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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“This is a reality that Government will have to take into account in formulating its fiscal plans. Notwithstanding this, we will continue to maintain an environment conducive for businesses to thrive. Government is committed to taxing factors of production as lightly as possible and will adjust corporate taxes downwards whenever the revenue position permits. In the last Budget, I indicated that a White Paper together with the legislation for a comprehensive goods and services tax will be introduced in Parliament when it is ready. I would like to inform the House that the White Paper is expected to be tabled in Parliament in the second half of this year. Finally, before I turn to the proposed tax changes for FY92, I would like to announce pending changes to the CPF contribution rates. Government is committed to achieving the target of 40% CPF contribution rate with equal contributions by employers and employees. This target should be achievable before 1996 at the latest. Government has decided that with effect from 1st July 1992, the employers' CPF contribution rate would be raised from 17% to 18%. The employees' CPF contribution rate will be reduced from 22 1/2% to 22%. As in previous years, I urge employees to recognise that the employers' CPF contributions are part of wage cost and to take this into account during the next round of wage negotiations. TAX CHANGES TAX ON COMPANIES Corporate Income Tax Although our corporate tax rate of 31% remains competitive internationally, I propose to reduce the rate by one percentage point to 30%. This will help to maintain Singapore as an attractive location for investments and will offset some of the business cost increases of the past year. The tax change will take effect from Year of Assessment 1993.”
“Reviews of the Ministries of Education and Trade and Industry are underway and should be completed by the middle of this year. Over the next one and a half years, zero-base reviews for another 5 ministries and 2 organs of state will be carried out. PART III - REVENUE AND TAX CHANGES Mr Speaker, Sir, I shall now move on to describe Government's revenue position and the tax changes proposed for FY92. The amendments to the Constitution relating to the protection of reserves safeguard both the reserves accumulated by previous Governments as well as the income generated from investing them. The Government can use this derived income for debt servicing and other investment related costs, but not to finance other expenditure, unless the Elected President concurs. This will protect the real worth of the reserves. In order not to draw on past reserves, the Government must finance all its operating and development expenditure from its operating revenue. In addition, the Government can spend surpluses which it has itself accumulated earlier in its current term of office, without referring to the Elected President. Operating revenue is projected to increase by only 4.1% to $15.2 billion in FY92. This is in line with the slower growth expected this year. With operating and development expenditure budgeted at $14.2 billion, there will be a modest surplus of around $1 billion. The FY92 Budget is hence not expected to draw on the reserves accumulated by Government from its previous terms of office. Our economy is entering the mature phase of its development. We are unlikely to grow as rapidly as in the past. Slower growth and an ageing population will lead to higher expenditure and slower revenue increase.”
“MANAGEMENT AND CONTROL OF GOVERNMENT EXPENDITURE Let me move on to inform the House of the various initiatives taken to better manage and control Government expenditures. I have already touched on the progress made in the Zero-Growth in Manpower Policy. Let me speak briefly now on the programmes to set up Management Accounting Systems and to conduct zero-base reviews in all ministries. Management Accounting Systems As I mentioned in the House last year, computer-based Management Accounting Systems, or MAS for short, are a powerful tool for identifying inefficient, wasteful or unproductive activities. With an MAS, ministries can redeploy manpower from low-value activities with confidence, knowing that there will be no deterioration in the quality of public service. With accurate costing information, ministries can also confidently farm out activities to the private sector, which are not cost-effective for the public sector to undertake. In short, ministries can be more pro-active in managing their manpower and funds allocated under the Block Vote Allocation System. I am pleased to say that work on the development of the MAS is progressing on schedule. By April this year, the Ministries of Finance, Education, Health, Environment and National Development will have working management accounting systems. Management accounting systems for all the other ministries are expected to be implemented by mid-1993. Zero-base Reviews Zero-base reviews by the Auditor-General are an important part of our efforts to keep Government programmes and practices up-to-date, relevant and cost-effective, and to eliminate waste and inefficiencies. Reviews of the Ministry of Home Affairs and the Inland Revenue Department were completed in FY91.”
