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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“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 $33,564,211,300 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 1997 to 31st March 1998 contained in Paper Cmd. 2 of 1997." Second Resolution reported - Question, "That the sum of $26,995,617,900 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 1997 to 31st March 1998 contained in Paper Cmd. 2 of 1997."”
“Mr Speaker, Sir, Government is aware of the problems posed by the unregulated soft commodities firms which trick Singaporeans into investing in commodities by promising them very high returns on their investments. The Commercial Affairs Department investigates and prosecutes operators of spurious investment schemes, especially if they have the intention to defraud. In addition, Government is studying the possibility of using legislation to regulate such activities. The Ministry is also looking into the relevant legislation with a view to regulate time-share resorts. One possibility is to make it a statutory requirement for promoters of time-share schemes to issue a statement disclosing various information to members of the public in the same way that promoters of other investment schemes are currently obliged to do so. AFFORDABLE BUS SERVICES 2. Dr Toh See Kiat asked the Minister for Communications (a) whether he will consider giving more rebates to poorer Singaporeans to make basic bus services more affordable for them and (b) whether the Government will give more subsidies to provide the infrastructure and capital stock of public bus services so that bus services can remain viable yet affordable to the average commuter.”
“No, that is not confidential at all. No loss was suffered. SPORTS AND RECREATION CENTRE IN CHOA CHU KANG NEW TOWN 5. Dr Teo Ho Pin asked the Minister for Community Development whether his Ministry will be developing any sports and recreation facilities (including swimming pool) for residents in Bukit Panjang area.”
“Mr Speaker, Sir, the Monetary Authority of Singapore (MAS) assisted the Bank of Thailand by intervening jointly in the foreign exchange market to stabilise the value of the Thai baht on 14th May 1997 when the baht came under speculative attack. Like other central banks, the Bank of Thailand and MAS' officials consult regularly on central bank related matters. And the proceedings of these meetings and the details or market transactions are necessarily confidential to the authorities.”
“We could do so, but we are cautious in making any changes too quickly. I think the basic principle is whether you want to remove the estate duty altogether, or do you want to maintain some degree of progressivity in estate duty? If we do so, then I think there is a case for maintaining the present system. But of course, we can always review this from time to time.”
“This increase from $3 million to $9 million was in fact in response to appeals from many members of the public who own large properties bought many years ago at very low values, and would have caused severe hardship, if sold, to pay estate duties when the owner passes away. That was the main reason for such an increase and it is not basically to cater for this multiplicity of assets. It is to cater to a lot of families who live in very old bungalows, which are worth a lot of money nowadays, although they had probably acquired for a few hundred thousand dollars 20 or 40 years ago, and these are real hardship cases which we are taking into consideration.”
“There is a reason. The main reason is that for residential properties, prices have accelerated faster than the movable properties which essentially are stocks and bonds. Therefore, an increase in the value of the movable property component from $500,000 to $600,000 was considered adequate to cover this sector, whereas the same percentage increase would be totally inadequate for private residential properties which have gone up by several hundred percent. Hence the jump from $3 million to $9 million. So for these two categories, the price structure moves quite differently and independent of each other. If they should converge, we can consider a single classification. 4.00 pm”
“Yes, of course. I would be glad to admit it is an error if it is an error.”
“I think rather than waste the House's time, we can do it outside afterwards.”
“I am sympathetic with the problems raised by Mr Low and I am prepared to conduct a special briefing for him on the intricacies of the new Budget book if he can spare the time, and I would also welcome other Members of this House to take advantage of this opportunity.”
“He has also expressed concern that the Budget book does not show any information on salary details. Before I go into details on this, let me just explain in broad terms what the changes are which led to this situation. Starting in FY94 the Budget book no longer contains a list, previously known as Appendix D, of the basic salaries of all grades of the civil service. The reason for discontinuing with this listing is that it is no longer informative with the introduction of various types of allowances into their basic salaries. Salary scales are also different for officers in the same grade but who are on different medical schemes. Instead of including these details into the list, which will have to be considerably enlarged and modified, a salary manual with all the details was prepared instead. A copy of this manual is available in the Parliament Library for consultation by Members. Starting in FY96, the listing of all grades in the civil service and their salary codes has also been excluded and this was previously known as Appendix C. The list does not serve any useful purpose as without Appendix D, it provides insufficient information. In addition, operating expenditure has been reclassified under two categories of running cost for day-to-day expenditures of Ministries, departments and Government-funded statutory boards and under "Transfers for subventions to public and other external organisations." For anyone interested in details on each item of Government expenditure, there is a very comprehensive book called the "Budget Control Document" which is a huge document about this size [indicating] available in the Parliament Library. It is impractical obviously to distribute a copy to all Members.”
“As for the ASEAN currencies, despite their current weaknesses, the Singapore dollar has only appreciated by 3.5% against the Philippine peso and has in fact depreciated by 0.4% against the Malaysian ringgit. The Singapore dollar has appreciated substantially against the Thai baht by about 13.5% and to a lesser extent against the Indonesian rupiah by 6.9%. But the appreciation against these two currencies should not pose a significant threat to our competitiveness because the composition of our exports differs considerably from the export packages of Thailand and Indonesia. Generally, Singapore's competitiveness should be viewed against a longer term perspective. That is what the Committee on Singapore's Competitiveness has been asked to do. Our exchange rate policy should not be guided by short-term expediency considerations. We always focus on managing the exchange rate of the Singapore dollar on a trade-weighted basis with a medium term perspective. Mr Low Thia Khiang has raised several questions regarding the changes in the Budget book which he finds confusing. This is understandable because we have restructured the composition of the Budget book considerably over the past few years, and some of the items are no longer in locations where he used to look for. For example, he asks where he can find figures on the Singapore Pension Fund payments. Pension payments used to be listed as an item of Government expenditure. But since the formation of the Pension Fund, the payments no longer appear as a Government expenditure but as an item within the Pension Fund Statement. In FY96, for example, on page 73 of the Budget book, a sum of $564 million was paid out as pensions and gratuities in 1996.”
