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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“The new section provides that shareholders can always request the company to send them the full annual report, at no additional charge to the shareholder. To address the problem of several copies of a summary financial statement being sent to the same household, the new section also provides that a summary financial statement need not be sent to any member who does not wish to receive it. When drafting the Bill, the views of members of the legal, accounting, banking and stock exchange communities on the proposed amendments have been sought. Both the Law Society and the Institute of Certified Public Accountants were in general agreement with the overall objective and rationale of the proposed amendments. The Association of Banks in Singapore, the Singapore Merchant Bankers Association and the Stock Exchange of Singapore have also supported the proposed amendments. The United Kingdom Companies Act has similar provisions to allow public listed companies to issue summary financial statements in lieu of full annual reports. The proposed amendments to the Companies Act follow closely the provisions in the UK Companies Act. Sir, I beg to move. Question proposed. Assoc. Prof. Walter Woon: Sir, I support this Bill. It is often the case that annual reports are just thrown away by shareholders. So to save the trees, if for no other reason, this is a good innovation. I would just ask the Minister for clarification on two matters. Firstly, clause 203A(1) says that regulations will specify the conditions under which a summary financial statement can be sent in lieu of the full financial statement. Could the Minister please inform the House what these conditions will be? If we leave these things to regulations, it is not transparent what the situation will be.”
“In such a scenario, the same shareholder could receive duplicate copies of the same annual report. To alleviate the above problems, the Bill introduces a new section to allow a listed public company to send a summary financial statement to its members instead of its annual accounts and directors' reports. The objective of the amendment is to help reduce costs of sending annual reports to shareholders, without compromising a shareholder's right to financial information on the company. A summary financial statement is a summary of financial information derived from the annual accounts and directors' reports of the company. It would comprise certain minimum information culled from the company's annual report, such as the balance sheet, profit and loss statement and shareholding statistics. Material changes in the company and the directors' interest in the company will also have to be highlighted to the shareholder. To ensure that the summary financial statement does not mislead the shareholders, the new section provides that the summary financial statement must contain an opinion by the company's auditor as to whether the summary financial statement is consistent with the company's annual accounts and directors' report and complies with the proposed new section and the regulations made under it. The company is still obliged to send a copy of the full accounts to those members who request it. The new section does not derogate from the obligation of a company to present its full accounts and directors' report at its annual general meeting and thereafter to lodge these documents with the Registrar of Companies. As such, the amount of information on the company available to a shareholder will not be reduced by the proposed amendments.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." Under the Companies Act, a company is required to send a copy of its last audited accounts, which comprises the profit and loss account, balance sheet and notes to the accounts, as well as the Auditor's Report and directors' report on those accounts to its shareholders before the general meeting at which these accounts are to be presented. This set of documents is commonly known as the annual report. Compliance with this requirement can be a very costly affair, especially for companies with very large numbers of shareholders. Some shareholders are not interested in studying the full accounts of the company. There is even more wastage when a few copies of the full accounts and the director's report are received by a single household because family members living within the household are all shareholders of the same company. As the existing Companies Act requires each shareholder to be issued one copy of the annual report, the company must send a copy of the annual report to each shareholder, even when the shareholder prefers not to be sent this annual report . The problem became more pronounced with the listing of large companies such as Singapore Telecom. With the listing of Singapore Telecom, many Singaporeans became shareholders. There arose a situation where a single household with members owning `B' or `C' shares could receive multiple copies of the same annual report, as each shareholder in the same household would receive a copy of the annual report. For shareholders who have bought the company's shares through different means, for instance, through their CPF account or by paying cash for the shares, the company would also recognise the shareholder as two different persons.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Bill seeks specifically to introduce provisions to facilitate investigations into suspected drug money laundering activities. The new provisions are complementary to those in the Drug Trafficking (Confiscation of Benefits) Act, which allows the investigation, tracing, freezing and seizure of proceeds from drug trafficking and provides legal assistance to foreign Government enforcement agencies on fulfilment of certain conditions. The new provisions in the Bill would facilitate applications for production orders and granting of mutual assistance to foreign government agencies where a customer of an insurance company is involved in laundering drug money proceeds. The amendment to the Insurance Act is similar to the recent amendments under the Banking (Amendment) Act, the Finance Companies (Amendment) Act and the Futures Trading (Amendment) Act. 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. COMPANIES (AMENDMENT) BILL Order for Second Reading read.”
“Dr Lee Tsao Yuan asked the Minister for Information and the Arts how the apparent contradiction between the need to establish borderless communication in order to develop Singapore as a regional information hub on the one hand, and the need to protect and preserve domestic cultural and moral values on the other, is being resolved.”
“Mr Speaker, Sir, card issuers are not totally prohibited from offering gifts and other incentives to its cardholders. Under guidelines issued by the Monetary Authority of Singapore, card issuers are only advised not to offer free gifts and incentives which are tied to or directly linked to the level of spending by cardholders. Any such schemes introduced before the guidelines were introduced may continue to operate until they expire. Other forms of incentives and promotions which are not dependent on or related to card spending levels, including free gifts, waivers of fees and programmes entirely sponsored by merchants continue to be allowed. The guidelines discouraging the use of spending linked promotional programmes were issued in October last year, after discussions with card issuers. The aim was to discourage the offer of rewards to entice card holders to spend excessively and beyond their means in order to qualify for the incentives. Furthermore, stiff competition in the credit card business had led to concerns amongst some card issuers that the use of increasingly costly incentive schemes will ultimately have to be passed on to cardholders. Government supports the healthy growth of the credit and charge card business as it contributes towards the creation of a cashless society. It does not condone, however, the use of aggressive inducements which lead to excessive credit creation, debt accumulation and, ultimately, loan losses. ESTABLISHMENT OF BORDERLESS COMMUNICATION AND PRESERVATION OF CULTURAL AND MORAL VALUES (Resolution of contradiction) 12.”
