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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“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to a certain resolution. Resolution reported - "That the sum of $11,399,401,000 shall be supplied to the Government on account under the heads of expenditure for the public services specified in the Estimates contained in Cmd. 18 of 1996".”
“Members should not misunderstand the amount requested under the vote on account to be a signal that the elections will be held later than earlier. This is only to provide the Prime Minister with flexibility should he decide not to hold the elections earlier. Historically, a vote on account is not without precedent in Singapore. In December 1961, the then Finance Minister, Dr Goh Keng Swee, secured a vote on account for the first half of FY63 amounting to 55% of the Estimates for FY62. The sum approved under the vote on account will form part of the Estimates of Expenditure for FY97/98 when these are subsequently tabled for Parliament's approval. BILLS INTRODUCED PROPERTY TAX (AMENDMENT) BILL "to amend the Property Tax Act (Chapter 254 of the 1985 Revised Edition)", recommendation of President signified; presented by the Minister for Finance (Dr Richard Hu Tsu Tau); read the First time; to be read a Second time on the next available sitting of Parliament; and to be printed. GOVERNMENT PROCEEDINGS (AMENDMENT) BILL "to amend the Government Proceedings Act (Chapter 121 of the 1985 Revised Edition)", presented by the Second Minister for Defence (RAdm Teo Chee Hean); read the First time; to be read a Second time on the next available sitting of Parliament; and to be printed. COMMITTEE OF PRIVILEGES REPORT (Motion)”
“In either case, under Article 66 of the Constitution, a General Election would have to be called within three months of Parliament's dissolution, that is to say, before 5th April 1997. From past experience, after the elections we will need about two months for the Government to formulate its programmes for the new term of office and for the President's Address and debate thereon. Thereafter, there will be a break of one month before the Government presents its FY97/98 Budget proposals to Parliament. The debate on the Budget Statement and the proceedings of the Committee of Supply which follow will take another three weeks or so. Overall, this process will take about four months. Even if the Prime Minister chooses to call for elections immediately after the dissolution of Parliament in the first week of January 1997, the President's approval of the FY97/98 budget can only be obtained towards the middle or end of May 1997. Legislative authority to make payments and drawdowns against the Consolidated and Development Funds will in the meantime have lapsed on 31st March 1997. However, if the Prime Minister decides to defer the holding of fresh elections until nearer 5th April 1997, the approval of the FY97/98 Budget will correspondingly be delayed until the middle or end of August 1997. To provide for expenditures that need to be incurred between 1st April 1997 and the approval of a new Budget for FY97/98, I am tabling Estimates containing a vote on account to be approved by the present Parliament. The vote on account is for $11.399 billion, or 21.2% of the FY97/98 estimates, to cover projected outlays over the 5-month period from 1st April 1997 to 31st August 1997. The amount requested is 95.7% of actual total outlays over the same period in FY96.”
“Mr Speaker, Sir, I wish to make a statement on the "Estimates Containing a Vote on Account for Expenditure for Part of the Financial Year 1st April 1997 to 31st March 1998" which I have presented to Parliament today as Cmd. 18 of 1996. Copies of the Command Paper are placed on Members' seats in the Chamber. The notice required under Standing Orders of the allotted day for consideration in the Committee of Supply has also been submitted to the Clerk of Parliament this morning and the allotted day will be 11th December 1996. Sir, it is proposed that pursuant to Article 148(B)(1) of the Constitution of the Republic of Singapore, Parliament will approve the Estimates tabled. The total sum to be appropriated under the vote on account is $11.399 billion. This is to meet projected operating and development outlays in the first five months of FY97/98, that is, over the period 1st April 1997 to 31st August 1997. Of this total sum, $4.771 billion is to be appropriated from the Consolidated Fund for operating outlays, with the remaining $6.628 billion to be appropriated from the Development Fund for development project expenditures and loans to statutory boards. Under Article 65 of the Constitution of the Republic of Singapore, the present Parliament stands dissolved on 5th January 1997, five years after its first sitting on 5th January 1992, unless it is dissolved at an earlier date by the President, acting on the advice of the Prime Minister. The Prime Minister has indicated that he would like the present Parliament to run its full term of five years. He could call for the dissolution of Parliament in the first week of January 1997 or allow Parliament's mandate to run out on 5th January 1997.”
