Richard Hu Tsu Tau
Singapore
“Sir, I think it is eminently fair, because the proposal really is for the Government to spend money to give shares to Singapore citizens. Either you agree or you do not agree. Or, if you agree, perhaps you consider the amounts insufficient or too much.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time". The purpose of this Bill is to make provision in accordance with Articles 148(2) and 148C(2) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act, 2001.”
“I think the Prime Minister and DPM Lee have already explained it will be based on income levels, with people living in flats as a proxy. So there is no political content in it. It depends on the income level, whether you have served national service or whether you are an elderly person.”
“I really do not understand. I know you are arguing on technicality for which I agree that you may have a point. But, nevertheless, because it is a proposal to share Singapore's surpluses with the population, the distribution is not something which you can argue against.”
“As I said, the estimates will be available around mid-October. I do not think, at this time, I want to give a specific date when the second package will be announced, but it will be done as soon as practicable. IN-PRINCIPLE AGREEMENT WITH MALAYSIA ON OUTSTANDING BILATERAL ISSUES (Assessment) 4.”
“Mr Speaker, Sir, when the $2.2 billion off-Budget package was announced in July this year, we said that the Government would do more to assist Singaporeans if the global economic situation worsened in the coming months.”
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“Sir, I will take points under (1)(b), (1)(e) and (1)(j) on the Order Paper Supplement and the Minister of State will take the subjects relating to the Housing and Development Board and Town Councils. First, Dr Tan Cheng Bock has raised some questions about the review of planning guidelines and design flexibility. I thank him for the support of the new initiatives we have introduced recently. He is specifically concerned about problems which might arise from the development of strata bungalows because it may not be easy for the management corporation set up to agree, particularly where the number of units may be small, and to obtain a majority may be difficult. Under the Strata Titles Act, for infrastructural changes, 25% or more of the members of the management corporation can veto an infrastructure project. I think this is a problem which is common to all democratic institutions where the majority decision has to be upheld. I do not think it is Government's job to try and set up guidelines further than the Strata Titles Act. But I would imagine that in the case of strata bungalows, the common share facilities are relatively small. Generally, they will be things like swimming pools, sports facilities and items which are separate from the dwelling units themselves. So hopefully the areas for disagreement may be much smaller. He has also showed interest in the sale of sites for individual small plots and he is concerned as to whether there should not be restrictions on the number of units which can be bought by single individuals. At the moment, there is no intention to impose a unit limit. In other words, anyone who wants to bid for one or all of the units is allowed to do so. I am aware that there is some reservation about large developers monopolising these units.”
“If the cost of living rises to a point where this becomes necessary, we will certainly review it.”
“Sir, the Government has not pegged pensions to the consumer price index, nor do I think that it is desirable to do so. Because it will mean that a small group of Singaporeans will be made inflation proof whereas everybody else is not. The Government does not revise pension payments generally but does give modest assistance to those in need, particularly those drawing low pensions through the Singapore Allowance. This was last revised in 1986 when it was increased from $75 to $100 for those with a pension ceiling of up to $850 per month. Since then, we have announced that the Singapore Allowance will be further increased to $130 with the ceiling lifted to $900. We believe that this increase should be more than adequate to offset the GST payable by this group of pensioners who earn $1,000 and below. Based on household income surveys, those who earn below $500 a month will incur a GST liability of $171 per year. And those who earn between $500 and $1,000 per month will incur a GST liability of $259 per annum. Both these groups will be more than covered by the $30 per month increase in the Singapore Allowance. The Singapore Allowance will, of course, be reviewed again in the future, from time to time, where there is a need to do so.”
“Finally, he has said that the oil companies have designed their retirement schemes on the Government model. And he asked why they should be taxed when the Government retirement benefits are not taxed. I have to explain that in the Government Pension Scheme, Government civil servants receive a much lower rate of CPF contributions both by himself and by his employer, which is the Government. In other words, the Government pays a contribution of only 10.8% towards CPF instead of the 18% in the private sector and his own contribution is only 13.2% instead of the 22% in the private sector. This means that he receives a substantially lower tax benefit during the course of his career than the private sector employee. On balance, taking into account the substantially lower CPF contribution, both by the employer and his own contribution, the freedom from tax after he retires about neutralizes the impact of his lower tax privileges during the main part of his career.”
“For example, any fee paid to a doctor is income in the doctor's hands even though it is part of the after-tax income of the patient. So this is parallel with the maintenance payments. In practice, we believe that the number of voluntary maintenance payments actually made is very small. It hardly ever happens. Most of the payments are made through legal requirements. So I am afraid the tax request cannot be granted. Finally, Mr Koo Tsai Kee has raised questions about retirement benefits. I would like to say that Government has set up the CPF system to provide all workers with savings for basic old-age housing and health care needs. The compulsory contributions to the CPF will, therefore, serve as a maximum level of tax retirement benefits allowed by Government. And Government will not exempt a lower tax rate for retirement benefits in excess of the 40% compulsory CPF limit. Even with the tax changes we have proposed, Singapore's tax treatment of retirement benefits will still be more generous than in most other countries. Mr Koo has also asked whether, for those who have started working much earlier and at a time when the CPF rates were low and are beginning to retire now, they could not be treated separately. We recognise that these people do face a special problem but there is no provision for separate treatment at this time. We are prepared to take a look at this but I would not encourage a great deal of optimism at this stage. It is a special problem affecting all retirees and for people who have started earning at an early stage of their career where CPF rates were relatively low. It is something that we will take a look at but I will not promise anything at this stage.”
“Mr Chia's argument seems to be premised on the belief that when property values rise, those who occupy shops which they own will lose out relative to those who rent. I would like to point out that those who rent, in fact, would suffer probably even higher costs because if property values rise, the owner's property tax will rise and they will increase their rents proportionately. So I do not see how an owner-occupied person should be worse off than a rent-paying person. Mr Chia has also proposed that we should have a cap on property tax payment and he also suggested that the full payment be deferred until the shop is disposed of. I am not in favour of this as it will create vast inefficiency. If the shop is never sold, both the owner and the tax authority would end up by accounting for tax liability which snowballs but is never paid. In the meantime, other Singaporeans would have to pay for public services that would have, otherwise, been financed through the property tax. The deferred payment would also, therefore, discriminate against businesses that operate from rented premises. For these reasons, I do not think we can accept such a proposal. Dr Soin has asked whether the tax-free status of voluntary maintenance payments should not also be applied to maintenance payments legally provided under the law. The difference is that any voluntary-made payment is deemed to be a gift and therefore not considered for tax purposes. Whereas a legal obligation to pay is deemed as taxable income and, therefore, liable to tax. It is a fundamental principle in tax that the taxability of a receipt is independent on whether or not it comes from after-tax income.”