“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. PENSIONS (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 148(C) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act, 1994. The additional sum has been presented as Supplementary Estimates which have been considered and approved by the House as Command Paper No. 2 of 1995. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Sir, I beg to move, "That the Bill be now read a Third time." Question put, and agreed to. Bill accordingly read a Third time and passed. SUPPLEMENTARY SUPPLY BILL Order for Second and Third Readings read.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." In accordance with Article 148 of the Constitution, heads of expenditure to be met from the Consolidated Fund and Development Fund, other than statutory expenditure, have to be included in a Bill to be known as the Supply Bill. The purpose of the Supply Bill before Members is therefore to give legislative approval for the appropriations from the Consolidated Fund and Development Fund to meet expenditure in the financial year 1st April, 1995 to 31st March, 1996. The heads of expenditure and the sums that may be incurred in respect of each head are shown in the schedule to the Bill. These have been approved by the House in the Main and Development Estimates of Expenditure for the financial year 1st April, 1995 to 31st March, 1996, and appear on pages 43 and 44 of Command Paper No. 3 of 1995. The Supply Bill, when approved, will empower me to issue warrants, authorising expenditure up to the amount for each head as shown in the Bill to be paid out from the Consolidated Fund and Development Fund. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Mr Speaker, 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.”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions. First Resolution reported - "That the sum of $22,592,250,980 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 1995 to 31st March 1996 contained in Paper Cmd. 3 of 1995". Second Resolution reported "That the sum of $18,177,176,500 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 1995 to 31st March 1996 contained in Paper Cmd. 3 of 1995".”
“(a) As of 13th March 1995, a total of 24 families have been given assistance under the Citizens' Consultative Committee (CCC) Assistance Scheme. (b) The Scheme was publicised in a press statement issued on 30th March 1994. Details of the Scheme were also circulated to all CCCs at the same time prior to the launch of the Scheme on 1st April 1994. (c) The purpose of the CCC Assistance Scheme is to ensure that the GST does not make low income families worse off. The utilisation of the Scheme was never expected to be high because of the generous GST offset measures introduced, which have been more than sufficient to offset the GST expenditure in most instances, in particular, those living in HDB flats. As a result, very few low income families have become worse off on account of GST to warrant assistance under the Scheme. WAIVER OF STANDARD MISCELLANEOUS FEES 2. Dr Kanwaljit Soin asked the Minister for Education if he will (i) give the number of school children who have applied for waiver of standard miscellaneous fees for the last 3 years in secondary schools; (ii) consider giving students from needy families, 100% instead of the present 50% waiver of standard miscellaneous fees; and (iii) disseminate information of this financial assistance scheme to each child in all languages when the child first enters secondary school.”
“Mr Deputy Speaker, Sir, I beg to report that the Committee of Supply has made progress on the Main and Development Estimates for the financial year 1995/1996, and ask leave to sit again tomorrow.”
“I have not yet obtained the figures. If necessary, I will give him a written reply.”
“After one year of actual operation, and based on actual or updated data from GST collections, we will have to update and recalculate these figures to see whether the original assumptions were correct. But up to now, we believe that this is so, that is, families at different income groups would have ended up with a positive gain as a result of GST. But we will ensure that this happens. If necessary, we will make adjustments. In the case of people who do not live in HDB flats but live in private housing, such as retirees, they were therefore not able to take advantage of these rebates for HDB dwellers. But there is this facility of the CCC Assistance Scheme. Up to now, our information is that the number of people who have applied to the scheme is not large. It only runs into several hundreds. We are trying to establish the reasons. They are either living with families which would benefit from the rebates and would therefore not require them to come forward or there may be personal reasons. We do not know. But it is a fact that claims under this scheme are not large. 5.00 pm”
“Several adjustments have been used in the collection of GST. So there have been several adjustments to the PCE figures for the purpose of GST collections. Dr Ow has also asked why is GST levied on Government taxes and fees. The reason is that GST is intended to be levied on the final value of the goods and services consumed. Where there is an indirect tax or levy imposed in the course of supply, the levy is included as part of the final value of the good or service for the computation of GST. It is included for a specific purpose. This is also the practice not only in Singapore but also in the United Kingdom, New Zealand and other countries with value-added tax. The Government and statutory boards have to charge GST and fees when it supplies goods and services to the public in competition with the private sector. This is to ensure that there is a level playing field between the public and private sectors. However, the following fees are not subject to GST. Firstly, we have regulatory fees. Since there is no similar supply of such services in the private sector, there is no need to level the playing field. Secondly, deterrent fees, since there is also no supply of such service in this case. The other question which I have not answered is whether the rebates for HDB dwellers have offset the GST burden of the lower-income families. When the rebates were fixed before the introduction of GST, family groups at different income levels were calculated based on estimates of their consumption patterns, and the rebates were structured to ensure that all of them would end up with a positive gain after the introduction of GST. And this was, in fact, published and printed in last year's Budget book and it is available.”
“Sir, I will answer the last question first. The PCE figures do include expenditures of foreigners who live and work in Singapore. So I think that has been adjusted, but it does not include tourist spending. This is confirmed by the Department of Statistics.”
“So, effectively, if your fundamentals of the economy do not support your exchange rate, there is nothing you can really do to force it in the wrong direction. I will ask RAdm Teo to take over the response to the other questions. 4.45 pm”
“But if there are large variations within months, it will be very harmful. So MAS' primary role is to try and manage currency so that large fluctuations do not take place. I will explain one of the reasons. Let me give an example. Supposing we decide that the Singapore dollar is going too fast, we would like to depreciate it by 10%. What do you do to achieve that? Firstly, you can install capital controls, but installation of capital controls will be disastrous for the economy. So we do not do that. The other tool we have is to intervene. Intervene, say, vis-a-vis the US dollar. The MAS will go into the market to buy US dollars, using Singapore dollars and therefore releasing Singapore dollar liquidity into the market. What is the consequence of that? Interest rates in the domestic market will fall very sharply as we buy more and more US dollars and inject funds into the market. All savings rate will fall. If it falls too low, it damages savings patterns. So that is a negative effect. Eventually, massive intervention will result in massive liquidity in the market which is undesirable. On the other side, if you want to strengthen the Singapore dollar artificially, there are two ways of doing this. You can raise domestic interest rate to make it more attractive for foreigners to bring money in. But that will damage the economy obviously. The other way to do it is to intervene the other way - go into the market and sell US dollars and buy up Singapore dollars, using our reserves to buy up Singapore dollars and reduce its supply. Even with the very generous reserves we have, if the market does not agree with you, all your reserves can disappear in no time, whatsoever, as very much larger countries have found.”