“I think the risk is very small. Do not forget that GIC has been in operation for many years and this is the first significant case we have come across. So the risk is relatively low. TERTIARY TUITION FEE SUBSIDY (Income ceilings for Malay students) 4. Mr Imram bin Mohamed asked the Minister-in-charge of Muslim Affairs, in view of the rise in the cost of living, whether he will consider raising the income ceilings set for Malay students applying for tertiary tuition fee subsidy, as they had remained unchanged since the scheme was introduced in 1991.”
“It is impossible to detect every single dealer's transactions which might go wrong considering the large size of the investments which are managed. To track accurately will require sustained tracking of performance which could involve market movements also. It is a very complicated procedure. Mr Low Thia Khiang: What is the Minister's assessment of the risk involved in such an investment since GIC is unable to track accurately every dealer's transactions?”
“The actual information on this particular person's misdeeds were in fact reported by Rockefeller themselves. It would be very difficult for GIC to monitor from the performance itself because the amount would be small relative to the total funds managed. I would like to point out that when a fund of a sizeable amount is managed by a fund manager, normally the performance depends on market conditions and the ability to earn a return based on their investment portfolios. If the company is doing reasonably well, to be able to identify malfeasance on the part of a particular trader is extremely difficult. In this case, it was in fact reported by Rockefeller themselves who do, on their own, carry out checks on the performance of their dealers worldwide.”
“I think the basic criteria are the company must have a good track record, it is well-established, and have a good reputation, particularly on its performance criteria.”
“Rockefeller is an established fund management company. GIC employs a range of such fund managers and there was no indication earlier on that this company had any particular problems. I would like to point out that it is a specific manager employed by this particular company who caused the trouble, and not the company itself. Their reputation has been good prior to this.”
“As I said, at this stage, because the investigation involved transactions over several years, it is quite complex. I do not think it will be desirable to make any broad estimates. As soon as we have the information, this will be made public, if the Member wishes.”
“Mr Speaker, Sir, the GIC has incurred some loss in its investments made through Rockefeller & Co and is in the process of ascertaining the amount. GIC is seeking to recover the loss attributable to possible wrong-doing of the Managing Director of Rockefeller & Co (Far East) Limited. Discussions with the parties involved are under way and it is therefore premature to disclose the extent of the losses.”
“ST2, like most of the asset enhancement programmes, was targeted at a broad group of Singaporeans, particularly those who wanted to invest their CPF savings in shares, but not necessarily at every citizen. Those who participated in ST2 had to make a co-payment, to show that they valued the scheme and prevent a handout mentality. ST2 alone could not cover 100% of the population. But taken together with the other asset enhancement schemes, like HDB home ownership, upgrading, or Medisave Top-Up, every citizen can expect to benefit in one way or another from the whole package of asset enhancement measures. IN-HOUSE SCHOOLING IN GIRLS/BOYS HOMES 4. Mr Cheo Chai Chen asked the Minister for Education whether he will consider providing in-house schooling at Girls'/Boys' homes so as to relieve parents from having to fetch their children from these homes to and from schools.”
“The second offer of Singapore Telecom shares (ST2) was a huge success. 1,530,000 people took up the offer, 120,000 more than the first time round. ST2 was part of the Government's Share Ownership Programme. The aim is to encourage Singaporeans to own shares in blue-chip Singapore companies, and thus take a direct stake in the growth and prosperity of Singapore. Share ownership also provides an additional means for Singaporeans to invest their savings and broaden their range of assets. To help Singaporeans take up the ST2 offer, the Government implemented a SOTUS scheme to top-up the CPF accounts of citizens. Furthermore, it sold the ST2 shares at a large discount to their market value. The Government also encouraged children of senior citizens to top up the CPF savings of their parents, so that their parents can afford to take part in ST2. These schemes enabled many older citizens to participate in ST2. 290,000 citizens aged 60 and above were offered ST2 shares. 60%, or 175,000, of these took up the offer, including 94,000 who topped up their CPF to buy the shares. 115,000 did not buy ST2 shares, of whom 98,000 did not have enough money in the CPF. Elderly Singaporeans enjoy several benefits and concessions which other Singaporeans do not enjoy. These include the Pre-Medisave Top-Up Scheme, tax exemption for annuity income under the CPF Minimum Sum Scheme, and special subsidy on outpatient polyclinic charges. As for the poor in Singapore, they can benefit from Government subsidy programmes which were specially set up for them such as the Public Assistance Scheme, Medifund, and the Rental and Utilities Assistance Scheme.”