“Also IRAS allows all taxpayers, whether individuals or companies, to pay their taxes with up to 12 monthly instalments, and the instalment system is interest-free. For these reasons, we think that it is not necessary to pay interest on refunds because of the rather generous system which we already operate. The tax authority also does not automatically make refunds on overpayments. Normally, it would carry forward the excess of the credit to the taxpayer and a refund is only made if the taxpayer specifically requests it. In 1992, for example, the tax authority made about 40,000 such refunds. So on that basis, I think it is unlikely we will change the system. Mr Lew Syn Pau asked a question previously raised by Dr Ow which I did not answer. I will take the opportunity to respond to both questions at the same time. Currently, an owner who resides in a property is exempt from income tax if its net annual value is below $75,000. This is actually a tax on notional income or income on which it is deemed to be earned. The exemption limit of $75,000 was deliberately fixed at quite a high rate to encourage home ownership and to tax only the very rich. Although the income ceiling of $75,000 was set in 1981, it is still generous by today's standards as most owner-occupied residences have net annual values well below $75,000. As at February this year, only 390 out of 628,000 owner-occupied residences or 0.06% have net annual values exceeding $75,000. So I do not believe that it is necessary to increase the exemption limit. Mr Chia Shi Teck has asked whether owner-occupied HDB shops or other people occupying owner-occupied shops should enjoy a special preferential rate.”
“Sir, Mr Chew Heng Ching has asked whether it is possible to grant tax relief for parents who are below 55. I would like to say that the aged parents relief system was introduced in 1975, primarily to encourage children to look after their parents in their old age. And the minimum age set at that time was 55 which was the compulsory retirement age. Currently, we have a tight labour market and we will be legislating for the compulsory retirement age to be raised to 60. To lower the mini sm age of parents for the claim of the relief will, therefore, be a retrogressive step. I understand that there are some cases where people retired for special reasons, but to reduce the age level below 55 would, in fact, encourage people to get out of the labour market altogether which is something we do not want to do. In the case of parents who are below the age of 55, they will qualify for the $3,500 parents' relief if they are handicapped physically or who are mentally handicapped and do not have separate incomes. Sir, it is unlikely we will make such a change. Mr Chew has also asked why the Inland Revenue Authority is not paying interest on delayed refunds of tax. The difference is as follows. Countries which pay interest on refunds of tax overpaid impose a tax on a current year basis. In other words, they operate the pay-as-you-earn system which means that the tax is paid in the year that the income is earned. Also refunds, if any, are only given in the following year. In such a system, therefore, it is fair to pay interest on late refunds. However, in Singapore, our income taxes are paid on a preceding year basis. This means that no tax is paid until the year after the income is earned.”
“Sir, I thank the Member for Yuhua for reminding me of this issue again. I did mention in my Budget speech that along with the capping of tax deduction for medical expenses, the medical benefits for public sector employees will also be reviewed. Changes to civil service medical benefits, which include changes to the benefits for female employees, will be part of this package and the announcement will probably be made in the second half of this year.”
“Practically all are in the process of converting or moving towards the system. Dr Ow Chin Hock: Thank you. Sir, I beg leave to withdraw my amendment. Amendment, by leave, withdrawn.”
“Sir, I would like to thank Dr Ow for his support of SIGMA in general and for his comments on the efficacy of SIGMA in the past. I have already reported on the progress of the SIGMA project in my Budget speech which I shall not repeat here. He has asked about the total project cost. As the project has not been fully implemented, it is too early to state the total project cost. However, I would like to assure Dr Ow that my Ministry is mindful of the need to control the cost of implementation and to get value for money. As far as possible, existing computer systems and inhouse expertise are used in the introduction of SIGMA. To-date, the Ministry has spent only $3 million on capital expenditure and initial consultancy studies. A total number of 17 accountants have been recruited to enhance accounting capability of the Accountant-General's Department and Ministries. SIGMA represents a significant step forward in the management of Government resources. Ministries are now in a better position to understand the full cost of their activities, to identify inefficient, wasteful and unproductive activities, reprioritise functions and to redeploy financial and manpower resources to areas responsive to the public demand. We are looking forward to the use of SIGMA to help pave the way finally for the implementation of activity-based costing, as suggested by Mr Lau Ping Sum. This will enable the Government to better control its costs and keep expenditures at low levels and at the same time to meet higher quality of services expected by members of the public.”
“At present, there is no intention to do so.”
“At the time of the exercise. Most people, when they exercise it, are unable to realise the gain because of cash flow problems. You either do a back-to-back arrangement whereby you exercise and sell at the same time and the taxable proportion will be the gain you have incurred. That will be the normal process. If there are variations in which he has some uncertainty, perhaps he could let me know in detail. He has asked whether Government will consider the setting up of an Exim Bank or some form of insurance. This question was asked earlier by him. I believe that the Economic Development Board and the Trade Development Board already administer a number of financial schemes to help local companies venture overseas. We also have bilateral investment guarantee agreements with 17 countries. These include ASEAN, Vietnam and the People's Republic of China. We are continuing to negotiate more investment guarantee agreements with other countries and these agreements reduce greatly the political risk faced by local companies operating in these countries. We are currently negotiating such agreements with another nine countries. However, we recognise that in specific cases the risks involved may be significant and we will examine the types of insurance coverage that could be given to local companies in venturing overseas to facilitate their risk taking. We will also examine whether the setting up of an Exim Bank is possible and if there is a way of doing this at this juncture.”
“In other words, you realise a capital gain.”
“Finally, Mr Chia has said that certain individuals in the Government are viewed with disgust. If there are indeed such individuals, I will appreciate it if he will let me know their names, privately. Mr Chay Wai Chuen supports capping of medical expenses but recommends a variation in which the capping is applied on an individual basis. I am not sure that it is really workable. The cap is on the company and it is up to the company to determine its internal policies on how the cap should be distributed. It should form part of the remuneration package which a company negotiates with its employees, rather than require Government to impose selective caps on different categories of staff which will become very messy and probably be an impractical scheme. He has asked specifically whether medical insurance expenses will come under the cap. I would assume that since it is an expense, it should be part of the cap. Finally, Mr Robert Chua has raised several points. First, he hopes that the property tax rebate can be reduced permanently. This is a matter which my Ministry is considering, whether our property tax rates are at levels which we should continue to maintain over the long term. He has also asked whether JTC could be asked to pass on the property tax rebate. I have, in fact, in my Budget Speech said specifically that all Government-related property owning companies will be asked to pass on all the rebates to their tenants. I hope that the private sector landlords will try to do at least half of that. He has asked about the tax liability of share options. My recollection is that when a share option is exercised, presumably it would be in the case where the shares have gone up in value. The tax liability will only fall if you sell it at the same time.”
“Unfortunately, although everyone agreed to remove technical impediments, the majority of the organisations indicated they were ready to receive civil servants but were not prepared to release their employees for assignments in the civil service. In other words, it was a one way move. Owing to staff shortages in the Administrative Service and the unwillingness of other organisations to engage in a two-way exchange, this scheme unfortunately had to be shelved. The civil service is monitoring the situation and we are prepared to revive the scheme if the private sector finds it attractive now. In the meantime, other avenues for interaction between top executives in the public and private sectors have been developed. For a number of years, Government has made it a point to form committees comprising key persons from both the private and public sectors to consider and formulate national policies. Examples are the Economic Committee and the Business Enterprise Committee. Others include the 1989 National Marketing Workshop and the various sub-committees and workshops which formulate the strategic economic plan. There are other ways for the private and public sector executives to interact. The Institute of Policy Studies holds regular seminars and discussions and, where appropriate, the newly established Civil Service College will invite private sector individuals to participate in its programmes for senior Government officials. For many years, senior civil servants have served on boards of Government-linked companies and this is another means in which they and the private sector can interact. We are receptive to taking up the Member's suggestion of giving Administrative Officers overseas assignments when suitable opportunities arise.”