“On the revenue side, for the last few years the problem has been the very large change in our growth rates. This is not entirely excusable but, nevertheless, it is a problem. The main reason why budget surpluses have been under-estimated is that not only has the revenue side increased beyond estimates but because development expenditures have fallen substantially short of estimates. And the reason for this are multiple. Most of the development projects, particularly large ones, incur a lot of gestation time. In between, changes are made because the process may have been improved, tenders are called and prices have been much lower than originally estimated. The cumulative effect of this is under spending on the development side which accounts for a good proportion of the budget surpluses. Officials are working desperately to try and improve its accuracy. But whether one can meet his target of 10%, plus or minus, is something we will have to see. Mr Leong Horn Kee has asked whether the strong Singapore dollar may eventually be harmful to the real economy. I have explained at some length yesterday the reasons for the Singapore dollar being strong, and perhaps I should just go over them very briefly. As I said yesterday, the value of the Singapore dollar relative to other currencies is not determined by the MAS. In the absence of capital controls, no government, no central bank, can fix currency at a rate which it desires. What the MAS does in fact is to try and avoid large fluctuations upwards or downwards in the exchange rate by intervening in the market to buy or sell Singapore dollars to level off changes so that the real economy is not affected. Companies which do export trade can manage appreciation, given sufficient notice.”
“Well, everybody has that. Hopefully, the value is higher and that is the only thing really which saves us. But do not forget that we are not that rich. All we have is cash reserve and we have nothing else or very little. Mr Chew Heng Ching has asked questions on Budgeting for Results (BFR). The Budgeting for Results procedure is a shift in our budgetary process from one which is largely input driven to an output based one. By focusing on outputs, the BFR will bring about better accountability and more entrepreneurial thinking and thus provide better value for money in the public sector. All Ministries are supportive of this approach. Many in fact have offered to implement BFR in their departments and statutory boards, and several have already begun to identify their outputs and set appropriate targets. BFR is a major exercise aimed at ensuring that Government agencies are structured to deliver the outputs efficiently and effectively within available resources. However, some concerns have been raised whether this would result in higher cost being passed on to the public. I would like to assure the House that this will not be so. On the contrary, proper identification of outputs, performance targets and cost will help to deliver greater value for money and therefore the implementation of BFR should not mean higher cost. Mr Low Thia Khiang has asked some detailed questions on development expenditure over payments. I am afraid I do not have the answer to that because it is a matter of detail. I will get it for him and give the answer a little later. Mr Koo Tsai Kee has expressed concern over the very large variance in our estimating process, both for revenue inputs and for expenditure. I agree that the accuracy of our estimates could be improved on.”
“For example, while we may have larger cash reserves than our neighbours like Indonesia and Malaysia, they are much wealthier countries in terms of total resources which include oil and gas under the ground, timber above it, and vast areas of land. To give you an example of how poor we are in certain resource areas, just take land. Indonesia, Malaysia and Singapore have land masses of 1.9 million, 330,000 and 640 square kilometres respectively. If you divide these by the population base of each country, it works out that each Indonesian citizen owns, if you like, 9,500 square metres of land. Malaysia is even richer in this resource. Each Malaysian owns 17,000 square metres. Each poor Singaporean owns only 220 square metres. I think that illustrates the size of our problem. All we have is cash reserve and practically nothing else. That is why we need it more than anybody else.”
“If the economy is over-taxed because of budget surpluses, as is inferred, the usual consequences will be a rise in interest rates, a fall in economic growth, a decline in asset values and a slowdown in the availability of money for infrastructure spending. In Singapore, we have in fact seen just the opposite happening over the last five years. If anything, we have been growing too fast and not too slowly and there is therefore real risk at this point of time of igniting wage inflation which will be very damaging for the economy over the long term. During the debate of the last two days, some Members have asked what is Government's target level of reserves. Should it be three months of imports? Maybe six months? Or, as Mr Koo has suggested, 80% of total imports? My answer is that there need be no upper limit set on the level of reserves. The reason for this is I see no reason that we should set a target for an upper level so long as we are not taxing the economy and causing it to be damaged. Because we have pursued a low tax regime, we are attracting more investments, both local and foreign, and the economy has responded by growing faster which in turn has generated more revenue and therefore more surpluses. And we should be able to do this provided we keep our expenditures under control. Our policy therefore is to accumulate as much surpluses as we can during periods of strong economic growth, provided we do not over-tax the economy. We should also not forget that although we may be cash rich and have larger reserves than many other countries, we are not a wealthy nation because we have a very poor resource base.”
“In other words, if all Government revenue goes into the Consolidated Fund, projects which are desirable and viable have to stand on their own merits in competition with other projects. If you have a series of dedicated funds where specific revenue streams go into, a situation would arise where quite often money is spent simply because it is there and this leads to waste and unnecessary expenditure. I am not saying that no dedicated funds should be created at all. In fact, one of the areas where some dedicated funds may in fact be necessary is to provide funds for the Land Transport Authority which has been proposed by the Minister for Communications. Clearly, it will need a source of revenue and we are now examining what motor-related income streams should be given to this Authority to allow it to operate, but with close scrutiny, so as to reduce the risk of over-funding. 4.30 pm Mr Chay Wai Chuen has expressed concern that continuous collection of budget surpluses may eventually affect the viability of the economy. In my speech yesterday I explained some of the reasons for the origin of these budget surpluses. But since both Mr Chay and Mr Heng Chiang Meng yesterday expressed such concern over the size of the surpluses, I think I should explain again. Let me say again that the large surpluses we have accumulated in recent years were the direct result of the very strong growth of the economy and our careful control of costs. We should not forget that surpluses have only begun to accumulate from 1990 onwards, after the economy recovered fully from the 1985/86 recession. In fact, we had budget deficits in the years of 1986 and 1987, near-balanced budget in 1988, and a small surplus in 1989. It was only from 1990 onwards that significant surpluses have been accumulating.”