“It is difficult to estimate the amount of estate duty that could be collected following the recent amendments as death occurrences do not follow any pattern and it is not possible to predict which wealth category the deceased would come from. However, if we were to apply the new rates and exemption thresholds to the assessments done in 1995, it would result in the following amounts of estate duty: Immovable Properties $9.7 million Movable Properties $38.8 million SINGAPORE TELECOM SHARES 3. Mr Cheo Chai Chen asked the Minister for Finance whether Government will help those citizens, especially the elderly, who have no CPF account, or insufficient funds in their accounts, or no children to top up the accounts to acquire the Singapore Telecom shares, and, if so, what are the Government's plans and whether such plans would include fully subsidising the cost of 300 shares.”
“Yes. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Dr Richard Hu Tsu Tau]. Bill considered in Committee; reported without amendment; read a Third time and passed. HIJACKING AND PROTECTION OF AIRCRAFT (AMENDMENT) BILL Order for Second Reading read.”
“I think the difference would be that in the case of maintenance order for, say, a wife who receives such payment because of a divorce, the tax component is already built in. In other words, it is income which will be subject to normal tax, whereas under the Maintenance of Parents Act, it is a special treatment accorded to the taxpayer for a specific reason.”
“That will be treated as normal income, yes, subject to tax.”
“Particularly, say, in the case of a divorce?”
“For other reasons. Dr Kanwaljit Soin: For maintenance of wives, yes.”
“We are dealing with the Maintenance of Parents Act and not on this other issue.”
“No. Awards made under the Maintenance of Parents Act are free of income tax. That is so.”
“On Mr Chiam's question, I think there is an existing provision for tax relief on installation of highly efficient water recycling processes. If not, it would certainly be something we would seriously consider. On the question by Dr Soin, I do not quite follow her question.”
“However, the construction period of large-scale plants may be very long. As such, the taxpayer may not be able to satisfy the condition that the plant must be in use at the end of the basis period for that Year of Assessment for the purpose of claiming the depreciation allowances. Clause 5 thus amends section 19A of the Act to allow claim of depreciation allowances under this section for capital expenditure incurred on plant and machinery even though the asset has yet to be put to use. Sir, I beg to move. Question proposed.”
“Clause 2 amends section 10 of the Act such that these payments would not be deemed as income in the hands of the parents and are thus not subject to income tax. The second tax change deals with accommodation benefits provided to an employee. At present, any gains or profits from employment carried out in Singapore are subject to tax. If the employee is provided with accommodation by his employer, such accommodation benefits will also be subject to tax. This is provided for in the existing Act. The value of the accommodation benefits to be taxed is, however, subject to a cap of 10 per cent of the employee's gains from employment (other than the accommodation benefits), less any rent paid by him. Currently, the Act does not include the gains derived by an employee from share options under the definition of his gains from employment. Such gains from share options are, however, taxed under a separate sub-section. Clause 2 therefore amends section 10 to make it clear that gains from share options should be taken into account in the computation of an employee's total gains from employment for the purpose of deriving the taxable value of accommodation benefits under the Act provided to the employee. Finally, the last amendment is to allow taxpayers to claim capital expenditure on plant and machinery under construction. At present, under section 19A of the Act, a person who has incurred expenditure on plant and machinery could choose to depreciate them over a three-year period instead of the longer periods specified under the Sixth Schedule of the Act. Depreciation allowances will be granted only if capital expenditure has been incurred and the plant and machinery are in use at the end of the basis period for that Year of Assessment.”