“First, I would like to point out that the Singapore dollar, unlike some of the currencies in the region, is not linked to the US dollar or to the currency of any other single country. It is monitored against a weighted basket of the currencies of our trading and investment partners. This weighted-basket currency approach has served us well in the past. Since we import and export to a large number of countries, a trade-weighted exchange rate has been more effective in keeping imported inflation low while safeguarding our export competitors. Moreover, managing the exchange rate on a trade-weighted basis has shielded Singapore successfully from the sharp currency misalignments that countries which peg their exchange rate to a single currency, like the US dollar, have experienced. Secondly, we also manage our exchange rate flexibly so as to cater for market fluctuations. The Singapore dollar exchange rate is determined by market demand for our currency. In recent years, the Singapore dollar has been appreciating gradually on a trend basis, reflecting our sound fundamentals and investors' confidence in our economy. More recently, however, with the easing of inflationary pressures world-wide, the upward movement of the Singapore dollar has also moderated. Mr Singh's concern about the competitiveness of our currency in the light of recent devaluations of the currencies of some of our ASEAN neighbours is misplaced. For example, compared to the beginning of 1997, our current position is that the Singapore dollar has appreciated against most of the European currencies and against the Australian dollar whilst it has depreciated against the US dollar, the Japanese yen and the pound sterling.”
“Although asset inflation is not the main cause of business cost inflation, Government is concerned about the macro economic consequences of such asset inflation, and I have already given the reasons yesterday why this is so and what we are doing to correct it. He has asked, in addition to the measures we introduced last year, what other means we might consider to control or restrict the rise of asset inflation. One suggestion is that we should consider restricting further foreign ownership of Singapore properties. Foreigners are now already subject to certain restrictions on purchase of Singapore properties, the main one being that they are not allowed to buy without official permission landed properties or properties in buildings lower than six storeys. They are free to buy condominiums, industrial and commercial properties without restrictions. For the time being, we think these restrictions are sufficient and, of course, we will continue to review the position. He has suggested that we should look at what other countries are doing - Malaysia, Hong Kong, Australia. In the case of Malaysia, you will note that they imposed special premiums on purchase of foreign properties which they now find too restrictive and are considering removing them. So the solution is not a simple one, and I think we do not want to be too precipitate in making changes. Mr Singh has also posed an interesting question on the strength of the Singapore dollar and its impact on Singapore's competitiveness. He is concerned about the strength of the Singapore dollar, especially against recent devaluations of the currencies in our neighbours by making it even more difficult for Singapore exporters.”
“You will recall that we increased the tax exemption for movable properties from $500,000 to $600,000, but increased the exemption for all residential properties from $3 million to $9 million. This is in recognition of the very large increases in individual property prices over the last few years. On this basis, after exemptions, the tax rate is chargeable at 5% for the first $12 million of the principal value of the estate in excess of the exemption, and then at a dutiable rate of 10% for anything above the $12 million limit. We believe that these taxes are not punitive and it will be useful to retain them for wealth tax purposes and to tax somewhat the transfer of properties from one generation to the other. We will review these levels periodically, of course, as property values change. But for the time being, there are no plans to change these rates. Mr Inderjit Singh has expressed concern that asset price inflation is perhaps the root cause of rising business cost. As I mentioned yesterday in my round-up speech, statistics do not bear this out because the costs of renting industrial premises account for only 5% of total business cost. The bulk of business cost in Singapore in fact is wage-related, accounting for some 40% of total manufacturing or business cost. So that is an area we have to concentrate on, not on occupation cost. Although for land-intensive industries, such as high-tech chip business, the EDB has identified special areas for their development where cost of land is factored into their incentives.”
“In the particular example where he quoted his problems in obtaining a bond for his maid's security deposit, one way of by-passing this problem may be to facilitate the payment of such bonds through the automatic teller system rather than removing it altogether. A lot of stamp duties are imposed for revenue reasons. They are very efficient in collection because they cover a wide range of activities and often we want to retain them for administrative reasons. But where they impose obstacles in efficient use, we will try and amend them but not necessarily to remove them altogether. Mr Lew has also raised a proposal to waive income tax on net annual value of a residential property. The introduction of an income tax on the net annual value of a residential property was meant to pre-empt the evasion of tax because of non-declaration of rental revenue and it applies only to very expensive pieces of residential property. Because of the rapid increase in the value of such properties over the last few years, the previous exemption was doubled last year to $150,000. So the net annual value tax residue will apply only to NAVs above $150,000. In other words, it has to be substantially over before you start paying tax on that residue component. For the time being, we are not considering the removal of this tax, although the number of cases where they apply has actually declined. In the Year of Assessment 1996, there were 127 cases. In Year of Assessment 1997, we expect a total of nine cases. Although the numbers are small, it is still a useful wealth tax which I am sure the property owners would not mind paying, considering that they own such valuable properties. 3.45 pm He has also suggested that we should not have two different classifications for exemptions in estate duty.”
“But once they are publicly listed with significant shareholdings from the private sector, we have to leave it to the judgment of management as to whether they should or should not go into areas such as property development. But just because they have large access to capital does not mean that all of them would be successful in any particular area, especially in property development. In fact, in the case of Singapore, the largest developers are not the GLCs but private companies, such as City Development and the Far East group, among others. He has suggested that GLCs and multinational corporations should join with SMEs to develop and grow, both domestically and in the region. I think that is a good idea. It is something which the Government will encourage. But to impose restrictions on what they should or should not do would be overly restrictive. In any case, GLCs in which Government has a controlling share are overseen by Temasek Holdings, which is the holding company owned by Government, and I am sure that Mr Dhanabalan, the Chairman, will ensure that whatever areas they venture into should be areas where they have some expertise and not merely because they are glamorous or they want to intrude into other sectors of the economy. Mr Lew has also suggested that we should consider the abolition of stamp duties on some of the smaller items in which much time and effort is spent in the collection without significant gains in revenue. I agree, and the whole list is being revised continuously. As he has noted, we have reduced them substantially already and we will look at whether we can further prune the list.”