“Mr Chew has asked why it was not withdrawn two years ago during the peak of the property market. The explanation is that if the tax was withdrawn during the peak of the market where there was a strong demand for property, it was very likely that the extra cost to the developer would have been immediately passed on to the consumer because demand was so strong and people were quite prepared to pay whatever prices were asked. Indeed, the right time to withdraw it is when the property market is softening and fewer people are chasing properties. Therefore, it is more difficult for the property developers to try and pass on these costs. We believe that property developers have made substantial profits in the last few years and can well afford to absorb the withdrawal of this concession. Dr Ow Chin Hock has mentioned a point on non-tax revenue and suggested that this should be announced together with tax measures during the Budget. We try to do this as much as possible. The few deviations which have taken place in the past have usually been related to CPF changes, for example, or some changes which could not await the Budget. But ideally, I agree with him, all tax and non-tax changes of significance should be announced together in the Budget so as to allow businesses to budget for these costs. We will try to pursue this as far as possible. He has also suggested that some of the non-tax revenues like COEs and levies, for example, should be paid into a dedicated fund for use related to the reasons for introducing the levies in the first place. He has quite rightly said that I dislike this form of dedicated use of funds simply because it inevitably leads to the use of funds for projects which may not stand up to scrutiny on their own.”
“As for charity events, such as fund-raising projects, GST-registered charities are only required to account for GST on that portion of the proceeds relating to the value of the taxable supplies associated with that event. The balance will be treated as donations for which no GST need be paid. For example, IRAS would only require GST to be levied on, say, $50 out of a $500 ticket for a charity dinner. That sum of $50 being the amount paid to the hotel, which is a taxable supply. The balance is tax free. We will ensure that IRAS is always flexible in its application of GST, particularly in relation to charitable organisations. Mr Chew Heng Ching has raised two points in connection with property tax. He says that the property tax reduction generally is not passed on by landlords. I think this is probably true for a significant number of private landlords although, in the case of Government landlords, like JTC and HDB, the tax reductions are passed through. We do not want to compel people to treat this tax as a mandatory pass through. For the time being, we prefer to use persuasion but, if it does not work, we may have to consider tougher measures. He has also asked why we have withdrawn the property tax exemption at this particular time because a number of property developers have complained that this is the wrong time and it is unfair. I would like to point out that property developers should remember that the tax exemption is a concession and not a right which was introduced in 1987 to help the property sector get out of the recession. It was never intended to be a permanent feature and it has been left in place for quite a long time. The property market has clearly come out of the recession and its withdrawal, in fact, is well overdue.”
“Dr Kanwaljit Soin has also asked what we mean by tax neutrality over the medium term. I have already explained this. She has also asked about the GST tax on voluntary welfare organisations. I would like to explain that the GST system has been designed to be as comprehensive as possible. With the exception of certain financial services and the sale or lease of residential properties, the provision of all other goods and services is subject to GST without exception. In line with this principle, Government's position is that charitable organisations should be treated no differently from commercial ventures for GST purposes. I would like to explain why. If we want offsets, they should be given outside the GST system. To provide some form of assistance, non-GST registered voluntary welfare organisations can apply to the Ministry of Community Development for a grant to offset their GST payment on purchases which are incurred in the course of providing direct welfare services. Dr Soin believes that this is a cumbersome process and the procedure could be streamlined. We will certainly look into this problem. However, I should point out that this grant is not extended to GST-registered charitable organisations as they can claim the input-GST incurred on their purchases. Donations from fund raising activities in the form of cash do not attract GST. For donated goods, however, only donors who are registered for GST need to account for tax on the goods. The IRAS would treat such donation as a sale at nominal value provided the charity and the donors are not connected persons. An example is a bakery donates surplus bread. These would probably be charged or accounted for, say, at one cent for GST tax purposes, to maintain the principle but without actually charging much.”
“I believe the majority do that, but of course this is left entirely to the shops. I think this is something I can consider.”
“Not every shop is required compulsorily to tag. But I think the majority of large companies do. Is the Member suggesting that there should be legislation to compel everybody to do so? I am not clear on this point. Mr Koo Tsai Kee: Sir, I am suggesting that GST-registered shops should be compelled to price tag their goods, especially on big ticket items like television and jewellery.”
“I think Mr Leong Horn Kee asked the same question. In the first year of the GST implementation, the Government's stated intention was to over-estimate or give more back to the population from the GST collections in order to cushion the initial effects of GST and to allow for some degree of error in the estimates. So in the first one or two years, or maybe more, we expect the actual collections to be less than the actual pay-outs in the form of rebates and tax cuts. This is done deliberately to cushion the introduction. We expect the tax negative aspect to be phased out within three to five years, by which time the intention would be that whatever is collected in the form of GST would have been entirely refunded in the form of tax offset or direct offset or rebates. That is what we mean by tax neutrality. In other words, the intention of Government is that in the introduction of GST it was not intended to create new revenue. It is a reform of a tax system where we are going to reduce the level of direct taxation and replace it with an indirect taxation in the form of a very comprehensive goods and services tax. In the process, since we do not need new revenue, the introduction is intended to be tax neutral. That is the basis of our definition. Mr Chay Wai Chuen asked whether Government expenditures are included for GST purposes. The answer is no. Government expenditures are taxed but the entire tax is fully recovered because the nature of GST is that it would be passed through ultimately to the final consumer and Government, in this case, as a service provider, is merely an intermediary in collecting this tax, like any other intermediary company. Mr Koo Tsai Kee has proposed that shops should price tag all goods to include GST in the price tag or the GST-free price.”