“Other projects include the Roads Building Programme; extension of the Bedok Sewage Treatment Works; construction of Revenue House; and the development of public parks and agrotechnology parks. Capital subsidy for public housing is projected to be $1.05 billion, an increase of 18.5% over FY91. This includes a higher capital grant to HDB for the building of more flats and a larger provision for the Upgrading Programme. Town Councils will also receive higher capital grants. In March 1988, I announced in this House that the provision for R&D would be increased gradually over the years to reach 1% of GDP. For FY92, a capital grant of $230 million or 0.3% of GDP is provided for the newly-established R&D Fund under the National Technology Plan. This R&D Fund is administered by the National Science & Technology Board. The R&D Fund will be the sole source of Government financing for industry-related R&D by both the public and private sectors. Capital grants to other statutory boards will amount to $1.1 billion, which is a 24% decline from FY91. The decline is the result of the completion of Changi Airport Terminal II and Phase I of the MRT system. Major projects in FY92 include the development of facilities and attractions on Sentosa Island and Singapore Zoological Gardens; the upgrading of facilities for SBC; the development of community centres, university campuses and staff quarters, independent and aided schools, and other educational institutions. Grants are also provided to EDB for the Economic Development Assistance Scheme, and to the restructured hospitals to meet depreciation expenses in respect of subsidised patients.”
“If we exclude these contributions, GIA will increase by $332 million or 24.2% to $1.7 billion. More than 50% of this increase is accounted for by the Ministry of Health to meet additional recurrent subventions for the restructured hospitals. This includes Tan Tock Seng Hospital, which will be restructured in FY92. The rest of the increase is largely to meet higher operating deficits of the tertiary institutions, including the Nanyang Polytechnic and the Singapore Open University, a higher operating grant to SBC and an operating grant for the National Arts Council. Pensions expenditure is expected to rise by 9.6% to $345 million. This is mainly to provide for an increase in the number of pensioners as well as the rising cost of medical subsidy to pensioners. Debt servicing costs are projected to fall by 12.6% to $2.3 billion. This is because debt servicing on new borrowings as well as Advance Deposits converted to loan stocks will be accounted for under the Government Securities Fund. Development Expenditure Development expenditure constitutes 30% of total expenditure. It will reach $5.1 billion in FY92, which is 18.5% more than that in FY91. The substantial increase is due partly to a contingency provision of $200 million for new development projects in FY92. If this provision is excluded, the increase in development expenditure is 15.2% over FY91. Direct Government development expenditure will rise by 50% to $2.7 billion. Major development projects include land reclamation at various sites; construction of new polyclinics and the new Institute of Health, and the redevelopment of major hospitals. Two new prisons at Changi and more civil defence shelters are being constructed. More schools will also be built and upgraded to enable secondary schools to go single session.”
“I am therefore pleased to say that the Zero Growth in Manpower policy has so far successfully contained the growth of the public sector establishment. This has been achieved without compromising standards and the quality of public service. Government will press ahead with this policy in line with our philosophy of containing the public sector's share of national manpower resources. Revised manpower targets have been set, and requests for increases in manpower will continue to be scrutinised carefully by my Ministry. We will examine ways in which manpower for new functions and increases in workload can be made available through reorganisation, redeployment, retraining and increases in productivity. Other Operating Expenditure or OOE is projected to increase by 10.1% to $4.7 billion. Apart from inflation, the increase is due to higher allocations for international humanitarian relief and peacekeeping operations, and staff welfare, as well as the establishment of the Singapore Cooperation Programme under the Ministry of Foreign Affairs. A sum of $15 million is also provided for the balance of Government's contribution of $25 million to the Singapore International Foundation. The increase in OOE is also accounted for by higher capitation grants to special education schools, and increases in the provisions for teaching bursaries and maintenance of roads. There is also a new provision for the maintenance of lands returned to Government by HDB. Grants-in-Aid or GIA, including operating subsidy to public housing, will fall by 5.7% to $1.8 billion. The drop is due to the exceptionally high one-off contribution of $500 million to the Universities Endowment Fund in FY91. Government's dollar-for-dollar matching contribution to the Fund in FY92 is estimated to be $60 million.”