“This is primarily because we do not want to go through the process which has been suffered by countries like Japan, Hong Kong and, more recently, Thailand in which asset price inflation, financed by huge bank loans, has led to the instability of the financial system. Of course, we will continue to keep this position under review and, at an appropriate time, if we consider it necessary, we will look at this quantum again. For example, in the case of Hong Kong, the loan quantum restrictions are even more severe. Currently, the housing loans can be financed only up to 70% of their value, and the Hong Kong authorities are considering lowering this to 60% because of the rapid escalation in private property prices taking place in Hong Hong. Mr Lew Syn Pau has expressed concern in the way the GLCs seem to be branching out into all sectors of the industry and into many activities which have no bearing on their original intentions. He suggests that they should confine their activities to their particular areas of expertise so as not to encroach into the areas of the private sector companies. By and large, I think the larger GLCs have in fact stayed within their original corporate guidelines. For example, Keppel would be mainly concerned with ship repair and ship maintenance. So is Sembawang, although they are moving into associated industry such as construction and so forth. But along the way, because they are publicly-listed companies, it would be very difficult for the Government to impose directions on them not to enter into what they consider to be profitable and desirable diversifications. If they were wholly-owned Government entities, perhaps guidance could be imposed.”
“For example, Standard Chartered Bank has an asset size of nearly $100 billion compared to DBS Bank of $56 billion, although Standard Chartered Bank's capital base, in fact, is smaller than DBS's. This is mainly because Singapore banks are much better capitalised than many foreign banks. Therefore, they are much more secure banks in that respect. DBS ranks 91st in the world and OCBC is ranked 97th in terms of asset size. So they are not small banks by any means. They have the capacity to grow and benefit from the growth in the financial services industry and many of them have, in fact, branched overseas, into the region primarily. The biggest constraint to their growth is not because they are unwilling to do so, because our banks have spent large amounts on the latest technology in IT and the telecommunications infrastructure. The biggest constraint is in fact the restrictive practices which are still prevalent for entry into countries in the region. This process will probably slowly erode over the years as the WTO agreements on financial services take effect. Mr Ong Kian Min has asked for a revision of the policy on bank loans which is presently limited to 80% of the market value of the property which is to be financed. The imposition of this 80% loan quantum cap was part of a package of measures we introduced in May last year to stop the acceleration of asset inflation, particularly in the private residential sector. It has been about a year now since these measures were introduced. It is still too early to consider an upward revision of this loan cap.”
“Mrs Lim Hwee Hua is concerned that the Government's emphasis in providing incentives for the larger companies, particularly the home grown financial institutions, may lead to the classification of the smaller institutions as "second class citizens", so to speak, and would like to know what help Government can provide to ensure that our banks and financial institutions do not in fact fall back and can participate in the growth of the financial services industry. I can assure the Member that the whole range of financial incentives for the financial sector is applicable equally to all financial institutions, including the Singapore-based banks. Where we have provided special incentives, as I have explained yesterday, it is simply to attract the really big institutions to come and locate and operate here because their presence here would have spill-over effects. In the case of Singapore banks, we are providing an extra boost for them to build up their capital base by increasing the provision allowances from 2% to 3% which I announced in the FY97 Budget. This will help considerably in building up their capital base. For financial institutions to grow and expand, it is essential to have large capital bases on which they can build their asset bases. In this connection, I think the Member need not worry that our banks are small in size compared to foreign banks. By and large, they are significant in size. For example, taking our big four banks, the largest one is DBS which has capital funds of nearly S$7 billion and a total asset size of about S$56 billion. This is not quite as big as some of the bigger multinationals.”
“Secondly, we have, as at last count, 34 treaties of double taxation avoidance with countries around the world, which would ensure that double taxation does not take place. Thirdly, for newer countries that companies are trading in, where avoidance of double tax treaties do not exist, we have provision to provide unilateral tax credit. With these three measures, it is most improbable that companies going overseas will be subject to double taxation. Mr Lew Syn Pau has suggested that we have a series of incentives for regionalisation, but the problem may be that a lot of these incentives are not sufficiently well known that we should promote and publicise these incentives more. The Economic Development Board and the relevant agencies in Singapore already have various publications available. But we will nevertheless take up Mr Lew's idea of perhaps consolidating these publications in a form which is more accessible to the companies and publicising them more widely. We will take up the suggestion. Mr Lew has also suggested that one of the problems involved in persuading companies to expand overseas is that they find difficulty in persuading Singaporeans to work overseas partly because of schooling problems, their wives being unable to work and the problems involved in returning to Singapore, and so forth. He has suggested that enhanced tax relief for the wife for a fixed period when they return might go some way to help relieve these problems. It is something we can look at but I do not think it would be welcomed by other wives in Singapore who do not go overseas and they would also like some form of comparable reliefs. But we would look at it and see whether it is practical or not.”
“Sir, both Mr Choo Wee Khiang and Mr Lew Syn Pau have asked questions concerning what help Government is providing Singapore companies to move into the region. They are concerned that the movement overseas is high cost and high risk and asked whether there are sufficient incentives to promote this movement. I think I did mention yesterday in my round-up speech that there already exists a package of special incentives to promote regionalisation which includes the Overseas Enterprise Incentive scheme in which taxable income earned overseas can be repatriated to Singapore on a case-by-case basis for a period of 10 years on approved investments. Similarly, in the case of the Overseas Investment Incentive scheme, companies which incur losses due to liquidation of companies in which they have invested overseas can offset this against local income. In addition, there are a series of other incentives which I think Members are aware of and which I would not repeat. Based on my latest figures for last year, there are over 3,600 Singapore companies now operating overseas as a result of our regionalisation programme, which is not an insignificant number. Mr Choo was particularly worried that income earned overseas might be taxed twice when repatriated to Singapore. I would like to reassure him that this is most unlikely. Firstly, we have a territorial system of taxation in which income earned overseas is only taxed when repatriated to Singapore. Bearing in mind that our tax rates are amongst the lowest in the world, it is very unlikely that such income will be taxed if it comes back to Singapore, because most of the countries in which Singapore companies operate will have higher tax anyway.”