“Sir, Dr Ow Chin Hock has raised some questions about the large variance between GST collections originally forecast and what was actually collected. He has asked several questions in connection with this issue. He wanted to know whether the PCE which forms the basis for the estimation of GST collections has been consistently under-estimated. I understand from the Department of Statistics which prepared the PCE that there is an element of under-estimation which they are examining. I should like to point out that PCE is based on estimates and there are no definitive figures. We will only accurately know the structure of our consumption expenditure after we have completed a full year of GST collections, by which time we would have a very comprehensive database to update, if necessary, the structure of our PCE. So it is entirely possible that it has been under-estimated. As for the scale of under-estimation, I am not able to say at this time. He has also asked whether some companies may have paid GST inadvertently, although they do not have to. I do not think this has actually happened and probably unlikely to be a reason for the variance. He asked whether the variance could also be due to sizable amounts of unclaimed refunds. The estimated GST collections for FY94 are still estimated, because we have not completed the fiscal year, but IRAS has in fact provided some estimates of the likely refunds which might be due up to 31st March this year. So I do not think that again is a factor which explains the variance. I think these were the three questions he asked in connection with the variance. He has also asked for a definition of what Government means by introducing GST in a tax negative way initially and tax neutral way subsequently.”
“The answer to both questions is no. To answer his second question, it is not designed specifically to help the higher income groups. The tax rebates were given in several forms. One, for those who pay tax, you have to give them a tax rebate. For those who do not pay tax, we have special rental and S&C charges. And these were all calculated to ensure that the average family, I stress the average family, will not be worse off. When we first estimated the GST collection based on the PCE, we were not certain whether they were accurate because these figures may not capture some expenditures, particularly in the services, and we will not know until we have had a full year of GST tax data. Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1995 to 31st March, 1996. ADJOURNMENT Resolved, "That Parliament do now adjourn." -- [Mr Wong Kan Seng]. Adjourned accordingly at Three Minutes to Five o'clock pm. Committee of Supply - ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 1995 TO 31ST MARCH, 1996 (Cols. 337 - 340)”
“In short, the future looks bright, barring unforeseen circumstances. However, we must note that at the end of the day Singapore is a very open economy; highly susceptible to the vagaries in the rest of the world. It is tautological to say that no one can predict the unforeseen. The Kobe disaster, the devaluation of the Mexican peso and the record slide in the US dollar which now threatens the recovery of the Japanese economy all took the world by surprise. What these events highlight is that we should never take the good times we have enjoyed for granted. We have to stay vigilant, capitalise on our strengths and draw upon our resilience to seize the excellent opportunities that abound in the booming Asian economies around us. Singaporeans should ride on the wave of progress that is sweeping through this region, exploit its momentum and raise our nation to even greater heights. I have every confidence in the vitality and versatility of Singaporeans to rise to this challenge. [Applause].”
“Edusave A Member has asked for more assistance schemes to be set up to help the lower income groups. He has suggested that more could be given in Edusave to children from lower income families. Edusave is a scheme designed to maximise the potential of every school-going child. It represents Government's commitment in investing in the most important resource we have, which is its people. I would not like Edusave to become a social assistance scheme. As I have mentioned earlier, we have several assistance schemes for lower income families and their children. These include the Public Assistance Scheme, Small Families Improvement Scheme and the CCC Assistance Scheme. Families with school-going children who require further financial assistance should apply for these schemes which have been specifically set up to assist them. White Collar Crime Prof. Walter Woon has expressed concern that the existing penalties are insufficient to deter white collar criminals. I agree with him and I would like to inform him that I have already asked my officials to work with the Attorney-General to review the adequacy of penalties under the various Acts under my purview. Nevertheless, I will convey Prof. Woon's concerns to the Attorney-General. Prof. Woon may also be interested to know that the Criminal Procedure Code and the Penal Codes are already currently under review. I am also aware of Prof. Woon's pet monster, the Companies Act, and I will refer his suggestions to my officials for consideration. Mr Speaker, Sir, let me now sum up the debate. We have had two years of exceptional growth. The outlook for 1995, while slightly less sanguine, is nevertheless still very rosy. The projected economic growth of 7.5% to 8.5% still surpasses our medium growth range of 6% to 7%.”
“Again, let me emphasise that the $200 CPF top-up is not intended to be a handout or a welfare scheme. There are other schemes in place to help the lower income groups. One of them is Medifund which, through contributions from the annual budget surpluses, provides a safety net for those in the lower income group who are unable to afford basic healthcare. Other schemes include the Public Assistance Scheme, Small Families Improvement Scheme and the CCC Assistance Scheme. The Member for Hong Kah GRC has suggested that the Government should top up the accounts of citizens who cannot attain the CPF Minimum Sum even after working until age 60. The Government recognises that there may be a case to help the older generation of Singaporeans who have missed out on the CPF scheme for the most part of their working life. However, this should be looked into separately from the top-up scheme. The Member for Ayer Rajah has suggested that the $300 and $200 CPF top-up be credited into the Medisave Account of those who are not paying CPF and those who are above 65 years of age. The top-ups will be credited to the CPF Ordinary Account to give citizens maximum flexibility on the use of the grant. Citizens can choose subsequently to credit all or part of the top-ups to their Medisave Accounts, if they choose to do so, and to open Medisave Accounts for this purpose. Use of CPF Funds Mr Peh Chin Hua has asked the Government to consider allowing Singaporeans to invest their CPF in certain designated overseas projects. This is not advisable. The risks involved in investments in foreign projects are high. It is also not practical to designate specific projects for investment of CPF funds. CPF members who invest in this way will receive little or no protection for their savings.”