“We have also given greater autonomy to our Ministries through our block vote budgeting system which allows Ministries greater flexibility to manage their own resources. Some budgetary allocations, such as capitation grants to independent schools and subventions to restructured hospitals, are based on full costs, including depreciation. To make Ministries more accountable to Members of Parliament and the public, it publishes performance indicators of key activities in our Budget book. We feel, therefore, that there is no compelling reason for us to introduce accrual accounting into our accounts at this stage. One has to bear in mind that accrual accounting also allows greater scope for subjectivity and window dressing than cash accounting which is a much more conservative form of accounting. However, we will continue to adopt those aspects of accrual accounting which are beneficial and, over time, we will move to what we consider the most efficient system. Mr Chia Shi Teck has raised some suggestions for trying to bring the private and public sector components together. I thank him for his suggestions. I agree that it is essential for the private and public sectors to have a much better understanding of each other as this will ensure good teamwork and facilitate greater growth of the economy as a whole. 2.45 pm The civil service itself initiated a cross posting scheme in 1987. It is modelled after a scheme used in the United Kingdom where officers were posted to the private sector and vice versa for periods between 12 and 18 months. Fifteen statutory boards and 23 companies were invited to help formulate and participate in the scheme.”
“For his information, I would tell him that we have, in fact, sent officers from the Ministry of Finance to study the New Zealand government's experience in implementing the accrual-based system. Their conclusion is that the purposes for which the New Zealand government introduced the accrual accounting can be largely achieved using our current system of cash accounting. Let me elaborate. The implementation of the accrual-based budgeting and accounting system in New Zealand was part of a broad-based public finance reform designed to provide greater accountability and to improve the performance of their government departments. The reform was aimed at tightening expenditure control and reducing expenditure as a proportion of GDP so as to help reduce their budget deficit. A key element of the reform was greater autonomy to departments in managing their resources. In order for this not to lead to abuse, departments have been made to account for their operations through more stringent financial reporting. They have, therefore, introduced accrual accounting to try and ensure that Government outputs are accurately costed and proper records of capital assets are maintained. Both these objectives can be achieved without incorporating special accrual accounting into our budget or statutory accounts. The path taken by my Ministry to achieve these objectives is slightly different. We have introduced Management Accounting System, or SIGMA, in our Ministries to enable civil service managers to know the full cost of departmental outputs and activities. SIGMA uses accrual accounting. We have also implemented a fixed assets system which ensures that capital assets of Ministries are properly accounted for.”
“This is designed to make our tax structure progressive and encourages home ownership. But if he buys another property for his aged parents, for example, he still remains exempt from income tax on one property. In short, section 10(1) of the Income Tax Act will apply. Mr Leong Horn Kee has asked whether Government could say something about its privatisation programme following the announcement about Telecom. The Telecom privatisation programme is proceeding smoothly on schedule and should be implemented sometime towards the third or fourth quarter of this year, probably around the end of the third quarter. Besides Singapore Telecom, another eight Government linked companies are scheduled to be floated on the Stock Exchange over the next two to three years. The exact timing of these privatisations will depend on market conditions and the decisions of the companies themselves. These will include companies, such as Singapore Technologies Industrial Corporation, Singapore Food Industries, Raffles City Private Limited, Chartered Industries of Singapore, PIDEMCO, SMRT and the CDC-Construction and Development Company. He has also asked whether there is a central body within Government to coordinate the manner in which the privatisation takes place. Basically, there is no separate body. The privatisation programme is coordinated by the Ministry of Finance with the participation of the controlling Ministries in which the statutory board or the company belongs. The final decision on the form of privatisation and the timing will, of course, be determined ultimately by the Cabinet if they concern statutory boards. Mr Koo Tsai Kee has asked whether Government will emulate New Zealand in moving over to a complete accrual system of accounting.”
“Sir, the first question raised by Dr Ow is whether double taxation relief is available for service income from Malaysia. The answer is yes. The Member has also asked whether, instead of giving further corporate tax cuts across-the-board, we might not consider a two-tier system whereby specific incentives are given for particular types of reliefs. I should point out that the Government already gives specific reliefs for activities, such as research and development and other forms of direct investments. These include cash grants, investment allowances and double tax deductions for expenses incurred in R&D activities. These special incentives already exist and I do not think we want to construct another layer of special incentives. Our preference would be to give an across-the-board corporate tax reduction up to the 25% long-term rate which we have recommended. Dr Ow has also asked some specific questions about the effect of tax reliefs on the liability or burden of taxation, particularly, in respect of the distribution of income tax burdens. Before the change, the top 10% of resident taxpayers bear about 76% of the total income tax paid. With the implementation of the tax cuts proposed and in the increase in reliefs and rebates, the top 10% of resident taxpayers will bear 94% of total income tax. With these changes also, 74% of all resident taxpayers will no longer need to pay direct taxes. He has also asked a specific question about whether the net annual value of $75,000 limitation can be lifted. At present, an owner who resides in a property with a net annual value of up to $75,000 will not have to pay income tax on it. However, if he has more than one residential property, this concession will apply only to one property.”
“Mr Speaker, Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolution." Question put, and agreed to. Resolution accordingly agreed to. ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 1993 TO 31ST MARCH, 1994 Order read for consideration in Committee of Supply [1st Allotted Day]. [Mr Speaker in the Chair] 12.52 pm”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolution. Resolution reported - "That the sum of $500,000,000 shall be supplied to the Government under the Head of Expenditure for the Public Services shown in the Second Supplementary Main Estimates of Expenditure for the financial year 1st April, 1992 to 31st March, 1993, contained in Paper Cmd. 6 of 1993."”