“I am not aware of this. SUSPENSION OF STANDING ORDERS (Business Motion)”
“I would assume that CAI would have done a proper evaluation of the investment before they proceeded. Whether it goes wrong subsequently is not something that I am in a position to judge at this point.”
“Mr Speaker, Sir, Chartered Ammunition Industries Pte Ltd (CAI) invested $2 million for a 47% share in Sino-Singapore Medical Disposables (SSMD) (Pte) Ltd in November 1995. In May 1997, CAI filed a court petition to wind up SSMD to recover an over-due debt of $4.5 million. On 4th July 1997, liquidators from KPMG Peat Marwick were appointed. The extent of CAI's losses arising as a result of this investment has yet to be determined.”
“With courage, conviction and creativity, Singapore will stay ahead in the 21st century. [Applause.] Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1997 to 31st March, 1998. ADJOURNMENT”
“The Ministry of Education intends to infuse National Education across the whole school curriculum. Hence, it will be entirely funded by Government. There is therefore no need to set up a fund to run the National Education Programme. However, the Ministry of Education is keen to work with private groups and organisations which wish to participate and contribute to the programme. They can collaborate with the Ministry in devising creative materials and media for reaching students and in reaching out to parents as part of the National Education effort. Dr Ker Sin Tze, MP for Aljunied GRC, has asked whether Government would be prepared to allocate more funds and grants to promote the use of Mandarin. I fully agree with the hon. Member that all Chinese should learn to speak Mandarin in order to preserve our cultural heritage. However, this process is expected to take many years. That is why the Government has been setting aside funds to mount a Speak Mandarin Campaign every year. However, spending money alone is not sufficient. There must also be a willingness on the part of Chinese Singaporeans to use Mandarin in their daily lives. On its part, the Government is actively encouraging staff in its departments to respond in Mandarin to Mandarin-speaking members of the public. Finally, Mr Speaker, Sir, allow me to sum up the past two days' debate. As we come closer to the turn of the century, Singapore faces more challenges, more competition and more uncertainties. These are the inevitable consequences of having to operate in an increasingly globalised economy. However, I am confident that we will surmount the future challenges. We have in place a sound and stable fiscal framework. We will continue to invest in our future.”
“Hence, instead of adjusting tax relief, we have taken the more direct route of helping the elderly by topping up their Medisave under the CPF Medisave Top-Up Scheme as well as the pre-Medisave Top-Up Scheme. Many of the retired pensioners will also benefit from the various grants and rebates given in the Budget. Mr Iswaran has asked whether the Government could relook into the basis of financing certain core community services which are essential for social development instead of a strict co-payment scheme. The Government will be providing more funds to voluntary welfare organisations which run social and family services. For FY97, the capital and operating grant for voluntary welfare organisations is expected to come to $73 million, a substantial 35% higher than the amount given out in FY96. The Government has therefore provided considerable financial assistance to help the voluntary welfare organisations. However, giving money alone is often insufficient. The families themselves must play their part as well, especially in the case of juvenile delinquency or taking care of the aged. Dr Yaacob Ibrahim has commented that Government should consider giving more incentives to encourage people to pursue an education in arts. The Member may be pleased to note that currently both the public and private sectors are already offering a number of scholarships for arts studies. In particular, the National Arts Council has allocated $1 million in scholarships, bursary and training grants for arts studies in FY97. This is an increase of 15% over FY96. Dr Yaacob Ibrahim has also asked whether a fund for National Education could be set up from which private groups can obtain financial support to run the National Education programme.”
“However, such concerns are entirely misplaced. For 1- to 3-room households, while the offset package is more than sufficient to cover the increase in utilities rates, these households would still have to pay substantial sums on utilities bills like everyone else. This is because the utilities rebate itself will only cover about 10% to 20% of the annual average utilities bills for the two years from July 1997 to June 1999. In the case of the 4-room households, the utilities rebate would only cover 5% of the annual utilities bill. While the lower income households will not be worse off, they would still have to pay out a very significant portion of their utilities bills in cash. Hence, there will be every incentive for these households to save water and electricity to avoid paying for their utilities. Dr Vasoo has commented on the plight of retired pensioners whose pensions could not keep up with inflation. He has asked whether there are any further reviews to provide top-ups for lower income pensioners. The Government has regularly reviewed the Singapore Allowance. The last revision was made in 1993 when the allowance was revised in connection with the introduction of the Goods and Services Tax. The Government will continue to periodically review the Singapore Allowance. Dr Vasoo has also suggested better relief for taxpayers who are looking after their aged sick. With the introduction of GST, around 70% of Singaporeans do not pay income tax. Introducing a tax relief for medical expenses incurred by the aged or giving a higher quantum of relief for taxpayers looking after the aged sick will only benefit those taxpayers who are more well to do.”
“I would like to clarify that the relief is never meant to fully defray the cost incurred on the maintenance of parents. It is to partially offset the maintenance cost. While the Government would want to encourage children to live with their parents, this cannot be achieved by just increasing the reliefs. The higher relief is given more as a recognition to those who live with their parents. Mr Lew Syn Pau has asked why the wife relief is only $2,000 whereas the relief for aged parents is $3,500. The quantum of the two reliefs have differed since the Year of Assessment 1990 when we raised the relief for maintenance of aged parents. We have deliberately set the parent relief higher because of the higher cost required to look after the aged and their greater medical needs. The higher quantum of relief for aged parents is also to encourage families to care and provide for their aged parents. Both Mr Lew Syn Pau and Dr Tan Boon Wan have warned against the risk of encouraging a welfare mentality through the giving of S&C and rebates yearly. In particular, Mr Lew has suggested that the rebates be confined to the 1- to 3-room HDB flats. The S&C and rental rebates are aimed mainly at those who are unable to benefit from the 10% tax rebate. In determining the rebates to be given, we are careful to ensure that the amount is not excessive so that it would not result in a welfare mentality. The rebates are also given in a graduated manner with the 1- to 3-room HDB flats enjoying the highest rebates. The 4- to 5-room HDB flats are only given one month's S&C rebate. There were also some concerns that giving rebates to HDB flat dwellers to pay their public utilities bills is a direct contradiction of the Government's policy of conservation of water.”