“CPF SOTUS The aim of SOTUS is to help citizens to enhance their assets through share ownership and other investments. The top-up should be in cash to allow citizens to choose whether to use it to purchase shares, invest in property, or simply retain as cash in their CPF accounts. In other words, the investment decision should be left to individual citizens. Some Members have questioned the need for co-payment under CPF SOTUS and pointed out the burden this imposes on the lower income groups. We should remember that CPF SOTUS is not intended as a handout or welfare benefit. Hence, the principle of co-payment. Seen in this light, it is appropriate that the individual citizen be prepared to come up with his share of the cost for enhancing his own assets. In the case of SOTUS II, he has to deposit a sum of $750 in his CPF account over an 18-month period before he is eligible for the $300 top-up. The deposit requirement, which works out to $42 per month, has been set sufficiently low to enable most eligible citizens to qualify for the top-up. For the first SOTUS exercise which had a similar deposit arrangement, 1.17 million of eligible citizens were able to enjoy the full top-up of $200. Another 90,000 citizens who were unable to deposit the full amount also received a pro-rated top-up. $200 CPF Top-up The objective of the $200 CPF top-up which I announced in this year's Budget is different. It is meant to reward all our citizens who have contributed to the good economy last year. One could regard it as a kind of dividend payment to all citizen shareholders. As such, every Singaporean, rich or poor, whether working or not, should be eligible for the top-up as long as he is aged 21 and above and has a CPF account.”
“There are about 250,000 individuals aged 60 and above in Singapore. Of these, only about 5% are paying income tax. The other 95% do not pay income tax, and therefore cannot be helped through the personal income tax route. Nonetheless, the Government recognises the contributions of these older Singaporeans to Singapore's development and is looking into ways to assist them through non-tax routes. Tax Incentives for Care and Re-employment of Older Workers The Member for Tanjong Pagar GRC may wish to know that older workers are already eligible for higher earned income relief. The relief which is given to encourage skilled and experienced people to work beyond their normal retirement age is $3,000 for those over 55 years and $4,000 for those over 60 years. The lower CPF contribution rate for older workers has also made it easier for employers to employ such workers. There is thus no need for new tax incentives on this issue at this time. Skills Development Fund Dr Ow Chin Hock has suggested that part of the collection of the foreign workers levy be channelled to enlarge the resources of the Skills Development Fund so as to provide more incentives and programmes, particularly for on-the-job training. The monthly salary ceiling for Skills Development Levy will be raised from $750 to $1,000 with effect from 1st April 1995. This is estimated to increase the funds available for skills development by $14 million in FY95 and will enable more skills upgrading programmes and on-the-job training to be undertaken. There is thus no need for Government to contribute to the SDF at this point of time. The Government can consider doing so should there be a shortfall in the SDF. However, even in that event, the contribution need not be tied to the foreign workers levy collection.”
“Hong Kong's personal reliefs also appear to be more generous. However, the reality is that our personal income tax burden is lower than Hong Kong's, except for some very high income people. By way of illustration, a working couple with two children will pay less income tax in Singapore than in Hong Kong for assessable incomes not exceeding $459,700. Also, our average tax burden is lower than Hong Kong's. In the Year of Assessment 1993, Singapore's average tax rate for resident individuals, which is a measure of the total tax assessed over the total assessable income, was just 7%. The corresponding figure for Hong Kong was 9%. S&C and Rental Rebates The Member for Cheng San GRC has commented that the relief given to the 1- to 5-room HDB flat residents in terms of service and conservancy (S&C) charges and rental rebates is too low compared to the revenue loss for the 10% rebate given to individuals. The 10% tax rebate is given to individuals who pay income tax and contribute directly towards the cost of public services. On the other hand, the HDB S&C and rental rebates benefit mainly individuals who do not pay income tax. Nonetheless, as these people have also contributed to the growth of the economy, the Government has decided to share the nation's wealth with them by giving them these rebates. However, there is a need for the Government to ensure that relief given in this form is not too excessive and does not result in a welfare mentality. Otherwise, Singaporeans will come to expect increases in such handouts year after year. Rising Cost of Living for Retirees Mr Chin Harn Tong has expressed concern for retirees. He feels that retirees are experiencing difficulties in coping with the rising cost of living. Therefore, more should be done to assist them.”
“Nonetheless, in my Budget last year, I had announced two tax changes to help Singaporeans working abroad. The first is the reduction of tax rates used to compute non-resident tax reliefs in Singapore. The second is the tax exemption of voluntary CPF contributions by overseas posted employees which are obligatory by contract of employment. These tax changes will result in a lower tax burden on the Singapore source income of Singaporeans working abroad. They have taken effect from the Year of Assessment 1995. We will continue to look into what other personal tax changes can be made to encourage Singaporean employees to venture abroad. Personal Income Tax Dr Wong Kwei Cheong has asked that the 10% personal income tax rebate be made a permanent feature of our tax system. He has also suggested that the personal income tax marginal rate be reduced to the corporate tax rate level. For the Year of Assessment 1995, a 10% rebate has been given. Its effect is equivalent to a 3% proportional cut in income tax rates. This method of lowering the personal income tax burden of individuals provides the Government with the flexibility to vary the reduction in income taxes according to Singapore's economic performance. The use of this method must be viewed in the context of Singapore already having one of the most competitive personal income tax systems in the world. The top marginal personal income tax rates in Malaysia, Taiwan, South Korea, Australia and Japan are 32%, 40%, 45%, 47% and 50% respectively. Ours is only 30%. In this regard, some people may assert that Hong Kong has a more favourable personal income tax system than Singapore. Hong Kong's marginal tax rates range from 2% to 20%, with a cap of 15% on the effective tax rate.”
“However, Singaporeans must realise that there is only so much that the Government can do. We cannot promise every Singaporean a landed property nor enable everyone to own a car, as the Prime Minister has said. As I have also said in my Budget Statement, the quality of life in Singapore has to be taken as a package. Tax Changes to Encourage Singaporeans to Work Abroad Some Members have asked the Government to do more to help Singaporeans who are posted overseas to work. When Singaporeans work abroad, they are liable for personal income taxes in two countries; firstly in Singapore, and secondly, in the country they are working in. This gives rise to two major concerns. One is the possibility of double taxation of the same income. The other is the likelihood that Singaporeans will have to pay higher personal income taxes in the country in which they are working. To address the concern of double taxation, the Government has concluded 30 Avoidance of Double Taxation Agreements (DTAs) with other countries. For countries with which Singapore has yet to conclude DTAs, the Government has been giving unilateral tax credits for foreign tax paid on employment income earned by Singaporeans in these countries since the Year of Assessment 1993. The second concern of Singaporeans who have worked abroad is that they have to pay higher personal income taxes in the countries in which they are working. This arises because most other countries impose higher personal income tax burdens than Singapore. However, we cannot recognise the additional income taxes paid to other governments for Singapore's personal income tax purposes. Doing so would be tantamount to the Singapore treasury paying the additional income taxes, on behalf of Singaporeans working abroad, to foreign treasuries.”