“I have no doubt that this optimism will be borne out so long as we stay ahead of our competitors. We have launched our incentives to develop an external economy and restructure our tax system at a critical stage in our economic development. I am confident that these initiatives will fuel our progress from an NIE to a developed nation and create a better and brighter future for all Singaporeans. [Applause]. Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1993 to 31st March 1994. ADJOURNMENT Resolved, "That Parliament do now adjourn." - [Mr Wong Kan Seng]. Adjourned accordingly at Ten Minutes to Six o'clock pm. Committee of Supply - Estimates of Expenditure For The Financial Year 1st April, 1993 to 31st March, 1994 (Cols. 835 - 838)”
“If there is sufficient interest in the concept, the Government will be happy to support the proposal. I am confident that the structural tax reform package that the Government has proposed will serve Singapore well. It will raise our competitiveness and increase our growth. We will have a bigger economic pie to share out every year. Overall, everyone will benefit. Now I will turn to issues of rising business costs in Singapore. There have been comments that this issue was not adequately addressed in the Budget. The issue is a complex one and it is currently being studied by the Cost Review Committee. We should await the Committee's detailed findings and recommendations. The Minister for Trade and Industry will also be dealing with this subject at the Committee of Supply and I will not dwell on it further. Dr Wong Kwei Cheong and other Members have raised questions over Government's plans to raise the employers' contribution towards CPF to 40% over the next two years and its consequent impact on wages. Government's policy on this matter is well known and I do not propose to expound it again at this time. Members, if they wish, may raise the issue again in the Committee of Supply proceedings. Some Members have raised questions over the Government's proposal to cap the tax deductibility of medical costs by companies to 2%. Like CPF, time does not allow me to enter into a debate on this issue and I will take it up again in the Committee of Supply. Much interest has also been generated by the CPF Top-up Scheme. As the Prime Minister has already explained the philosophy underlying the scheme, I will not dwell on it further. Finally, Mr Speaker, Sir, allow me to sum up. 1992 has been a good year. If all goes well, 1993 should be better. The general mood is upbeat.”
“In addition, the 15% rebate for the first $10,000 in chargeable income has been subsumed in the lowest three rates. This means that the tax payable at these three rates has, in fact, been reduced by at least 16.1%. Hence the tax rate cuts do not work against the lower and middle tax brackets. The Member has also asked for higher personal relief. As I have said before, Government gave higher tax rebates than more reliefs because doing so works to the advantage of the lower income groups. Mr Low Thia Khiang is inaccurate in his assertion that the gap between the rich and the poor will widen. The personal tax changes have been structured to benefit the lower income groups. While it is true that the higher personal reliefs are more beneficial to taxpayers in the upper tax brackets, the Member should take into account the other personal tax changes. The tax rate cuts are proportional. The tax rebate of $700 favours taxpayers in the lower brackets. It becomes a reducing proportion of an individual's tax as his income increases. Overall, the personal income tax structure is now more progressive. Mr Walter Woon has suggested that legislation be introduced to impose an obligation on children to maintain their parents. This is an interesting revival of a recommendation made by the 1984 Committee on the Problems of the Aged. The recommendation was not taken up then as it was felt that the timing was not right. The issue was again studied by the 1988 Advisory Council of the Aged. It concluded that such legislation was unnecessary as statistics indicated that few parents were neglected by their children. However, if Mr Woon feels that the legislation is now timely, he may wish to move a motion in this House to introduce a Private Member's Bill for Parliament's consideration.”
“In Singapore, we have decided to exempt businesses with an annual turnover below $1 million because it would be difficult for them to collect the tax as they may not have in place a proper accounting system. Small businesses, like neighbourhood retail outlets, HDB shopkeepers, GP clinics, wet markets and hawkers, will as a result not be burdened with having to comply with the GST accounting and collection requirements. Dr Wang Kai Yuen, the Member for Bukit Timah, has noted that out of the total GST offsets of $1.1 billion per annum, $318 million will benefit companies, leaving $786 million for individuals. As the GST collection is estimated at $921 million, he has asked who will bear the balance of the tax. Mr Speaker, Sir, the GST revenue is collected on consumption by both residents and tourists. The estimated yield of $921 million consists of $677 million from residents and $244 million from tourists. The yield from residents is therefore less than the $786 million that Government is giving back through the personal income tax reductions, rebates and subsidies. Government will therefore be giving back more to households than what it collects from them through GST. The net gain to households will amount to about $109 million per annum. In the case of tourists, Government has said that the GST collected from them will be refunded if an administratively simple refund mechanism can be found. Such refunds of course would be borne entirely by the Government. Mr Umar Abdul Hamid feels that the tax rate cuts favour the top brackets. This is not true. The top rate has been cut by three percentage points. This is equivalent to a tax reduction of 9.1%. The tax payable at all other marginal rates has similarly been cut by at least 9.1%.”
“Furthermore, businesses will be able to offset the cost of compliance from the cut in corporate tax. There is, therefore, no reason for any business to raise prices beyond 3%. There have also been fears that the GST may spark a wage inflation spiral. This should not be the case. At most, the introduction of the GST will cause a one-time increase in prices. This is borne out by the experiences in most other countries. Where introduction did lead to inflation, this was not caused by the GST itself, but by other factors such as excessive wage demands. In Singapore, we have designed a package of tax cuts and rebates to offset practically all households for the GST they will incur. The majority will, in fact, enjoy a net gain in disposable income. There is, therefore, no reason for wage demands to increase on account of GST. There has been much concern that the GST rate will be raised after five years. The rate will not be raised as long as Government does not need additional revenue. This is possible if our economy continues to grow within our projected range of 4% to 6% and public expenditures are contained. Government has so far been successful in keeping its costs down. To a great extent, this depends on everyone not making unreasonable demands for subsidies. In short, the way to keep the 3% GST rate for as long as possible is to ensure that our income levels continue to rise with economic growth and Government costs are kept under control. Mr Chng Hee Kok is of the view that Government should not exempt businesses with an annual turnover of below $1 million. The experience of other countries with GST shows that the cost of complying with the tax falls unfairly on small businesses.”
“Government has done this before. Members will recall that the last occasion was during the Gulf crisis. We will not hesitate to do this again, if necessary. NTUC FairPrice has given the assurance that they will not raise prices by more than 3%. This will provide shoppers with a reference point. On their part, consumers should shop wisely. They should boycott shops which raise prices unfairly. This will ensure businesses keep their prices competitive. Consumers can also form consumer groups and clubs. For instance, the Residents' Committees can set up price control groups to monitor and publicise the culprits. CASE is well placed to play a larger role and Government is prepared to increase its funding to CASE to allow it to do so. On its part, Government would take tough action against blatant profiteers. The Inland Revenue Authority of Singapore will review their accounts. As a last resort, the Price Control Act can also be invoked. Some Members are also concerned that, although the GST rate is 3%, prices may increase far more as businesses will add on to the cost of administering the GST. The GST system that we have proposed is a simple one. The tax will apply as a single rate without complex exemptions and zero rating. As we will also exempt businesses with annual turnover below $1 million, only the bigger ones with proper accounting systems will have to collect the tax. The standard accounting period is three months. These businesses will in fact enjoy a cash flow advantage as they collect the GST on their sales first and pay to the Government only later at the end of the accounting period. All these will help minimize the cost of businesses of complying with the tax.”
“There are, of course, a few who may genuinely need help because they cannot enjoy the benefits due to their specific circumstances. This group comprises not only retirees but also low income families living in non-HDB premises. These people will be helped through assistance schemes administered by the CCCs. Concerns have also been raised that while the GST is permanent, the offsets for the lower income groups are transitional. The offsets will operate for five years in the first instance to help lower income households tide over the introduction of GST. During this time, income should grow by 5% to 7% per year in real terms. Most will graduate into the higher income groups and benefit from the tax reductions. However, Government recognises that there may remain a small pocket of lower income households, comprising mainly the older generation, without the skills needed to secure good paying jobs. This group will shrink over time. I have said that Government will re-assess the situation after five years to decide whether we need to continue with the offset package in a modified form. The public can be assured that Government will always look after those who need help. We have done this before, and we will continue to do so. Mr Speaker, Sir, when families do their sums, practically all will find that the reduction in personal income taxes and the package of rebates and subsidies will fully offset their GST burden. A major area of concern is that prices will rise beyond 3% as a result of profiteering by retailers when the GST is introduced. In our market economy, competition will be our best safeguard against profiteering. Today, there is an abundant supply of necessities in Singapore. If need be, Government will ensure that the supply is increased even more.”