“Recurrent Expenditure Recurrent expenditure consists of operating expenditure, debt servicing and expenses on investment. It accounts for almost 70% of total expenditure. Recurrent expenditure for FY92 is projected to be $11.6 billion. This is an increase of 2.2% over the revised FY91 expenditure. However, it represents only 15.5% of GDP compared to 16.3% in FY91. Expenditure on Manpower or EOM is projected to rise by 11.4% to $2.4 billion in FY92. This will constitute 3.2% of GDP, slightly higher than the 3.1% for FY91. The increase is to provide for normal salary increments, filling of essential vacancies and a small increase in total staff establishment. The number of posts in ministries, organs of state and Government-funded statutory boards will increase by 0.3% or 279 posts to around 100,000 posts. This is due mainly to a large increase in the number of teaching posts, which has been partly offset by a reduction in posts in the Ministry of Health arising from the restructuring of Tan Tock Seng Hospital. Despite the higher staff establishment, the Government-funded public sector will be able to keep its total establishment to 6.8% below the staff strength as at 31st December 1986. This was the ceiling imposed under the Zero-Growth in Manpower Policy announced in this House 3 years ago. In terms of staff strength, there were about 89,000 persons employed in the Civil Service and Government-funded statutory boards as at 31st December 1991. This is 18% lower than the staff strength of about 108,000 as at 31st December 1986. Put another way, only one out of 17 workers in the economy is currently employed in the Civil Service and Government-funded statutory boards, compared to one in every 11 workers in December 1986.”
“THE FY92 BUDGET ESTIMATES The FY92 Budget achieves Government's medium-term policy target to hold total operating and development expenditure within 20% of GDP. Development expenditure is expected to increase from 6.2% of GDP in FY91 to 6.8%. On the other hand, operating expenditure will decline to 12.2%. Together, operating and development expenditure will amount to 19% of GDP. Statutory expenditure on debt servicing and expenses on investment will take up another 3.2% of GDP. Total Government expenditure in FY92 will therefore stand at 22.2% of GDP, a small decline from the 22.5% in FY91. In absolute terms, total Government expenditure in FY92 is projected at $16.6 billion, an increase of 6.7% over the revised FY91 expenditure of $15.6 billion. The Social and Community Services sector will continue to have the largest share of total expenditure, taking up almost 35%. This sector covers mainly education, health, environment and public housing. The Security Sector, covering defence and home affairs, will take up the next largest share at 29%. The proposed allocations reflect the priorities of Government. These are to ensure national security; house our people in affordable housing in a clean and green environment; and invest in quality education and good healthcare. The importance of education is reflected in the transfer of $1 billion in FY92 to the Education Endowment Fund. This is an investment in our future. The transfer will be Government's first capital contribution to the Fund. It will be used to generate income for disbursement to schools and pupils' individual Edusave accounts. Further capital transfers will be made to the Education Endowment Fund in future years if healthy surpluses are realised. Allow me now to elaborate on the FY92 expenditure proposals.”
“In resource poor Singapore, it would be highly irresponsible for the present generation of Singaporeans to commit our children similarly. CONCLUSION The Singapore economy is likely to see slightly slower growth this year. Over the medium term, it will continue to make good growth but not at the rates that we are used to. Although restructuring and upgrading are difficult or even painful to do in some areas, we need to press on in order not to constrain our pace of growth. We must always remember the fundamentals which have brought us where we are today. The free market has served us well and enabled Singaporeans to earn a good living. We should continue to harness it to generate prosperity for Singaporeans. Fiscal prudence has enabled us as a people to build up valuable assets. We should not be tempted to take short sighted steps that would eventually undermine our economic dynamism. II - THE FY92 BUDGET Mr Speaker, Sir, allow me to move on to the Budget for the next financial year. EXPENDITURE POLICY Government's policy is to continue to support the private sector as the engine of growth. The public sector will be kept lean and trim to free more manpower and financial resources for the private sector. Government's expenditure will focus on basic public services and in areas which yield lasting returns. These are education, basic healthcare, infrastructure, housing and environmental protection. More emphasis will also be given to the arts, sports, recreation and programmes to enhance the quality of life in Singapore. Government will contain operating and development expenditures at a level that can be financed by operating revenue. Surpluses would be accumulated in good years as a buffer against periods of economic downturn.”