“To encourage finance companies to build up their reserves, general provisions made by such companies for their loans and investment in securities will also be allowed tax deduction with effect from Year of Assessment 1997. Clause 4 amends section 141 to provide for the extension of this incentive. Second, to encourage the use of highly efficient pollution control and energy-efficient equipment, I have announced that businesses will be allowed to claim capital expenditure on such equipment over a one-year period instead of over three years. Clause 5 amends section 19A for this change. Third, Members are aware that since the Year of Assessment 1993, National Servicemen are given tax reliefs of $1,000 for active NSmen and $500 for those who have done full-time national service but are now not in the active national service. As the value of these reliefs has been eroded by subsequent reductions in personal income tax rates, I have announced that the reliefs will be increased to $2,000 and $1,000 respectively with effect from the Year of Assessment 1997. In addition, as a recognition of the contribution of parents and wives of the NSmen to Total Defence, parents of NSmen as well as their wives who are Singapore citizens will be eligible for tax relief of $500. Clause 6 thus amends section 39 to provide for these changes. Tax Changes not announced in the 1996 Budget Statement I shall now deal with three tax changes which were not announced in the 1996 Budget Statement. The first pertains to maintenance payments received by a parent under the Maintenance of Parents Act. Under the Maintenance of Parents Act, a person could be compelled by a maintenance order to make maintenance payments to his parents.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Income Tax (Amendment No. 2) Bill 1996 seeks to give legislative effect to income tax changes announced in the 1996 Budget Statement. Opportunity is also taken to incorporate three other amendments to the Income Tax Act. Tax Changes Announced in the 1996 Budget Statement I shall begin with the tax changes that were announced in the 1996 Budget Statement. There are a total of six tax changes that require amendment to the Act. First, on changes pertaining to tax rates. I have announced in the 1996 Budget Statement that with effect from Year of Assessment 1997, the corporate tax rate will be reduced from 27% to 26%. Clauses 9, 10, 11 and 13 of the Bill provide for this change. I have also announced that with effect from Year of Assessment 1997, the top marginal individual income tax rate will be lowered from 30% to 28%, with appropriate reductions in the other rates. In addition, the number of tax brackets will also be reduced from 14 to 10. Clauses 8 and 16 amend section 42 and Part A of the Second Schedule to the Act respectively to effect these changes. In addition, to encourage the development of activities which require high input or funding from overseas as well as to facilitate the development of Singapore as a knowledge and technology hub, withholding tax on royalty and interest was reduced to 15% of gross of such payments with effect from 28th February 1996. Clauses 7, 9, 11, 12 and 14 amend the relevant sections of the Act for this purpose. The next three tax changes pertain to existing tax concessions. First, since the Year of Assessment 1992, banks are allowed to claim tax deduction for general provisions made for loans and investments in securities.”
“Sir, I do not have the figures readily available. If the Member were to submit the questions, I will answer them. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Dr Richard Hu Tsu Tau.]. Bill considered in Committee; reported without amendment; read a Third time and passed. INCOME TAX (AMENDMENT NO. 2) BILL Order for Second Reading read.”
“Under these new amendments, how much would the Government be collecting a year in respect of estate duty for immovable property and movable property?”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." I have announced in the FY96 Budget Statement several changes to the structure of estate duty to allow for the effects of inflation and rising asset prices over the years since the duty was last revised in 1984. Prior to the announcement, estate duty was structured in two tiers: the first $10 million value of estate chargeable duty was taxed at 5% and all subsequent amounts at 10%. Exemption was given to the first $3 million of all residential properties and the first $500,000 of all movable assets, including Central Provident Fund balances. Central Provident Fund balances in excess of $500,000 were also exempt. To compensate for the effects of inflation since 1984, the Estate Duty (Amendment) Bill 1996 seeks to do the following: (1) to raise the value of the estate on which the first tier rate of tax of 5% would apply to $12 million. (2) to raise the exemption limits for residential properties and movable assets (including Central Provident Fund balances) to $9 million and $600,000 respectively; and (3) to exempt Central Provident Fund balances in excess of $600,000 from duty. Clauses 2 and 4 of the Estate Duty (Amendment) Bill will provide for the increase in the value of the estate which the first tier rate of 5% would apply from the previous $10 million to $12 million. Clause 3 of the Amendment Bill will insert a new subsection to raise the exemption limits for residential properties and movable assets (including Central Provident Fund balances) to $9 million and $600,000 respectively. These changes would apply to persons who pass away on or after 28th February 1996. Sir, I beg to move. Question proposed. Mr Chiam See Tong: Sir, I have a question for the Minister.”
“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. CRIMINAL PROCEDURE CODE (AMENDMENT) BILL Order for Second Reading read.”