“Those with household incomes of $1,000 to $1,500 per month will on the average be able to save $240 per 2year from the reduction in income tax. Together, these two measures will be adequate to offset the GST payable for most of these households. Members of the Opposition have also raised concerns that the middle-income group will not be taken care of under our offset package. This is not true. Households which earn above $1,500 per month will be able to benefit from the generous tax cuts. The tax savings will more than offset the GST payable. Take, for instance, an average household with a monthly income of $2,400 and which spends about $1,700 per month. It would save on income tax by almost $740 per year. This exceeds the GST payable of $590 per year by about $150. This computation has not even taken into account the savings on property tax that can amount to as much as $150 per year, if he owns a property with an annual value of $5,000 or below. If we add the property tax rebate of $150, the total net gain to the household is about $300 per year. Even if we assume that the household spends all of its income after CPF, the GST payable on its expenditure of about $2,000 per month would be, at most, around $720 a year. The saving of $740 from just the income tax alone is more than the GST payable. Some Members are concerned that the package of offsets for GST may be inadequate for retirees. Most pensioners and retirees will be covered under one or more of the various rebate schemes announced in the Budget to help the lower-income groups. Some will benefit from the tax reductions. Others may be supported by their children who will also benefit from the tax cuts and other rebates.”
“If we were to wait until we encounter an economic downturn and the money was needed before implementing the GST, households will find it very difficult to cope. Mr Chiam has said that the Singapore Government in the 1960s opposed the introduction of turnover tax by the then Federal government. He has conveniently failed to point out the high rates at which incomes were then taxed in the Federation. Personal income tax rates were as high as 50%, while tax on corporations was 40%. Obviously, the imposition of a turnover tax posed a further burden on individuals. As the turnover tax was a tax on tax and with cascading effects, it discriminates in favour of large firms which can do many stages of production in-house. For these reasons, the government at that time opposed the introduction of the turnover tax. Today, circumstances are different. Over the years, income tax has come down. This trend is likely to continue as countries compete for capital. In Singapore, we are introducing the GST as part of our restructuring to lower personal income and corporate taxes. It is not done for revenue reasons. Our package of offsets is proof of this. The majority of households will be better off after GST. Unlike a turnover tax, the GST does not cause cascading. This is because businesses are able to get a refund of the GST paid against the GST collected. There is obviously no basis for Mr Chiam's comparison. Dr John Chen, the Member for Hong Kah GRC, is concerned that the lower income households living in 4-room HDB flats will be worse off after GST. Mr Speaker, Sir, although these households will not benefit from the rebate on S&C charges, they will gain from the property tax rebate of about $150 per year.”
“By shifting the burden of taxation from the production of income to the consumption of goods and services, we will encourage individuals and companies to work harder and produce and invest more. It will also make Singapore a more competitive place for doing business. The Member for Potong Pasir has expressed the view that we need not cut our corporate tax rates because we have sufficient tax incentives already to attract foreign investment. If he is referring to pioneer-type incentives, then I would remind him that these are only given for a limited period of time to attract new and specialised investments, and are not enjoyed by the bulk of established companies, particularly those in the manufacturing sector. Even in this area, our competitive edge has, however, been eroded in recent years by competitors who have also cut their corporate taxes and introduced similar tax incentives. Their actions clearly illustrate that we do not have a monopoly on these strategies to attract foreign investments. Cutting our corporate tax rate at this time buys us insurance for the future. It ensures that the profits of Singapore-based companies remain taxed at a rate that will make them competitive with other countries which are also recipients of foreign investment. In this way, we will continue to attract foreign investments to secure our future economic growth and prosperity. Thanks to Government's prudence and continued economic growth, we have a healthy surplus and do not need more money now. This is precisely the time to introduce the GST. This way, we can offset the tax through cuts in personal income taxes, rebates, and so forth, and make it easier for households to adjust.”
“Members have given many suggestions on the kind of support that Government should provide our companies in their overseas ventures. They include financial support, insurance against political risk, greater Government participation and the setting up of Singapore schools and clubs overseas. Government will do whatever else it can to assist in outward economic expansion. The Committee to Promote Enterprise Overseas will look into these suggestions. Mr Heng Chiang Meng, the Member for Cheng San GRC, has urged Government to introduce group relief for losses in connection with the call to go regional. We cannot allow this because of the serious tax revenue implications. Where the incomes of the profitable companies comprise Singapore dividends, we may end up by repaying all the tax paid by the companies distributing these dividends. This is because we have a full imputation system in which the tax paid on corporate profits is passed on to the shareholders through the distribution of dividends. We would do well to learn from the experience of countries which allow group relief for losses. They have found that even without a full imputation system, such relief is easily exploited by tax planners. Dr Wong Kwei Cheong has asked for a two-tier corporate tax system to promote entrepreneurship. We will not do so as this allows tax avoidance through business splitting. The better approach is to lower corporate tax across-the-board. People will know that those who dare and succeed will not have a large part of their rewards taken away by tax. I will now turn to GST. The GST will be introduced to allow us to lower our corporate and personal income taxes.”
“There have been comments that the incentives should have been given across-the-board instead of a case by case basis. With the exception of the unilateral tax credit which will be given automatically to any resident who qualifies, an across-the-board approach cannot be used for the other incentives. This is to avoid hollowing out our domestic industries, round tripping of domestic income and our being labelled a tax haven. Nevertheless, we recognise that companies need certainty in tax treatment in planning their overseas ventures. The overseas enterprise incentive has been designed to address this. Companies will now know in advance the kinds of investments which will qualify for tax exemption. This exemption will also be given for longer periods of up to 10 years. Some Members hold the view that the regionalisation incentives will not benefit the small and medium enterprises. This is untrue. SMEs will benefit as much as big companies. They are eligible for all the incentives. Specifically, for the overseas enterprise incentive, all Singapore companies will be eligible, regardless of size. The criteria will be sufficiently liberal so as not to prejudice any particular sector of the economy nor the scale and form of the overseas venture. In addition, the tax exemption for venture capital funds will encourage the financing of SMEs, which would not normally have access to conventional capital markets. Sir, developing an external economy is a multi-dimensional problem requiring a total approach to succeed. We are only at the beginning of our efforts to develop our external economy. More can be done eventually as the needs for those going regional become more clearly defined. Tax incentives alone will not enable us to grow an external wing.”