“Thereafter, we will make annual contributions to Edusave and Medifund, depending on the size of the budget surpluses each year. If there is no budget surplus, no money will be put aside. That Government has been able to set up Medifund and Edusave shows how right its policy of fiscal prudence has been. Had we spent all the revenue collected or, worse, spent more than what we had collected, Singaporeans would be struggling to repay debt, not thinking up reasons how the reserves should be put to best use. We should not look at the size of our reserves alone and forget about our special circumstances. First, we have no natural or physical assets; every cent of our reserves is accumulated through the sweat and toil of Singaporeans. Our reserves appear large only because other countries do not include their physical endowments such as valuable minerals, oil or gas, or even abundant land and labour, or their foreign assets held by the private sector, all of which are much larger than Singapore's. Second, we import almost everything we need. Without reserves, we would be unable to satisfy even our most basic needs in an emergency or war. Third, just like a person in prime working life, Singapore now earns more than it spends. And, like a prudent person, Singapore saves to prepare for a secure future, and invests in assets which can be passed down to future generations. If we do not plan for the future, we will turn our children into debtors even before they are born. This has happened to the US, the richest nation on earth. It has been estimated that every American man, woman and child owes the rest of the world US$1,700, much more than the average Singaporean household earns in a month. This is a substantial burden, even for a country blessed with immense resources.”
“Its 1991 report on Singapore stated: `With no natural resources and a small domestic market, Singapore's success has been based on an open exchange and trade system, an outward-oriented, export-based growth strategy, prudent financial policies, high rates of domestic investment financed by high rates of domestic savings and foreign direct investment, and attention to infrastructure and human capital development.' [IMF Staff Report for 1991 Interim Article IV Consultation] FISCAL PRUDENCE Let me now turn to fiscal matters. This year is the first when Government's budget has to be approved by the Elected President. Government has always run a conservative fiscal policy. We do not spend more than what we earn. We build up budget surpluses almost every year to add to reserves. We have imposed this conservative stance on ourselves even before we formalised it with the Elected Presidency. This prudent approach has not constrained growth nor held back any productive investments. We have built Changi Airport and the new Brani container terminal, completed the MRT, reclaimed land and built public flats, without touching the reserves. The reserves that we have built up have kept the Singapore dollar strong and inflation low. Not made flabby by fat Government subsidies, Singaporeans retain the incentive to work hard for themselves. The result has been a highly motivated workforce, strong economic growth and a sound financial system. If the economy performs as well as we expect, and we are careful with Government expenditures, we should run a budget surplus over the next few years. Out of next year's surplus, Government will put aside $1 billion to start off Edusave. Government will also allocate money for Medifund, when the proposal is firmed up.”
“In sectors like healthcare, road transport or the allocation of foreign workers and domestic maids, significant market imperfections and non-economic considerations require market forces to be tempered by Government intervention. But although the markets in these cases are not perfect, the most efficient solutions are still found by harnessing market forces to the greatest possible extent. In healthcare, Singaporeans pay for services, although at subsidised rates. They enjoy high quality medical services that even public hospitals in the US cannot match. Under the National Health Service in the UK, where all services are free, service quality has deteriorated. Patients queue for years to get the treatment they need, often for simple procedures. In the case of road transport, where it is necessary to limit the number of cars on the road, the most efficient way of allocating car ownership is to make use of the market mechanism, and tender for the limited supply of COEs. There is no contradiction in using market forces and limiting the supply. The use of market forces ensures that COEs go to those who value them most, and provides revenue for Government to spend on worthwhile projects elsewhere for the public good. The market system, suitably tempered by Government intervention, has served Singapore well. We have combined one of the highest growth rates in the world with a good income distribution. The International Monetary Fund has cited Singapore as a model of the type of policies it has traditionally advocated.”