“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 Clause 2 of Article 148 and Clause 2 of Article 148C of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act, 1996. The additional sums have been presented as Supplementary Estimates which have been considered and approved by the House as Command Paper No. 6 of 1996. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“The 229 persons accounted for 0.054% of total taxpayers and they paid 5.4% of total tax paid in Singapore. HDB SHOPKEEPERS (Adjustment of rental on renewal of lease) 11. Dr Ker Sin Tze asked the Minister for National Development whether the Housing and Development Board will consider having moderate rental adjustments in stages when HDB shopkeepers are renewing their third lease so as to ease the severe hardship suffered by these shopkeepers, especially those who are paying low rentals.”
“Sir, the total amount of tax paid by the 229 top earners mentioned in Senior Minister's speech is $116.3 million. The amount of tax paid by the rest of the 424,052 individuals amount to $2,030.4 million. These amounts are arrived at after allowing one-off rebates of 10% and the GST rebates of $650. The number of taxpayers who did not have to pay income tax for the Year of Assessment 1995, ie, based on income accrued in calendar year 1994, is 888,175. Mr John De Payva (Nominated Member): Sir, would the Minister say how much tax did the 229 top earners pay as a proportion of total individual income tax collected?”
“Sir, I beg to move, In page 12, after line 16, to insert -- "(f) the date of acquisition or disposal of any real property shall be determined in accordance with section 10F.". Sir, this is to make clear that the date of acquisition or disposal of property held by a relevant company will be determined in the same manner as that under section 10F. Amendment agreed to.”
“Sir, I beg to move, In page 11, line 13, to leave out "company" and insert "companies". Sir, this is a consequential amendment. Amendment agreed to.”
“Sir, I beg to move, In page 11, line 12, to leave out "a" and insert "one or more". Sir, this is a drafting amendment. Amendment agreed to.”
“Sir, I beg to move, In page 8, to leave out line 32. Sir, there is no need for such an exclusion provision with regard to the disposal of shares. Amendment agreed to.”
“Sir, I beg to move, In page 8, line 13, after ""acquire"", to insert ", in relation to any shares in a relevant company,". This is to make clear that this section is referring to acquisition of shares in a relevant company. Amendment agreed to.”
“Sir, I beg to move, In page 7, line 16, to leave out "of such" where they secondly occur. Sir, this is a drafting amendment. Amendment agreed to.”
“Sir, I beg to move, In page 6, after line 12, to insert -- "(d) for prescribing a different time of acquisition or disposal of any real property or class of real property, or by any person or class of persons; and". The reason for this amendment is similar to amendment No.(1). Amendment agreed to.”
“Sir, I beg to move, In page 4, to leave out line 9 and insert -- "(e) as a result of repossession and termination of a lease by any statutory body under the written law establishing that statutory body; (f) in accordance with any provision of the Residential Property Act (Cap.274) or any notice or direction issued thereunder; or". This is to specifically provide the disposals under the following circumstances will be excluded from the ambit of the tax measures: (i) disposal as a result of repossession and termination of a lease by a statutory body; and (ii) disposals required under the Residential Property Act. Amendment agreed to.”
“Sir, I beg to move, In page 4, to leave out lines 6, 7 and 8 and insert "without any option to purchase and which is for a term not exceeding 7 years in the aggregate;". This amendment is to exclude leases which do not have an option to purchase and which is for a term not exceeding seven years from the ambit of the tax measures. Amendment agreed to.”
“Sir, I beg to move, In page 4, to leave out line 3 (including marginal reference) and insert "any written law". Sir, this is a drafting amendment. Amendment agreed to.”
“Whoever sells it. The question is: who has effected the sale? Where do the proceeds lie? The person to whom the proceeds accrue will be liable to tax. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. -- [Dr Richard Hu Tsu Tau]. Bill considered in Committee. [Mr Deputy Speaker in the Chair] Clause 1 ordered to stand part of the Bill. Clause 2 --”
“On the question of multiple ownership of a property where shareholdings are not specified, I think I have already answered this in my response to Dr Ow's question. If shareholdings are not specified and there are more than two owners, for example, it will be divided equally between shareholders until proven otherwise. I am not clear exactly what the last question was. It had something to do with non-taxable properties?”