“With the collapse of communism and the dynamism of East Asia, there are more competitors than ever before. We have so far been well served by our open door policy of attracting foreign multi-nationals to provide us with capital, jobs, technological know-how, and ready access to overseas markets. We can no longer rely solely on this paradigm. As we are a small country without natural resources, and with a very small labour base, we are becoming increasingly uncompetitive in labour cost terms with our neighbours - Indonesia, Malaysia, Thailand and, even more so, with countries such as China, India, Pakistan, East Europe and Russia. We must therefore build up an external economy to complement our present growth strategy. With our accumulated capital, technology and skills, we are well placed to do so. Venturing abroad will create new business opportunities to bring us more wealth. I am confident that, in the long run, overseas expansion will enable us to build up some large local MNCs. Having said this, I must caution that we should not chase evanescent markets all around the world. We should focus our energies on markets which are on the point of take-off, and which we know well. The most promising is East Asia. It is the biggest, fastest growing and most dynamic new consumer market in the world. Our geographical, historical and cultural links give us a competitive edge in doing business in East Asia. We must move quickly to press home our advantage before the best opportunities are seized by others. In my budget, I announced seven tax incentives to encourage Singapore entrepreneurs and companies to make direct investments as well as develop and market their goods and services in other countries.”
“Mr Speaker, Sir, I would like to begin by thanking all Members of this House who have spoken in support of the Budget over the last two days. The debate has been a long one, but many Members have given useful feedback, especially on our initiative to develop an external economy and to introduce the Goods and Services Tax. Time will not allow me to address Members' concerns point by point. I will, therefore, focus on two areas: first, the building up of an external economy and, second, the introduction of GST. I will also deal briefly with some other major issues. Matters of detail will be carried forward to the Committee of Supply or to the Second Reading of the GST Bill. The thrust of my Budget is to boost our international competitiveness. We must restructure our tax system to sharpen our competitive edge and strengthen our external economy. We must not take our past success for granted. Sir, the current global economic conditions are not as favourable as in the past. First, world economic growth is sluggish. Many countries, including the world's three largest economies - US, Japan and Germany - are mired in difficulties. Although the US is showing some signs of a recovery, there remain structural problems, like a large budget deficit and an over-sized health sector. Second, trade frictions have increased. The looming trade imbalances are fuelling protectionist sentiments. The recent trade actions of the US Government have raised concern that it is veering towards protectionist policies. The US is the single largest market for East Asia's economic power houses - Japan, South Korea and China. US protectionism will retard East Asian growth. Without doubt, the world economic environment is more turbulent and competition is becoming more intense.”
“The site opposite Block 602, Yishun Central/Yishun Street 61 has been safeguarded by HDB for institutional uses. The development of branch libraries is under the purview of the Ministry of Information and the Arts. MITA has informed me that the building of new branch libraries is being reviewed by the Library 2000 Review Committee formed in June 1992. The Committee is reviewing the role of the National Library and will recommend guidelines and models for the development of future branch libraries in due course. MITA will finalise the types of libraries to be built and their locations after studying the recommendations of the Library 2000 Review Committee. PERMANENT RESIDENTS AND CITIZENS BETWEEN 1983 AND 1992 3. Mr Chia Shi Teck asked the Minister for Home Affairs, for the years 1983 to 1992, what is (i) the number of foreigners granted permanent residence each year, (ii) the number that subsequently took up citizenship each year, (iii) the number that surrendered their permanent residence status and left Singapore, and (iv) the number that continue to be permanent residents and have not accepted citizenship when this was offered to them.”
“Although the outlook for 1993 is somewhat better, for the longer term we need to change the orientation of our people towards venturing abroad if we are to continue enjoying high economic growth. Government will on its part do whatever is possible to encourage, facilitate and be a partner of an outward economic expansion. The focus of public expenditures will continue to be on investments which will enhance our economic performance. Our tax changes are designed to promote overseas investments as well as clear the way for the foreign earnings to be repatriated. When the GST is implemented and the tax reform is in place, we will become more competitive. Our challenge is to claim a bigger piece of that fast-growing economic pie in the region. I am confident that we have what is needed to meet that challenge. Mr Speaker, Sir, I beg to move. [Applause].”
“However, the Government cannot promise that households whose incomes are presently low, and who therefore pay little or no tax, will never pay more tax than they now do, even after their incomes rise as a result of economic growth. The tax burden has to be spread as broadly and fairly as possible, so that it will weigh lightly both on individuals and on the economy as a whole. This is indeed one of the purposes of introducing the GST. Gains and Losses Appendix E (Cols. 611 - 612) summarises the benefits to specific households by dwelling and income groups per year in the first and fifth year. Appendix F (Cols. 613 - 618) gives the net change of expenditures for lower-income typical households before and after the GST is introduced. It confirms that most households will be better off after the GST is introduced than before. Appendix E - NET BENEFITS FOR DIFFERENT TYPES OF FLATS, (Cols. 611 - 612) Appendix F - ANNUAL ACCOUNTS OF DIFFERENT TYPES OF FLATS (Cols. 613 - 618) Appendix G (Cols. 619 - 620) summarises Government's revenue position as a result of all the tax changes and offsets against the revenue collected from the GST. It shows that the revenue loss from the whole package amounts to $1,104 million. If we exclude the transient items, the total loss is still $1,070 million. As the GST collection is estimated at $921 million, the Government will have a reduced revenue of $183 million revenue per year during the initial 5 years. However, in the long run, I expect the package to be revenue neutral, because with economic growth consumption will increase and so will tax collections. Appendix G - TOTAL REVENUE LOSS TO GOVERNMENT OF OFFSETS (Cols. 619 - 620) CONCLUSION Mr Speaker, Sir, we have seen our economic growth rate levelling down over the last three years.”
“It is important to be clear that the CCC scheme is not meant to solve all the financial problems of poor families, or to give general assistance to households in distress. Other welfare schemes already exist to help poor families. The CCC scheme is designed specifically to offset the GST that poor families will incur, to the extent that the package of other rebates does not make up for the GST they have to pay. The CCCs will have to administer it with this objective in mind. Timing The property tax rebate, the increases in Public Assistance and the Singapore Allowance, and the additional subsidies for Town Council S&C charges will continue indefinitely. However the S&C charges rebates, rental rebates and CCC grant scheme will operate in the first instance for 5 years. They are meant to be transitional measures to help households tide over the introduction of the GST. Therefore the amounts of the S&C charges and rental rebates will diminish over time, although even in the fifth year the total package of assistance provided will be more than sufficient to offset the GST payable by most low-income households. During these 5 years, incomes should grow in real terms by 5 to 7% per year. This will be more than sufficient to offset the 3% GST, which should lead only to a one-off increase of prices of around 3% in the year of introduction. Higher incomes will reduce the need for these special schemes. After 5 years we will re-assess the situation to decide whether to continue the package in a modified form. The Government has undertaken that nearly all households will be better off after the GST is introduced than before. This offset package fulfils this promise.”