“Some small businessmen who rent their premises have complained that the property tax cut will only benefit landlords, as they do not pass on the tax cut to their tenants in the form of lower rentals. I am pleased to say that the Jurong Town Corporation had passed on their tax savings to their tenants last year and are likely to do so again this year. HDB is currently looking into doing the same. I would like to urge private landlords to follow their example and do likewise. The certainty that the property tax rate will be cut to 12% over the next couple of years should also give tenants greater scope to negotiate for better rental rates with their landlords, and thus benefit from the tax cut. Rising Aspirations of Singaporeans Some Members have asked what the Government plans to do to meet the rising aspirations of younger Singaporeans. It is good for the nation as a whole for each generation to have higher aspirations than the last. That is the way to progress, as aspirations are what drive all of us to apply our minds to achieve even more. However, a distinction needs to be drawn between realistic and unrealistic aspirations. While realistic aspirations drive progress, unrealistic ones simply breed resentment and disenchantment. Singaporeans should realise that dreams will forever remain as castles in the sky if they are not tempered with a dose of reality. The Government has tried and will continue to try to meet the aspirations of all Singaporeans. We will continue to invest heavily in education to enable every child to flourish, in our road system to enable more Singaporeans to own cars, in our public transport system to make it more comfortable and convenient for commuters. More land will also be released to meet the housing needs of the population.”
“Of these, 25 have gone public with a market capitalization of $3.8 billion. In addition, a $120 million venture capital fund was set up in 1994 for investment in small and medium-sized businesses in Singapore with the potential to expand into the region. The fund will be managed by the Regional Investment Company which will in turn be jointly managed by the Economic Development Board Investments Pte Ltd and Transpac Capital. Besides the venture capital fund, the Government also provides other forms of assistance to help local SMEs venture overseas. The Local Enterprise Finance Scheme (Overseas) helps local enterprises to set up overseas operations through low-cost loans. Local entrepreneurs can also apply for grants provided under the Market and Investment Development Assistance Scheme to help cover expenses incurred for activities such as feasibility studies, overseas missions and marketing and development trips. In addition, double tax deductions are allowed against income of approved expenditure incurred in initiating and developing investment outside Singapore. Property Tax Some businessmen have complained that the property tax cut will not help to reduce business cost. They argue that its benefit is negated by increased annual values of their properties. The annual value of a property is determined by market forces. Just as annual values are adjusted upwards when the property market is buoyant, it is also readjusted downwards when rentals fall. Businessmen should remember that without a tax cut, their property tax burden would have been even higher when annual values rise.”
“This is because the multi-agency network in operation now has already made available an immense and diverse range of expertise needed by SMEs to improve themselves. This expertise comes from the various specialist agencies such as the National Computer Board providing IT expertise, NPB - productivity expertise, SISIR - technical expertise, etc. Setting up a separate body would in effect be recreating the various expertise. This is essentially duplicating existing agencies' SME developmental efforts. Moreover, the development of different expertise is difficult to achieve by any one organisation. Two-tier Corporate Tax To help the SMEs, some have proposed that the Government implement a two-tier corporate tax system, with a lower tax rate for smaller companies. Such a tax system will simply encourage tax avoidance through business splitting. The better approach, which we are adopting, would be to lower corporate tax across-the-board over time. Measures to Assist the Retail Sector There have been calls for the Government to come up with some measures to help the ailing retail sector. As the Minister for Trade and Industry will be addressing this issue specifically during the Committee of Supply proceedings, I will not deal with it now. Venture Capital Funds Some Members have called for the Government to do more to help local entrepreneurs venture overseas. I would like to assure Members that there are already a number of measures in place to help local entrepreneurs do so. The pool of venture capital funds allocated to assist local entrepreneurs venture overseas has increased by 33% from $2.6 billion in 1993 to an estimated $3.5 billion in 1994. To-date, more than 150 local companies have received venture capital funding.”
“Others have called for greater coordination amongst the various Government agencies in this respect. In fact, many schemes have already been put in place to assist them over the years. Moreover, an extensive multi-agency network has been established to provide assistance in a coordinated manner. Currently, this network involves six statutory boards, nine industry associations and four institutions of higher learning, helping SMEs to develop their operations. I will highlight a few major ones. The Local Enterprise Finance Scheme provides low cost loans to help local companies invest in modern and sophisticated machinery to upgrade their operations and purchase larger factories to expand their capacity. Since its inception, a total of over $3.4 billion worth of loans has been extended under this scheme to help fund about 14,700 projects. The Local Enterprise Technical Assistance Scheme provides grants to help SMEs modernise, upgrade and improve their management and business operations through seeking external expertise and training. In 1994, a total of $8.6 million was given to 656 approved cases. The Business Development Scheme provides grants to help SMEs develop business opportunities in international markets through organised overseas missions. A total of $600,000 was given to 190 approved cases in 1994. Local small and medium-sized enterprises are integral to the economic development of Singapore. They are encouraged to upgrade their operations and technology. In this regard, Government will continue its efforts to facilitate their growth and development. There is, however, no need to set up a new agency to focus on the needs of the SMEs.”