“Government revenue is primarily used for essential Government programmes, such as education, defence, infrastructure, public housing and health. Rebates, on the other hand, are over and above these programmes. Mr Low has also claimed that all the rebates given are not sufficient to offset the increases in various fees and charges. However, the real issue is whether Singaporeans could cope with these increases and still enjoy better living standards each year. Even after factoring in the various increases in fees and charges cited by Mr Low, the expected inflation will still be well below the wage increase this year. In addition, for the lower income groups, we have taken special measures to help them. The utilities rebates for the hike in water tariffs announced in this year's Budget is a good example. The amount of rebate given to the 1- to 3-room HDB flats will more than offset the increase in utilities rates. Mr Chiam See Tong has said that the rental rebate for HDB households represents a mere transfer from one Government pocket to another and that the people would not be impressed by the rebate. I am afraid that Mr Chiam clearly does not understand how the rebate works. Without the rebate, these HDB 1- and 2-room households will have to pay HDB their rentals from their own pockets. With the rebate, they now save between one and two months' rental. They pay less to HDB. It would therefore be more accurate to describe the rebate as a transfer from the Government's pocket to the pockets of those living in 1- and 2-room HDB flats. Mr Chiam has also said that the higher parent relief would not encourage children to live with their parents as the amounts needed to maintain parents are much higher than the relief.”
“NCMP Mr J B Jeyaretnam has described the Budget as one favouring the rich and not the ordinary man, as the 10% rebate would mainly benefit the rich. It is invidious for Mr Jeyaretnam to make such a comparison. Such rhetoric to score political points is not helpful in maintaining social cohesion. If he persists in continuing in this vein, it will soon solidify his claim to be the Rip Van Winkle of Singapore. Let me point out to him that only about 30% of the high income Singapore residents now pay income taxes and it is these taxes which contribute substantially to Government's tax revenue, which provides the funding for a host of Government programmes designed to help the middle and lower income groups. These include the HDB Main and Interim Upgrading Programmes, Edusave and Medisave programmes, CPF Top-Up Schemes and a variety of grants to the voluntary organisations and self-help groups, the Public Assistance Scheme and the Rent and Utilities Assistance Scheme and subsidies on flat rentals. Even the cost of the 3% GST has been fully offset for the lower income groups through a package of rebates on HDB S&C charges and flat rentals. In addition, the majority of the lower and middle income groups also enjoy subsidies in HDB housing and medical expenses. All these programmes cost the Government about $1.5 billion a year, which is very much more than the revenue forgone through the 10% rebate which is estimated to cost $250 million. The amount is also much higher than the $400 million that Mr Low Thia Khiang claims is all that the Government is giving back to the people. It is also not correct for Mr Low to compare the amount of revenue collected with the amount of rebates given out.”
“He has asked whether HDB shop rental increases and rental increases for hawker stalls under the Ministry of the Environment could be frozen. On HDB rentals, HDB will be freezing the rentals of HDB properties which are already at market level or 1996 levels for the next 12 months. For properties already enjoying less than market rentals, HDB will continue with their rental adjustments based on existing policies. This is similar to JTC's rental adjustments. On the suggestion to freeze rentals of hawker stalls, Mr Peh would know that they are in fact already heavily subsidised compared to market rentals for stalls in private eating outlets. Mr Iswaran has questioned the rationale for not abolishing estate duty when the collection is not significant compared to other major revenue sources, and its usefulness as a redistribution tool is limited. He has also expressed concern that the estate duty could force high net worth individuals to tax-plan. The collection from estate duty is naturally not large when compared to other revenue sources, but only because we target it at the very wealthy estates. But the sum collected in absolute terms is not insignificant. For last year, it was about $70 million. There is still, therefore, a role for estate duty for the purpose of income redistribution. On estate planning, there are many factors involved in estate planning, and it is also not easy to tax-plan effectively. With the high exemption limit and low rates of duty, not many have found it worthwhile to resort to tax planning. Mr Iswaran may wish to note that some countries which have abolished estate duty have imposed other forms of wealth tax, such as the capital transfer tax in the United Kingdom and the gift tax in New Zealand.”
“In contrast, labour cost accounts for nearly half of total business costs. Nonetheless, the Government is concerned with asset price inflation because of its macro economic and financial consequences. The experience of a number of countries has shown that the deflation required after a prolonged period of asset price inflation could lead to painful economic adjustment as the net worth of households, businesses and financial institutions deteriorates during a downturn. The financial system will also come under severe strain, sometimes requiring costly Government intervention to prevent systemic risk. The strong growth in asset prices has, by and large, reflected fundamental factors like rapid growth in real income and the scarcity of land in Singapore. The speculative element, however, exaggerated price increases, specifically in the residential property market. It was to quell this speculative element that we introduced the package of anti-speculation measures in May 1996. These measures have achieved a salutary effect as housing prices have moderated. The Government has also acted to dampen property price inflation through the release of more State land for both residential and industrial developments. Mr Inderjit Singh has also commented that the strength of the Singapore dollar has made Singapore expensive to US investors, and that the situation has been made worse by the recent devaluation of other ASEAN currencies. As Mr Singh will be raising the same issue in the Committee of Supply, I will respond to this question in detail tomorrow. Mr Peh Chin Hua, the Member for Jalan Besar, has given several comments on reducing business costs.”
“Although we are carrying out extensive land reclamation for industrial use in Tuas, Jurong Island and other areas, reclamation is costly and there are physical limitations as to how much reclamation can be done. The Jurong Town Corporation has studied ways to intensify the use of industrial land. One way is to redevelop old industrial estates where land utilisation is poor, and to relocate the industries affected to other locations where higher plot ratios can be achieved. Assistance will be provided to companies to relocate. JTC has also been implementing new building designs and creative layouts for the standard and flatted factories to make better use of the land. The intensification of industrial land use is estimated to potentially lower the total demand for industrial land by up to 12% in the year 2030, while catering to the quantity of floor space required by industrialists. The Ministries of Law, National Development, Trade and Industry and their agencies have been reviewing, on an on-going basis, land policies which impact on the intensification of land use, including differential premium and development charges. Such reviews aim to strike a balance between providing incentives to encourage lessees to use land more optimally and preserving Government's interest in the value and planning of our land resources. Mr Inderjit Singh has also commented that asset price inflation had escalated the costs of doing business in Singapore. I should clarify that asset price inflation is not the main cause of rising business costs. According to the index of unit business costs compiled by the Department of Statistics, rental of industrial premises comprises less than 5% of total business costs for the manufacturing sector in Singapore.”