“The cost of a property will include the cost of the purchase, the cost of any duties paid, stamp duties, legal fees and any other costs which contributed to the transaction in a normal way. Dr Soin has asked why we have introduced a capital gains tax. I would like to tell her that it is not a capital gains tax. We do not have a capital gains tax. Property gains have always been taxable in Singapore for companies trading in properties. It has never been easy, however, to tax individuals who do not transact on a regular basis, and the present Bill corrects this anomaly. She says that for a forced sale, it is not fair. This is true. We have said that for cases where sales are involuntary and for cases of hardship, exemptions could be made. She has asked for tax exemption for a principal place of residence. Presumably, she means that tax exemption should be granted when the principal place of residence is sold. Exemption from tax cannot be granted if a gain is made within 3 years, unless the sale is involuntary. After the property is sold and a new property is acquired, it becomes a new principal place of residence. Should we exempt that too if it is later sold? It is very difficult. So I think the answer has to be no. She has questioned whether the 3-year holding period is too long. I think it is a reasonable period if we assume that people who buy properties for genuine purposes, either for own use or for investment, would not normally sell in under three years. Shortening the period could be done, but I think it will not be as effective in curbing speculation. We could say two years. It is arbitrary. Three years is reasonable. Anybody who buys a property for genuine use or for genuine investment would not normally sell it in under three years.”
“If there is a dispute between the parties, it is up to them to settle their differences. Finally, he has asked why there are so many amendments. These amendments have arisen because of appeals which were received subsequent to the announcement of the two Bills. We have been very careful to ensure that where the appeals are justified, appropriate amendments have been made to the Acts. That is the reason why we have to go through this exercise today.”
“Even between fathers and sons, there have been cases of transfers which have been disputed afterwards. So I think there is an in-built deterrence to any such device. Besides, I think repeated offences of this type would be watched very closely by IRAS, although it may be difficult to catch them. However, I do not think such a situation is likely to develop. Dr Ow has also asked for an interpretation of the formula used to compute the taxable gain of a person owning shares in a property company. The use of coefficients, rather than absolute figures, in the equation is because a company can buy and dispose of shares and make profits during the 3-year period in a variety of ways. In the first year, for example, it could be selling properties A, B and C; in the second year, it could be selling C, D and E; and in the third year, it could be selling F, G and H. Each of these sales will have a separate tax liability. So we need a complete formula for calculations. I think we will be happy to show you an example of this, because you are buying shares in a company which owns a large number of properties. So the tax liability is not as straightforward as the sale of one property. The Member has asked for the reason why 75% is considered a benchmark figure. It is a figure which we have considered reasonable. 100% would be unreasonable. 50% would be too low. 75% is half way in between. I think this is a reasonable compromise. He has also asked about withholding tax where there is a co-ownership which is not specified. In the absence of any specified shareholding, it will be assumed that the joint partners share equally, unless they can prove otherwise. If there is no specified share ownership, we will assume that they own equal shares, half-half.”
“Dr Ow has asked whether there might not be a tax loophole if a person transfers his sale of a property to his relative who has a low income. I think there are two restraints for such a move. In the first place, if the taxable component is substantial, it automatically increases the tax rate for the individual even at the lower end. Let us say, you make half a million dollars in the sale of a property. You transfer to somebody who is paying $10,000 tax. His tax for that year is over $500,000. So the tax liability rises immediately to a very much higher level. That is one constraint. If the profits are substantial, it will automatically raise the level of tax which applies. Secondly, whoever does this is carrying a considerable risk. In transferring the title, he may not get it back, even between relatives and this has happened.”
“The tax payable by the seller of such shares will vary according to the period over which he holds his shares, his percentage shareholding in the company as well as the period over which a property is held by the company. Clause 2 thus also inserts a new section 10G for this purpose. In recognition that such share owner could be compelled to dispose of his property or shares within three years of its acquisition, clause 2 of the Bill also specifically excludes disposal under circumstances such as upon the death of the owner of the property or shares or as a result of bankruptcy from the proposed tax treatment. Withholding tax on non-resident sellers of property At present, the Income Tax Act provides that a person who makes payments which are income chargeable to tax in Singapore to a non-resident, the payer must withhold tax on such payments. Clause 3 inserts a new section 45D to provide that tax must be withheld at the rates of 15%, 10% or 5% of the value of the property if the sale of the property or shares is made by a non-resident person. The percentage of withholding tax will depend on the holding period of the properties or shares. The party responsible for the withholding tax will be the advocate and solicitor acting on behalf of the buyer of the real property or shares, or in the absence of a solicitor and advocate, the buyer himself. Sir, I beg to move. Question proposed.”