“Some own significant amount of property, or have accumulated more than enough savings for their needs. Some old folks are supported by their children, who will benefit from the tax cuts and other rebates. It is difficult to design a single scheme of Government assistance to target precisely those who need help. We need a more sensitive mechanism to distinguish those who genuinely need help to cope with the GST from those who can manage on their own. The Citizens' Consultative Committees (CCCs) provide such a mechanism. Being grassroots organisations, the CCCs are in constant touch with the ground. They are well-placed to identify which households in their constituencies need help, and what type of help will be most useful. The CCCs can work with other grassroots organisations like Residents' Committees in this task. They can then channel help to whomever needs it, including pensioners and retirees not living in HDB flats and not owning private property, or households which for some reason do not benefit from the offsets that I have listed above. The Ministry of Community Development will budget $3 million per year for CCCs to operate this assistance scheme. This should be sufficient to cover all the estimated 20,000 low-income households not covered by the HDB and other schemes, even though probably not all of them will need help. The $3-million budget can be increased if necessary. The CCCs will evaluate needy cases who approach them for help. They will have the discretion to decide whom to help, and how much help to give. The amount per household will usually not need to exceed $200 per annum. This will resolve the specific problems of retirees and non-HDB residents arising from the GST.”
“Increase in Public Assistance Public Assistance is currently given to aged destitutes and those certified medically unfit for work, widows or deserted wives with young dependent children, and orphans. The amount given ranges from $150 per month for a single-person household to $430 per month for a 1-adult and 3-children household. To help this group offset the GST on their monthly consumption items, we will increase the amount of Public Assistance by between $5 per month for a single-person household to $15 per month for a 4-person household. This translates into a 3 to 5% increase in the Public Assistance for the various household compositions. Details will be released by the Ministry of Community Development. Increase in Singapore Allowance A special allowance is given to pensioners whose pension is less than $850 per month. The Singapore Allowance is the difference between the $850 and the individual's pension, subject to a limit of $100 per month. As at 31st March 1992, there were 16,473 pensioners of whom 9,858 or 60% receive this allowance. From 1 April 1993, we will increase the maximum allowance by $30 per month to $130 per month, and the specified pension level by $50 from $850 to $900 per month. This will be more than the GST payable by these individuals when they spend their pensions. Cost is estimated at around $4 million per year. Grants to CCCs The rebates on HDB rentals and S&C charges, the property tax rebate, the increases in Edusave grants, Public Assistance and the Singapore Allowance will cover 90% of the households with income below $1,500. Most pensioners and retirees will also be covered by one or other of these schemes. The remaining 10% or 20,000 households are a small but diverse group. Not all of them are necessarily poor.”
“Specifically: (a) For 1-room flat dwellers: $12 per month for the first year, declining by $1 a year to $8 per month in the fifth year. (b) For 2-room flat dwellers: $11 per month for the first year, declining by $1 a year to $7 per month in the fifth year. (c) For 3-room flat dwellers: $8 per month for the first year, declining by $1 a year to $4 per month in the fifth year. The cost is estimated at $24 million per annum over the 5 years. Offseting GST Payable on S&C Charges Households staying in HDB flats will have to pay GST on their S&C charges, as S&C charges are for a service like other goods and services which households consume. In order for the GST not to raise S&C charges, Government will increase the subvention to Town Councils to offset the GST payable on the S&C charges. The amount of subvention given will depend on the S&C charges collections from each Town Council. This will benefit all HDB residential flat dwellers. The cost is estimated at $9 million per annum. Edusave grant The Edusave grant is currently $50 per annum per pupil. To help families with children defray any increases in educational costs due to GST, Government will increase the Edusave grant per pupil to $100 per annum from 1994. As mentioned earlier, to do this the Government will double the Edusave Endowment Fund to $2 billion. The increased grant will more than offset the GST payable on school books and other miscellaneous school items. It will also make the offsets fairer between big and small families, as families with more children who incur higher household expenses and pay more GST will also obtain more Edusave grants.”
“They will benefit from the property tax rebate for owner-occupied properties outlined earlier. The remaining 20,000 families earning below $1,500 per month are tenants in old shophouses, old walk-up private flats, or owner-occupiers in attap and zinc-roofed houses. They form only 3% of the total number of households in Singapore. However, they are too diverse a group to be reached by a single rebate or subsidy mechanism. Instead, the Government will work through the Citizens' Consultative Committees (CCCs) who are in close touch with the ground to administer a CCC assistance scheme for families needing help to cope with the GST. In addition, Government will increase several grant schemes to meet the needs of specific groups. It will increase the Edusave grant from $50 per child to $100 per child, to help families with school-age children. It will raise Public Assistance rates to help destitute households. It will also raise the Singapore Allowance, to help Government retirees on low pensions cope with the GST. Rental Rebates There are 61,000 HDB rental premises, of which over 83% are 1 and 2-room flats. We will grant rental rebates to tenants of 1 and 2-room rental HDB flats who are Singapore citizens, as follows: (a) For 1-room tenants: a rental rebate of $16 per month for the first year, declining by $1 a year to $12 per month in the fifth year. (b) For 2-room tenants: a rental rebate of $12 per month for the first year, declining by $1 a year to $8 per month in the fifth year. The cost over the 5 years averages $7 million per annum. Rebates for Service and Conservancy Charges Singapore citizens staying in 1, 2 and 3- room HDB flats will enjoy rebates on their S&C charges over a period of 5 years.”
“The revenue loss from the changes in existing indirect taxes is estimated to be $162 million per annum. ADDITIONAL REBATES AND OFFSETS The White Paper stated that most households, including most lower income households, will be better off after the GST is introduced. For nearly all households earning at least $1,500 per month, the combination of personal income tax reductions and rebates, plus the property tax rebate, will be sufficient to offset the GST. However, households earning below $1,500 do not pay sufficient income tax for these tax reductions to offset in full the GST they will pay. To ensure that they too are not worse off, the Government will implement a package of additional rebates to offset the GST. The rebates will be largest at the beginning, when households are still adjusting to the new tax, and will taper off over time as incomes rise. According to the 1990 census, there are 195,000 households earning less than $1,500 per month in Singapore. (See Appendices (Cols. 607 - 610) C and D) 90% of them stay in HDB flats. 125,000 or 64% of them are in 1, 2, and 3-room HDB flats. Government will therefore use rebates on rentals for 1 and 2-room flats, and rebates on Service and Conservancy (S&C) charges for 1, 2, and 3-room flats, as the main mechanism to assist low income households. The Government will also increase S&C subsidies to Town Councils to offset the GST payable on S&C charges. Appendices - HOUSEHOLDS EARNING BELOW $1,500 PER MONTH BY RESIDENTIAL DWELLING (NUMBER), STATUS OF HOUSEHOLDS EARNING LESS THAN $1,500 PER MONTH (Cols. 607 - 610) Another 55,000 or 28% of the low income families are owner-occupiers of larger HDB flats, shophouses, terrace houses and semi-detached houses and small bungalows.”