“6 billion, which comes close to one-fifth of the FY97 Budget. In addition, the Edusave Endowment Fund will be increased by another $500 million to reach its target level of $5 billion. We will continue to invest in our educational and training infrastructure and expand the intake to universities and polytechnics to improve the quality of our workforce. To augment our existing pool of manpower, we also seek to attract foreign professionals to come and live and work in Singapore. EDB's International Manpower Programme, for example, attracts foreign talents to work in strategic industries in Singapore. To date, 3,300 professionals have been placed in jobs in Singapore through this programme. We also allow foreign workers in Singapore to complement our limited domestic pool in selected sectors. Companies such as HP and other organisations have also on their part been actively recruiting foreigners. Overall, all these measures will help alleviate wage increase pressures. Nominal wages, as measured by average monthly earnings, have risen by an average of 7.1% over the period 1991-1996. This is due partly to the tight labour market. We must not let wage increases to continuously outstrip productivity growth which has averaged 4% in the last five years, as this is unsustainable and will erode Singapore's longer term competitiveness. This is one of the reasons for the Government's recommendation to moderate wage increases this year. Mr Lim Swee Say and Mr Inderjit Singh have also asked for our Government's policy with regard to intensifying the use of industrial land, and whether the differential premium and development charges should be reviewed. Land is scarce in Singapore. We have to optimise its use among competing applications.”
“The Skills Redevelopment Programme was launched in December 1996 by NTUC to equip the lower educated workers with relevant skills to enhance their employability. EDB and PSB will fund about 70% of the cost of $9 million training programme. The back-to-work programme is targeted at those who have left the workforce for some time and need to be retrained before rejoining the workforce. About 2,500 persons, of whom 43% who are married females in the age group of between 30-50 years, have participated in the programme so far. These new programmes have cost the Government about $20 million in less than 10 months. Our efforts to encourage companies to support more training have also paid off. In 1996, companies in Singapore invested 3.6% of their payroll in training, up from 2% in 1992. Mrs Yu-Foo Yee Shoon has suggested that a national centre for training be set up and for Government to fund such a centre. Government will consider this and other proposals which would raise the overall workers' productivity and enhance our labour resources. Dr Tan Boon Wan has also spoken on the need for Singapore to develop our human resources in the face of regional competition. Mrs Lim Hwee Hua has commented on the implication of manpower shortages in terms of rising wage costs. Manpower is our most important resource. It is a main driving force behind Singapore's economic development. To ensure that we have the necessary manpower to support our economic growth, the Government has and will continue to invest heavily in the training and education of our workforce. Over the last five years, total spending on education has risen steadily at an average of 8.6% per year. For FY97, the increase is even larger, $700 million more or a jump of 18% to $4.”
“Mr Chay Wai Chuen has commented that there is a need for Government to do more to encourage training and retraining of workers in view of the recent low productivity growth. I would like to assure the House that the Government accords very high priority to the training of workers, including the training of older workers. The Government has therefore introduced various schemes to encourage older workers to upgrade their skills continually. Examples include the Skills Development Fund. In FY96, grants committed under the SDF totalled nearly $68 million. SDF funds were also used to train more than 90,000 workers aged 40 and above. This was 27% higher than in the previous year. Another new initiative is the Total Company Training Plan (TCTP) introduced in September 1996 which aims to encourage companies to adopt a systematic approach to staff training by helping them draw up comprehensive training plans. Under the scheme, companies with approved training plans will be allowed high levels of SDF support.”
“These include double tax deduction for approved R&D expenses incurred in-house or paid to approved R&D organisations, industrial building allowances for buildings used by an R&D organisation, and various grant schemes under NSTB, such as the R&D Assistance Scheme and Research Incentive Scheme. There is also the Innovation Development Scheme administered by EDB. Besides the above schemes, there are also grants to assist companies to employ foreign researchers to supplement and complement local R&D manpower resources, such as the Foreigner Researchers Recruitment Programme and the Research Exchange Overseas Programme. Mr Lim Swee Say has asked for more incentives to encourage water recycling. There are currently three schemes administered by EDB which provide tax incentives and grants to encourage companies to conserve water. In particular, the investment allowance is an attractive scheme which offers companies additional tax deduction of up to 50% of fixed capital expenditure incurred towards water recycling, in addition to the usual capital allowances. In last year's Budget, the scheme has been enhanced by allowing the investment allowance to be offset against the company's income taxed at the normal rate, even though the company is enjoying a tax concession on the project for which the investment allowance is given. The Government fully recognises that water is a key strategic resource and will monitor the response to the various schemes to conserve water. Changes will be made to these schemes, if necessary. A number of Members have spoken on the need for Singapore to develop our human resources. Mr Lim Swee Say has emphasised the need for more resources to be spent on retraining older workers.”
“Mr Magad may wish to note that the Productivity and Standards Board has set up a first stop centre for SMEs called the Local Enterprise Upgrading Centre to provide an integrated package of services to help SMEs upgrade and grow. As I have mentioned earlier, the Government has also implemented several schemes offering grants and loans to enable SMEs to upgrade themselves by the transfer of technology and managerial skills from MNCs and large local companies. Mr Lew Syn Pau has also suggested group relief for companies which are venturing abroad. In general, we do not favour the idea of allowing group relief as this will have serious implications for tax revenue. It would also open up opportunities for tax planning which would require complex tax rules to be drawn up to prevent abuse. Singapore also has a full imputation system in which the tax paid on corporate profits is passed on to shareholders through the distribution of dividends. Allowing group relief under a full imputation system, like ours, may mean that the tax authority may have to refund the taxes paid earlier when the company distributes dividends to their shareholders. This could result in serious tax erosion. However, as a concession, the Overseas Investment Incentive allows capital losses from the sale of shares in, or the liquidation of, approved overseas investment to be set off against the company's domestic income. Companies which wish to insure overseas investments against risks and uncertainty can apply to the EDB for this incentive. Dr Yaacob Ibrahim has asked whether there will be new tax incentives for SMEs to undertake research and development activities. There are already currently a number of tax incentives and grant schemes to encourage SMEs to undertake R&D.”