“Both as a condition of IMF financing, and because the Indian Government had concluded that change was imperative, India moved decisively on a comprehensive reform programme. It tightened monetary policy, devalued the rupee, reduced subsidies, liberalised domestic industry and reduced barriers to foreign direct investment. India's experience illustrates an important principle: that distortion of price signals leads to inefficiency, wrong allocation of resources, and overall slower growth. This applies whether we are talking about the whole economy or about sectoral issues. Even in education, where there are good reasons for the Government to intervene, and not leave matters to private enterprise, economic forces cannot be stifled. As Adam Smith wrote in the Wealth of Nations, the effort of teachers falls without the spur of competition: `In every profession, the exertion of the greater part of those who exercise it, is always in proportion to the necessity they are under of making that exertion. This necessity is greatest with those to whom the emoluments of their profession are the only source from which they expect their fortune, or even their ordinary revenue and subsistence.' `The endowments of schools and colleges have necessarily diminished more or less the necessity of application in the teachers. Their subsistence, so far as it arises from their salaries, is evidently derived from a fund altogether independent of their success and reputation in their particular professions.' [The Wealth of Nations, Book V, Chapter I, Article II] In short, productive forces will wither away if they are not rewarded according to their value. Insulation from market forces will eventually lead to declining fortunes. This is an additional argument for independent schools.”
“India, after independence in 1947, moved away from what they considered to be the exploitative market system of their ex-colonial masters, and sought to progress through state planning and self-sufficiency. Imports were to be substituted by domestic production. The spinning wheel became the symbol of self-sufficiency and national pride. The Government would direct resources to the most important sectors through central planning. Essential goods and services were subsidised to ensure that people could afford them. For India, pursuit of self-sufficiency resulted in 40 years of poverty, stagnation and abysmal services. The subsidies have led to enormous, crippling distortions. The International Herald Tribune reported that a 500-kilometre train journey costs US$3, travel across New Delhi costs 10 US cents, and Indian university students pay US$1 a month in tuition fees. The result of these subsidies is poor and inefficient service, rather than better service and greater access. Yet it is almost impossible to remove the subsidies once people have got used to the low prices. This approach to development has prevented the Indian economy from performing anywhere near its potential. In 1947, India's per-capita income was comparable to that of the Asian NIEs. Today, Hong Kong's per-capita income is 30 times that of India while Korea's is more than 10 times. In the 1960s and 1970s when the Asian NIEs forged ahead at 9% growth, the Indian economy averaged only 3.5% growth. Last year, India ran into a serious financial crisis. Its official foreign reserves dropped to the equivalent of 3 weeks of imports. Commercial lending dried up. India had to seek financing support from the IMF.”
“This is above the average for the manufacturing sector. This shows how constant upgrading and the infusion of new technology can give a new lease of life to a traditional business. Government will also help those who wish to leave their businesses to do so. It will make sure that there are always employment opportunities elsewhere in the economy. But it cannot provide lower rents, or an unlimited supply of foreign workers, to enable old businesses to remain what they are. Doing so would offer false hope, deprive other more productive sectors of scarce resources, and delay unavoidable adjustments, making them more painful later. The growth rate will fall. Overall, Singapore will be worse off. Efficient Allocation of Resources The problems of restructuring and upgrading are part of a wider economic problem: how to allocate scarce resources so that they are used efficiently and optimally. Efficient resource allocation is central to economic growth. Thirty years ago, economists were divided on the key ingredients of economic growth. One group, from the Massachusetts Institute of Technology, argued that resource allocation was the key issue. The other group, from Cambridge University, argued that Government intervention and income redistribution were the key issues. Time has however proven the Massachusetts group right. The free market is the best system known for allocating resources efficiently. More than 200 years ago, Adam Smith wrote eloquently about how each individual working for his own interests in the free market ensures the best possible outcome for all. Smith's advice did not always prevail.”