“The objective of the Monetary Authority of Singapore exchange rate policy is to promote long term export competitiveness and to sustain economic growth by keeping inflation low. A relatively strong dollar has allowed us to neutralise imported inflation. This is an important consideration, since imported consumer goods, capital and intermediate inputs account for some 70% of our expenditure and exports. Given our tight labour market conditions, a strong Singapore dollar has also helped to alleviate overheating in the economy and the labour market. By curtailing labour demand and achieving lower CPI inflation, wage growth has also been lower than what it would otherwise have been without an appreciation of the currency. Productivity growth has also been stronger, as the strong Singapore dollar has propelled businesses to upgrade and automate. It is noteworthy that, apart from China, Singapore's GDP growth - averaging about 10% per annum over the last two years - has been the strongest in Asia. On the other hand, our inflation has been one of the lowest. Indeed, in a situation of full employment, holding down the Singapore dollar artificially, even if we could do this, would only buy temporary improvement in competitiveness. This will be quickly undermined by its inflationary consequences. The MAS recognises that exchange rate appreciation poses short term adjustment problems for exporters. It also recognises the imbalances in demand conditions across different industries. The MAS has thus sought to ensure gradual appreciation of the Singapore dollar against a basket of currencies of our main trading partners. Small and Medium-sized Enterprises Some Members are concerned that little has been done to help the local Small and Medium-sized Enterprises (SMEs).”
“Nonetheless, as a measure to reduce business costs and enhance our long term competitiveness, I had reduced the property tax rate for commercial, industrial and let out residential properties by 1% last year, and by a further 2% this year. I have also committed to reducing the property tax rate to 12% in subsequent years. Strong Singapore Dollar Some Members have questioned the objectives of maintaining a strong Singapore dollar and expressed concern about its impact on our overall competitiveness. I would like to point out to Members that it is not the MAS but the international market which determines the value of the Singapore dollar. The value of a currency is determined by the international market's evaluation of a country's fundamentals. The Singapore dollar is strong because our fundamentals are strong. We have a strong stable Government, large reserves, no foreign debt, current account and budget surpluses, low inflation and large inflows of direct foreign investment. All these are factors which support the appreciation of the Singapore dollar against the currencies of other countries which are deficient in one or more of these fundamentals. MAS role is to manage the movement of the Singapore dollar against a basket of currencies of its main trading partners to avoid large specula- tive movements, either upwards or downwards as these can be damaging to the real economy. The Singapore dollar has appreciated by about 3% against the US dollar since the beginning of this year. This has, however, reflected the US dollar's weakness in global currency markets. Against the Japanese Yen and major European currencies, the Singapore dollar has in fact weakened by as much as 4-8%.”
“Corporate Tax As expected, the business community was disappointed with this Budget as it did not contain a corporate tax cut. I would like to reiterate that the corporate tax rate of 25% is our medium term target. Our existing tax rate of 27% is already very competitive. With our economy entering into its third year of very buoyant growth, it is unnecessary, and indeed unwise, for us to further stimulate the economy through another cut in the corporate tax rate. Otherwise, we run the risk of overheating the economy, fuelling inflation and undermining our competitiveness. As a measure of our competitiveness, Members should not forget that we attracted a record of $5.8 billion of foreign investment commitments in 1994. Business Costs Some Members have expressed disappointment that nothing was done in this Budget to reduce business costs. They have called for the Government to provide some means to help restore our competitiveness. While Government is fully aware of the need to keep our business costs competitive, we must at the same time recognise that our operating costs reflect our basic resource constraints. Singapore will not be able to match the lower costs of labour, land and natural resources in the emerging economies. We should instead aim to be competitive in high value added and high technology economic activities, while keeping costs as low as possible. In the long run, we must focus on strengthening our capability to enhance our competitiveness. We can achieve this through developing our human resources, our core capabilities in key industries and our local enterprises.”
“Firstly, I should say that although details of the annual budgetary allocation to MINDEF are not made explicit in the House, this allocation is part of the overall budget passed by this House. In passing the overall budget, I am required to furnish a statement to say whether or not the budget is likely to draw on the past reserves. There is therefore no likelihood of the budgetary allocation for defence being used to draw down on past reserves without the President knowing it. The rationale for amendments to the Constitution to provide that certain Articles in the Constitution shall not apply to any defence and security measures was clearly spelt out in the speech for the Second Reading of the Constitution (Amendment No. 2) Bill 1994 on 25th August 1994 and I will not go over the same ground. Foreigners Working in Financial Sector The Member for Cheng San GRC has also asked if the same stringent conditions imposed on locals wishing to work in the financial sector are also applied to foreigners. I would like to assure the Member that this is so for foreigners working in the banking and securities industries. In the example on remisiers he has quoted, I would like to inform him that foreigners have to pass the same examinations that Singaporeans are required to pass, in order to apply to the SES to be remisiers. Currently, individuals, whether local or foreign, working in financial futures companies do not need to be licensed by the MAS. However, when the Futures Trading (Amendment) Act which was passed by Parliament on 1st March 1995 comes into effect, both local and foreign individuals working in the financial futures industry would have to be licensed by MAS and be subject to the same licensing criteria.”
“The Government is committed to reducing the overall burden of taxes and levies on the economy over the long term. However, in the context of our recent rapid economic growth of well above our potential growth rate of 6-7% per annum, running a budget surplus is an appropriate macro-economic policy. An expansionary fiscal policy would aggravate the overheating of the economy and worsen labour cost pressures. Our budget surpluses are not reflective of high taxes. The tax burden, comprising individual and corporate income taxes, property tax and consumption tax, is lower than that of most industrialised countries. It is also no higher than that of other ASEAN countries and the Asian NIEs (except Hong Kong). Recent budget surpluses were higher than expected largely because of revenues from our use of fiscal measures to allocate scarce resources through the COE system and foreign worker levies. These are efficient price mechanisms, but the intention was not to boost Government revenues. On the expenditure side, Government has been consistently investing heavily in education, health care, public housing and infrastructure development. Efforts have also been made to channel some of the surpluses back to citizens via schemes such as Edusave, Medifund and SOTUS. Elected President Mr Ling How Doong touched on the amendments to the Constitution made last year to say that the Elected President's powers to safeguard past reserves had been unduly compromised in the area of defence and security. He alleged that since defence allocation is not transparent, what safeguards were there to prevent future Governments from using the defence allocation to provide subsidies and handouts resulting in a draw on past reserves.”