“Local companies can also tap the Business Development Scheme (BDS) which provides grants to defray the cost of organising overseas business missions for the purpose of exploring new technologies and markets, establishing new business contacts or to pursue joint venture arrangements. I would also like to clarify Mr Peh Chin Hua's comment of the difficulties of SMEs getting bank loans for investment overseas as a result of its restrictions imposed by the MAS. The MAS does not have any ruling, regulation or guideline which prohibits banks from extending loans for investment overseas. These are commercial decisions which banks have to bear. Banks, in determining whether they would extend loans to any potential borrower, whether for use in or outside Singapore, and whether collateral is needed, would assess the credit-worthiness of the potential borrower and the risk and viability of their project. Mr Sin Boon Ann has suggested that Government can use some of its reserves to acquire foreign companies and to capitalise on their expertise and experience. What Mr Sin has suggested, that we adopt an acquisition strategy of buying into or even buying over companies to acquire expertise, technology and market access, is in fact one of the strategies of Temasek Holdings and the GLCs. For example, NOL has recently proposed to acquire a large American shipping line called American President Lines. Mr Ahmad Magad has spoken on the need for Government to track the progress of our small and medium enterprises in restructuring themselves towards more high value-added activities.”
“As I have mentioned in my previous speeches, the objective for implementing the AA framework is simply to make the civil service more efficient, effective and performance-oriented. The pricing of public services will continue to be a separate policy matter. Hence, the AA initiative per se will not lead to any increase in Government fees and charges. Mr Lew Syn Pau has suggested that we introduce a multi-tier corporate tax rate system in order to allow smaller companies to be taxed at lower tax rates. However, Singapore's corporate tax rate of 26% is already low in comparison with other countries. Moreover, a variety of lower tax incentives are already available for selective activities. A multi-tier tax rate system will open up substantial opportunities for tax planning. To guard against this would require more elaborate tax rules. This would, in turn, lead to higher tax compliance cost for small companies which would defeat in the end the purpose of such a tax change. Mr Inderjit Singh has asked how we can further assist local industries and businesses in their efforts to regionalise. I would like to inform the House that there are already several schemes in place to encourage local companies to regionalise. Local companies that are setting up operations overseas can obtain low-cost loans under the Regionalisation Finance Scheme (RFS) administered by the Economic Development Board. This programme is designed to assist local companies acquire fixed assets for their overseas projects. To-date, 60 companies have received about $78 million in loans under this scheme.”
“The Government will also be spending 20% more on community development this year to further promote social cohesion and a caring and gracious society. Some Members have asked whether Government would state its policy on the accumulation of reserves. A simple answer is that there is no target, as we would like to accumulate as much reserves as possible, in other words, the more the better, always provided that the accumulation does not come from increased taxes causing a drag on the economy and stultifying growth. Except for the recession year of 1985, Singapore has enjoyed continued strong growth over the past decade accompanied by budget surpluses in every year. We believe the present economic slowdown is due to a cyclical downturn in the electronics sector, and the good June figures for non-oil exports would indicate the probability of an economic upturn in the later part of this year. We should also not forget that Singapore has little reserves of land and no natural resources. We have to rely entirely on our financial reserves to meet unforeseen circumstances. I will now move on to address specific concerns raised by individual Members. Mr Chiam See Tong, Mr Jeyaretnam and Mr Low Thia Khiang have all spoken about the increasing collection from fees and charges from $3.7 billion in FY96 to $4.1 billion in FY97, an increase of 10.8%. This increase is due mainly to the higher COE collections expected in FY97, largely because of the higher number of vehicle quotas to be issued in FY97 in view of the implementation of road pricing. Mr Chiam has also asked whether the introduction of the Autonomous Agency (AA) programme will lead to higher fees and charges.”
“As our development expenditures have generally been around 6% of GDP, and revenues have often exceeded 20% of GDP, we have been able to generate healthy budget surpluses, part of which has been returned to the economy in the form of tax cuts and asset enhancement schemes and rebates, and the balance set aside to the reserves. From the foregoing, Members can see that the Government's budget surpluses are generated not by over-taxing the economy but are the outcome of economic growth and careful control of expenditures. There is therefore no need for concern that the surpluses will harm the economy in the long term. Members may also be interested to know that our revenue collection is much lower than the G7 countries and comparable to the regional economies, in terms of percentage of GDP. For example, our FY97 revenue collection is projected to be about 19.5% of GDP. This is much lower than the G7 countries' average of between 33% and 48% of GDP. We are also lower than economies like Taiwan, Malaysia and South Korea whose revenue collection is between 21% and 29% of GDP. As to the question whether the surplus could be lowered to give more incentives to businesses and to promote social cohesion, I would like to assure the House that Government has set aside sufficient funds to help local companies, both in business development and skills upgrading under the Economic Development Assistance Scheme. From the year 1996 to the year 2000, a block vote of $1.3 billion for grants and $3.3 billion for loans will be set aside for the Economic Development Assistance Scheme. Apart from substantial funding for economic promotion, the Government will spend more on transport improvements, such as the building of MRT, LRT and roads.”