“Beyond ASEAN, Singapore will continue to play an active role in the Asia Pacific Economic Co-operation or APEC grouping, which comprises the key Pacific economic powers and the North East Asian economies. We will, of course, continue to enhance our economic links to the industrialised countries. They will remain an important source of technology and investment for this region. Upgrading and Restructuring Rapid growth in the Singapore economy has been accompanied by rapid structural change. In broad sectoral terms, we have seen the relative decline of entrepot trade and the emergence of manufacturing, banking and tourism. Within manufacturing, saw-mills have disappeared, and been replaced by new industries making disk drives and pagers. In the financial sector too, innovation and change have been rapid. New activities have grown much faster than traditional lending business. Singapore is now the fifth largest forex trading centre in the world. Singaporeans have accepted these rapid changes as part of the process of growth. To achieve 5 - 7% growth in the medium term, we need to continually upgrade and restructure. Domestic businesses which have survived largely intact despite rapid changes elsewhere in the economy are now feeling the pressure. They find it difficult to hire workers, and their rentals are rising. Government is mindful that change and adjustment are unsettling and even painful for individual firms. We will make it easier for them to manage the transition. We will help traditional businesses to upgrade and innovate, to use new technology to produce a better product. For example, although the garment and textiles industry is often seen as a "low-tech" industry, it achieved productivity growth of more than 6% in 1991.”
“Any constriction in the volume of world trade would have a large impact on our small economy. The impact of these arrangements goes beyond trade restrictions. MNC investments may be diverted from Singapore towards North America or the EC. Often, it is not only the fact that a market is protected but the possibility that access may become difficult that affects the flow of investment funds. For example, Japanese car-makers have set up plants in the US and the EC to assure themselves of continued access to these markets. Today, it may be cars. Tomorrow, it could be products like disk drives which form a significant part of our exports. While we continue to make the best of opportunities in our established markets in the West, we should actively seek out new opportunities closer to home. Already, nearly two-thirds of our tourists come from Asia. Half our trade is with Asia. As the dynamic Asian countries enter the ranks of middle-income countries, more opportunities will open up. Foreign investors have seen this coming and are busy expanding to this region. The creation of the ASEAN Free Trade Area or AFTA will make ASEAN more attractive to investors. AFTA will have a population of 350 million, comparable to the EC. Admittedly, AFTA's purchasing power is only one-fifteenth that of the EC and one-twentieth that of NAFTA. But ASEAN as a whole is much larger than any single one of its members. As the ASEAN countries develop, and purchasing power goes up, AFTA will become an increasingly significant market. AFTA will enable investors to enjoy greater economies of scale, often by locating plants throughout the ASEAN region, thus capitalising simultaneously on the different strengths of each ASEAN member.”
“The rest of the world will not declare a moratorium on competition while we debate on who is best suited to go into certain businesses, whether we should have a more leisurely pace of life or how we should reward the able. It is more difficult to stay "lean and mean" when we can afford to eat better. Linking ourselves to the world will goad us to stay fit and compete successfully with the world's best. Second, as the US economy has grown less dominant, the global economy has changed to a more distributed structure in which Japan plays an increasingly important role. The Asia Pacific region is also growing in significance. Singapore has always looked to the industrialised countries to supply technology and markets. We should continue to do so, but we should begin to balance our international outlook with a more regional one. The formation of new institutional arrangements, like the Single European Market or SEM and the North American Free Trade Area or NAFTA, has implications for Singapore. The SEM and NAFTA will group together markets of 350 million people each. Their members have repeatedly assured us that these groupings will not turn protectionistic. Indications so far are that in some sensitive areas like cars, the instinct to protect domestic interests is still strong. Even without explicit trade barriers, the existence of common standards and free movement of goods, services, capital and even people across borders within each region would give an edge to traders who are inside vis-a-vis traders who are outside. Singapore will be an outsider in Europe and North America. We have to work harder to gain access. Our stake in the global trading game is big - we are the world's 18th largest exporter and 15th largest importer.”
