&C grant will be $3 per month for 1-room flats, $4 per month for 2-room flats, $5.”
“To encourage factories to implement effective measures to counter noise and chemical hazards, I have decided to allow expenditure on such measures to enjoy 100% depreciation in the first year, provided that certain qualifying criteria relating to noise and chemical exposure levels are satisfied. This incentive will apply to expenditure incurred with effect from 1st January 1998. The scheme will be administered by the Ministry of Labour. Details of the guidelines and qualifying criteria for these incentives are set out in Annexes (Cols. 565 - 572) I and II. Annexes - ACCELERATED DEPRECIATION ALLOWANCE FOR NOISE CONTROL IN FACTORIES (Cols. 565 - 568) Annexes - ACCELERATED DEPRECIATION ALLOWANCES FOR CHEMICAL HAZARD CONTROL IN FACTORIES (Cols. 569 - 572) TAX CHANGES FOR INDIVIDUALS Income Tax Rebate Slower economic growth will translate into more moderate wages for our workers. The impact will be felt by both individuals and households. To provide a measure of relief to taxpayers, I have decided to give an across-the-board rebate of 5% on individual income tax in Year of Assessment 1998. The estimated revenue loss to Government will be $130 million. Rebates on HDB Service and Conservancy and Rental Charges Following the GST-related changes made to personal income tax, currently about 70% of individuals no longer pay income tax and would not benefit from the income tax rebate. The Government will grant rebates on HDB Service and Conservancy (S&C) charges and rentals to citizens in this group staying in rented and owner-occupied HDB flats. The rebates will be as follows: (a) One-Room Flats Two months' net rent and two months' net S&C charges, after deduction of the GST offset rebates and the S&C grant associated with the utilities rebates which I will elaborate later.”
“To tap this growing market, I have decided to grant a concessionary tax rate of 10% on offshore trading income derived from transactions made over the Internet under the Approved Cyber Trader Scheme for companies that qualify. Approved companies will also enjoy an Investment Allowance of up to 50% of the cost of qualifying new fixed investments, and full or partial exemption of withholding tax on qualifying payments. These incentives will be granted for a period of 5 years with effect from Year of Assessment 1999. The scheme will be administered by the Trade Development Board. Double Tax Deduction for Employing Talent from Abroad The Prime Minister has at last year's National Day Rally spoken on the need for Singapore to tap the best talent from around the world to meet future competition. In support of this, I have decided to allow companies to claim double tax deduction for approved relocation and recruitment expenses incurred in the hiring of talent from abroad. The double tax deduction will help to offset the extra costs which companies have to bear in employing such talent to supplement our local work force. Further details of the scheme will be announced later. One-Year Accelerated Depreciation Allowance For Industrial Noise And Chemical Hazards Control Noise and harmful chemicals are the two main occupational health hazards in industries. Exposure to excessive noise can cause hearing loss, while overexposure to harmful chemicals may result in poisoning and diseases. As Singapore continues to industrialise, more workers could be exposed to these hazards unless measures are taken to prevent them.”
“Given our strategic location and excellent infrastructure, we are well positioned to develop into an International Exhibition City. To provide further impetus to the development of the exhibition industry, I have decided that approved exhibition organisers will be granted a concessionary tax rate of not less than 10% on their incremental income. The incentive will enable exhibition organisers to offer better quality and bigger exhibitions and trade fairs to the international business community. The incentive will take effect from Year of Assessment 1999. Approved Cyber-Trader Scheme Changes in technology have revolutionised the mode of business transactions. Internet, for example, is set to change the way companies conduct their businesses. The value of goods and services currently being traded on the Internet is estimated at US$46 billion. It is expected to grow to between US$200-300 billion by the year 2002. Internet electronic commerce holds many opportunities for businesses. The financial and logistics sectors will gain from the increased international trading generated by this new mode of transaction. The media and communications sectors, including advertising, information technology, and content creation will also benefit from this development. Local companies can take advantage of this new medium to expand their businesses to the region and beyond through direct marketing and other new strategies. Foreign companies can also use Singapore as a test-bed for broadband applications and a launch pad for its Internet trading activities in the region. The uniqueness of Asia calls for a hub that can service this time zone, and meet its distribution and consumer needs. Singapore is well placed to become an electronic commerce hub.”