“However, all ACUs already enjoy a 10% concessionary tax rate, irrespective of their size. Other tax incentives announced in the Budget, such as the tax exemption for income arising from managing IPO share offerings of foreign currency shares, trading of foreign shares and the extension of tax exemption to syndicated loans which are not underwritten will benefit banks, merchant banks, ACUs, Approved Security Companies and other financial institutions which undertake these activities. A Member has asked whether the award of tax incentives for financial firms could be tied to the training of local staff. However, doing so will impose an additional burden on the financial companies. Ultimately, the decision to employ expatriates or local staff will depend on the firm's bottomline. Government's Policy on the Accumulation of Reserves Several Members have expressed concern over the size of the Government's annual budget surpluses. Mr Lew Syn Pau has asked whether the continual withdrawals of liquidity may not have detrimental effects on Singapore's economy. Others have asked whether the surplus could be lowered by giving more incentives to businesses and to promote social cohesion. Let me now explain the rationale underlying Government's budgetary policy. Our basic policy is to run a balanced budget in which all recurrent and development expenditures are met from Government revenues. In years of strong economic growth when revenues are buoyant, we would expect to realise substantial budget surpluses if expenditures are kept under control. As I indicated in my Budget speech, our aim is to ensure that growth in Government expenditure does not exceed GDP growth. In recent years, recurrent expenditures have been capped at around 10% of GDP.”
“Intense competition has forced companies to consolidate and combine to create ever larger institutions which can better afford expensive IT technologies and highly skilled staff. The race is on to create bigger and stronger financial institutions with global reach. Competition for financial centre status in the region will be fierce, especially from a rejuvenated Japan which has embarked on a "Big Bang" reform of its financial system. If Singapore is to retain its position as a major financial centre in the region, it is essential that we attract the larger players to locate in and operate from Singapore in order to build up a critical size of such institutions. When this happens, the industry as a whole will also benefit from the expertise brought in by the bigger players. The emphasis in attracting large players does not mean that there is no place for smaller companies, including local companies. In the fund management industry, for example, all approved fund managers have been enjoying a 10% concessionary tax rate for many years, regardless of the amount of funds they manage in Singapore. Our tax incentives are deliberately geared towards encouraging fund managers to continually expand their operations in Singapore. Besides the 10% concessionary tax rate, applicable to all fund managers, in 1995 we introduced an incentive to tax at 5% the incremental income of approved fund managers who manage at least $5 billion worth of non-resident funds. The new incentive this year will exempt from tax altogether for those who manage at least $10 billion in non-resident funds. Similarly, to encourage the ACUs to expand, the 5% tax on incremental income from all taxable ACU activities will be extended only to those whose taxable income from ACU activities exceeds $50 million.”
“Other measures already taken earlier this year include the reduction in foreign worker levy for workers in the manufacturing sector and the freeze or reduction in JTC land rentals. The reduction in foreign worker levy is expected to cost $14 million per annum while the reduction in JTC land rentals will cost $42 million. Clearly, there are many incentives and assistance schemes for the manufacturing sector and SMEs, and we will continue to monitor and fine-tune these incentives and schemes, wherever necessary. The Committee on Singapore's Competitiveness will be studying the issue of Singapore's longer term competitiveness and will, among other things, address issues relating to business costs and the competitiveness of our manufacturing sector and SMEs. The Committee will be reporting its findings early next year and will no doubt recommend new measures to improve the competitiveness of Singapore for the various sectors. Incentives for the Financial Sector Members of this House have commented that the Government appears to have gone out of its way to provide a package of incentives for the financial sector in the FY97 Budget and that the incentives appear to benefit the larger financial institutions. Dr Tan Cheng Bock has called the Budget a "Shenton Way Budget". It is true that the financial sector has been singled out for special treatment in this year's Budget. Let me explain why. Strong economic growth in the region has led to a rapid increase in the demand for sophisticated financial services. The trend towards the opening up of international financial markets, coupled with the rapid developments in electronic data transmission and information technology, has also led to the integration of financial markets world-wide.”
“Financial assistance for the manufacturing and local SMEs is also available under the Economic Development Assistance Scheme and the Cluster Development Fund, for which a total grant of $310 million had been allocated in FY97, an increase of 19% over FY96 allocation of $260 million. In addition, for the SMEs, the Local Enterprise Finance Scheme provides low cost loans to help local companies upgrade and automate their operations and expand their production capacity. Last year, a total of $590 million worth of loans was extended under the scheme, an increase of 13% over 1995. Other financial assistance schemes which the SMEs can avail of include the Local Enterprise Technical Assistance Scheme which provides grants to help SMEs defray the cost of engaging external consultants to upgrade and modernise their business operations. In 1996, a total of $12 million in grants was approved. In addition, to assist local companies in business and capability development, the Local Industry Upgrading Programme helps local companies tap technical and managerial expertise of multi-national corporations. $3.2 million was spent under this scheme in 1996. In my Budget Statement I have also mentioned that development expenditure on economic and infrastructural development will double from $2 billion in FY96 to $4 billion in FY97. This increased expenditure will ultimately enhance the efficiency and hence the competitiveness of Singapore's businesses, including the manufacturing sector and the SMEs. The Government is also conscious of the need to contain business costs in the present climate of a slowdown in the manufacturing sector. In my Budget Statement I have also stated that Government is taking measures to ensure an adequate supply and realistic pricing of industrial land.”
“There is therefore no need to make further tax adjustments so soon after last year's revision. As it is, our corporate tax rate is already amongst the lowest in the region. Our tax depreciation provisions are also very generous and have been ranked number one by the 1996 report of the Davos-based World Economic Forum. Coupled with an extensive network of double taxation agreements, unilateral tax credits and generous tax incentives, we have one of the most attractive corporate tax regimes in the world. Over the past five years, the tax changes made by the Government have reduced revenue collection by about $2.5 billion per year. The Government continually monitors its revenue policies to ensure that tax rates remain competitive and that the tax burden remains as light as possible. Manufacturing and SME Sectors Several Members have commented that there is not enough help given to the manufacturing sector and the local small and medium enterprises (SMEs) in the FY97 Budget. This is not true. The fact is that Government has already put in place a comprehensive set of more than 60 tax incentives and assistance programmes to help the manufacturing sector and the SMEs. For example, the tax incentives available to the manufacturing sector and the SMEs include the Pioneer Incentive, Development Expansion Incentive and Investment Allowance schemes. These tax incentives entail a substantial revenue loss for the Government every year. Based on Year of Assessment 1995 figures, these three schemes alone accounted for a total revenue loss of close to $200 million. This is approximately the revenue which the Government would have lost had we reduced the corporate tax rate by one percentage point.”