“This will benefit most HDB owner-occupiers, and also households staying in lower-end private properties such as terrace houses, shophouses and private walk-up flats. The revenue loss is estimated at $69 million per annum. Changes in Other Existing Indirect Taxes The Government currently levies a range of indirect taxes, for example tourism cess, utilities taxes on PUB and Telecom bills, excise duty on petrol and import duties on vehicles. The Government will suspend or reduce the following levies with effect from 1st April 1994, to offset the GST. The cess charge of 4% levied on tourist restaurants and hotels will be reduced to 1%. The 5% tax on the bills of domestic telephone subscribers will be suspended. The 5% tax on PUB bills of households in excess of $40 will be reduced to 2%. The 5% entertainments duty on all forms of general entertainment will be suspended. Cinematograph film hire duty will be suspended. Royalty payments for film hire will be liable to income tax as at present. Existing duties on petrol and diesel will be adjusted downwards to nullify the effect of the GST. These duties were introduced as a means to control the usage of cars. Government does not intend the introduction of the GST to cause an increase in total taxes payable on these fuels. The import duties on cars, taxis, motorcycles, and buses will be reduced to nullify the effect of the GST. Like duties on petrol, these were introduced as part of a package of measures to control car ownership and road congestion. Government does not intend the introduction of the GST to result in cars paying higher total taxes. Duties on tobacco, alcohol and gambling will, however, not be reduced when the GST is introduced.”
“Personal Tax Changes The top personal income tax rate of 33% will be reduced by 3 percentage points to 30%, with proportionate reductions in other tax brackets. The reduction in personal tax rates for each tax bracket is in Appendix B (Cols. 605 - 606). Appendix B - REDUCTION IN PERSONAL INCOME TAX RATES WITH EFFECT FROM YA94 (Cols. 605 - 606) Personal relief will be increased by $1,000, from $2,000 to $3,000 A rebate on individual income tax will be granted annually. The rebate will be $700 in the first year, declining by $50 per year until it reaches $500 in the fifth year, after which it will remain at $500. This means that resident individuals will have their income tax liability reduced by the amount of the rebate, that is to say, $700 in the first year. Individuals whose liability is already $700 or less will not have to pay income tax for that year. I have chosen to give a combination of tax rebate and personal relief, rather than to rely on higher personal relief alone, because a tax rebate benefits low income taxpayers more than higher personal relief, for the same amount of revenue forgone. The personal income tax changes will take effect from Year of Assessment 1994. Revenue loss is estimated at $494 million per annum. Property tax rebate The Government will give owner-occupied residential properties with annual values of less than $10,000 a property tax rebate based on a sliding scale. For properties with annual values of $5,000 or less, the maximum rebate of $150 per annum will be given. For annual values between $5,000 and $10,000, the rebate will vary along a straight line from $150 at $5,000 to zero at $10,000.”
“Briefly, they deal with: (a) Unilateral tax credit for overseas employment income and director's fee. (b) Taxation of retirement benefits. (c) Waiver of the residence requirement for the aged parent and handicapped sibling reliefs. (d) Separate assessment for married women on all incomes. (e) Separate claims for normal and enhanced child reliefs. (f) Tax deduction for CPF contributions by self-employed individuals. Paper 3 - OTHER FY93 TAX CHANGES AFFECTING INDIVIDUALS (Cols. 597 - 600) Other Tax Changes Duties on Cigarettes and Tobacco Duties on cigarettes and tobacco were last revised in March 1991 to discourage smoking. In support of the national anti-smoking campaign and in particular to discourage smoking among our younger population, the import duty on cigarettes will be raised from $100 to $115 per kilogram. The import duty on tobacco and excise duty on cigarettes will also be raised from $50 to $60 per kilogram. Details of the duty changes for the various types of igarettes and tobacco are in Appendix A (Cols. 601 - 604). The change in duties will take effect from today. Appendix A - CHANGES IN CIGARETTE AND TOBACCO DUTIES (Cols. 601 - 604) I now turn to tax changes which will take effect next year when the GST is introduced. These tax changes constitute a major reform of our tax system, and are a principal reason for the Government to introduce the GST now. TAX CHANGES TO ACCOMPANY THE GST Corporate Tax Change The corporate tax rate of 30% will be reduced by 3 percentage points to 27%. This will take effect from Year of Assessment 1994. The reduction represents a major step towards the target of a 25% corporate tax rate. It will ensure that Singapore's corporate tax rate remains competitive internationally. The estimated revenue loss is $318 million per annum.”
“In September, the Government will contribute a $200 grant into each such CPF account, provided the member or his employer has paid in at least $500 during the 6-month period from 1st March 1993 to 31st August 1993. Members who pay in less than $500 will receive a pro-rated contribution from the Government. Citizens without CPF accounts will be allowed to start one to benefit from the Scheme. Retirees, housewives and the self-employed can therefore also enjoy, first the CPF Top-Up, and later, the purchase of Singapore Telecom shares at a discount. This $500 co-payment that we require corresponds to a CPF contribution of $83 per month, or a salary of about $250 per month. Thus almost all working Singaporeans will qualify for the full $200 CPF top-up. The Scheme is expected to cost the Government around $200 million. It will take some time for Singaporeans who have not owned shares to become familiar with shares, and to learn the value of investing part of their assets in the shares of blue-chip companies like Singapore Telecom. They will learn from experience how good shares can multiply many times in value over the next 5 to 10 years. In future, when we have strong budgetary surpluses, we will from time to time top-up their CPF accounts to help Singaporeans buy shares of other statutory boards which will be corporatised. This way, every Singaporean will own shares and properties, which will appreciate in value as Singapore continues to prosper because of sound economic and social policies plus their own hard work. Other FY93 Tax Changes Affecting Individuals In addition to the foregoing, I am proposing six other tax changes affecting individuals. The proposals are set out in detail in Paper 3 (Cols. 597 - 600) which I will now ask the Clerk of Parliament to distribute.”
“Rebate of Service and Conservancy Charges For Singaporeans staying in 1 to 3-room HDB flats who pay little or no income tax, Government has decided to pay on their behalf the Service and Conservancy charges payable in the month of December 1993. This will be a one-off payment for citizens only, the equivalent of the 5% income tax rebate. The estimated expenditure by the Government is $10 million. CPF Share Ownership Top-Up Scheme At the National Day Rally last August, the Prime Minister spoke of the Government's intention to increase the assets of Singaporeans under an Assets-enlargement Programme. In addition to HDB upgrading and the sale of HDB shops programmes, he said that the Government would sell shares of corporatised statutory boards at a discount to Singaporeans. His aim was to make Singapore a share-owning society as well as a home-owning society. The Ministry of Communications will be floating Singapore Telecom (ST) on the Stock Exchange later this year. Details will be announced nearer the date of flotation. As part of the flotation, Government will sell several hundred ST shares at a discount to each CPF member who is a Singapore citizen. This is part of a programme to build up the assets held by Singaporeans, and promote widespread long-term ownership of blue-chip stocks, so that Singaporeans will have a more direct stake in the growth and prosperity of Singapore. To launch this share-owning programme, in addition to the 5% rebate on personal income tax and the rebate for Service and Conservancy charges, the Government will implement a Share Ownership CPF Top-Up Scheme to help middle and working-class Singaporeans to own shares. The CPF Top-Up Scheme will be confined to citizens aged 21 and above who are CPF members.”