“The exemption will take effect from Year of Assessment 1999. (b) Tax Concession for International Freight and Logistics Operators Singapore has a long history as the main shipping and distribution hub in the region. To further enhance our hub status, I have decided to introduce a tax incentive to encourage international freight service providers to expand their activities in Singapore. This incentive will be available to ship agencies, ship management companies and logistics providers. To qualify for the incentive, the company must have substantial operations and a good track record in the provision of freight and logistics services. Companies that qualify will be accorded a concessionary tax rate of not less than 10% on their incremental income. The incentive will be granted for a period of five years and will take effect from Year of Assessment 1999. c) Tax Exemption for Income Derived From Writing Offshore Marine Hull and Liability Insurance Business It is estimated that Asian shipping companies own more than 40% of world shipping tonnage today. Singapore is well placed to serve the marine insurance needs of the companies in the region, particularly in the provision of marine hull and liability insurance. I have therefore decided to exempt from tax the income derived by approved insurance companies from writing offshore marine hull and liability insurance business for a period of 10 years. The incentive would allow insurance companies to tap the insurance potential of the shipping communities in the region. It would also complement Singapore's development as a shipping hub. This concession will take effect from Year of Assessment 1999. Tax Incentive For Exhibition Organisers Singapore is currently a major venue for international exhibitions and trade fairs.”
“The fund management companies which manage these venture capital funds will also in tandem enjoy concessionary tax rate under the Development and Expansion Incentive beyond the tenth year. The changes will take immediate effect. Transport and Logistics Our transport and logistics network has played a pivotal role in Singapore's development as a global city of international trade. Today, the transport and logistics sector contributes 9% to GDP and employs more than 110,000 workers or about 7% of our work force. As an industry which provides essential support to our trade sector, it needs to constantly evolve new and improved services to meet the demands of the trade. Our continued growth as a global city of international trade and hub port also depends critically on the development of a transport and logistics sector with extensive networks. To encourage major transport and logistics operators to further expand their businesses in Singapore and use Singapore as a base for their operations, I have therefore decided to introduce the following tax concessions: (a) Tax Exemption for Income Derived from Uplift of Freight Currently, tax is levied on the uplift of cargoes from Singapore, except for Singapore-flagged vessels and vessels from countries with which Singapore has signed a tax treaty. To further boost Singapore's development as an international cargo and shipping hub, I have decided to exempt non-resident ship owners and charterers from tax on their freight uplift from Singapore. This benefit will also be extended to resident shipping companies and companies under the Approved International Shipping Enterprise Scheme. Removal of the tax on freight uplift would allow shipping companies greater flexibility in planning their shipping schedules and operations.”
“The tax holiday was extended in 1988 and again in 1993 for additional 5-year periods to support the growth of SIMEX. The incentive has enabled the Exchange to build up its reserves and improve on its trading infrastructure. SIMEX is currently the foremost financial futures exchange in the Asian time zone for the trading of international futures and options contracts. But there is no room for complacency. In order to meet the challenges of global competition and the emergence of other exchanges in the region, SIMEX must continue to improve on its facilities and strengthen its financial reserves. I have therefore decided to extend the tax holiday for SIMEX by another 5 years to the year 2003. Extension of Venture Capital Incentives The Government has been actively promoting the venture capital industry since the mid-1980s. Venture capital funds managed in Singapore have reached $7.7 billion as at end of last year. Currently, venture capital funds enjoy tax exemption on the gains from disposal of investments, and on certain investment incomes for a maximum of 10 years. At the same time, fund management companies which manage venture capital funds are awarded pioneer status for managing these funds. The current 10-year limit may be too restrictive for some investments which have maturity periods which are longer than 10 years. I have therefore decided to extend the tax incentive enjoyed by venture capital funds, on a case-by-case basis, by up to a further 5 years beyond the current maximum of 10 years. This will encourage venture capital funds to take a longer term perspective of their investments and to minimise premature divestment. The extension will take the form of a concessionary tax rate of not more than 10%.”