“This is slightly below our medium-term projection of sustainable growth because of less buoyant external demand conditions. MEDIUM TERM SUSTAINABLE GROWTH A growth rate of 5 - 7% for the medium term may seem a let-down after the average growth of 8.5% in the last 3 decades. However, our GDP is now at a higher base of US$10,000 per-capita, and we have reached full employment. Expansion can no longer be as effortless and rapid as before. The experience of other economies shows the limits of what is possible. Japan has one of the strongest records of economic growth over a long period. Its per capita GDP was around US$10,000 in the late 1970s and early 1980s. Yet its growth rate in that period averaged only 4.5%. Singapore can aim for a slightly higher medium term growth rate of 5 - 7% because our smaller economy can restructure more quickly and ride on successive waves of rapid growth in different activities. Three main strategies are needed to achieve our medium term growth target. We need to enhance our linkages to the world economy, to continue restructuring and upgrading, and to harness market forces as far as possible. Enhancing International Linkages The need to enhance linkages with the world economy may seem obvious, when we are already one of the most internationalised economies in the world. However, there are two reasons why we have to reiterate this. First, as we become better off, we need to guard against complacency. It is tempting, after having achieved some progress, for us to turn introspective. We may quibble over how the cake should be divided within the family instead of continuing to work hard to increase the size of the cake.”
“5%, this marks the third year in a row where real wage growth has exceeded productivity gains. As a result, the profit share in nominal GDP fell from 48.6% in 1990 of GDP to 47% in 1991 (see Chart 1 (Cols. 503 - 504)). Chart 1 - PROFIT SHARE (Cols. 503 - 504) In the manufacturing sector, unit labour cost rose by 6.8% in 1991. Although unit labour cost also rose in the other three Asian NIEs, the rate of increase in Taiwan and Hong Kong was lower. The Singapore dollar also appreciated faster than the other NIE currencies. As a result, our unit labour cost relative to the other NIEs rose by another 7.5% (see Chart 2 (Cols. 503 - 504)). This brings our relative competitiveness position to that in 1982 and 1983. Chart 2 - SINGAPORE'S RELATIVE UNIT LABOUR COST IN MANUFACTURING AGAINST THE OTHER NIEs (Cols. 503 - 504) ECONOMIC OUTLOOK FOR 1992 In November 1991, the Ministry of Trade and Industry or MTI forecast growth for 1992 at 5 - 7%. Since then, international economic developments have not dispelled the overall picture of uncertainty. This uncertainty is reflected in the expectations of the business community. In the most recent survey of business expectations, 16% of firms in the manufacturing sector expect business conditions in the first half of 1992 to improve, 16% expect conditions to worsen, while 68% expect conditions to remain about the same as in the second half of 1991. MTI's assessment is that the slow recovery of the US economy, and the economic problems in Europe and Japan, will dampen our prospects. It has revised the forecast for 1992 growth downwards, to 4 - 6%. The second half of the year is likely to show stronger growth than the first.”
“However, the performance of financial institutions in Singapore has remained good because of improved interest margin and a switch into new off-balance sheet activities not captured under conventional methods of compiling value-added statistics. The commerce and the transport and communications sectors have also slowed down moderately. Commerce expanded by 6.4% in 1991, lower than the 8.2% in 1990. Its growth was mainly from entrepot trade. However, domestic trade, hotels and restaurants were affected by the sharp decline in visitor arrivals caused by the Gulf War and the recession in some of our major tourism markets. The transport and communications sector registered slightly slower growth of 8% compared with 8.8% in 1990. Air cargo grew more slowly but sea cargo expanded at a faster rate. In contrast with the other sectors of the economy, the construction sector expanded more rapidly in 1991. It was the fastest growing sector, with growth of 21%. This boom was a reflection of the large value of contracts awarded in previous years. The slower growth in the economy, however, helped to ease pressures on prices. While the average inflation rate for 1991 was the same as that in 1990, at 3.4%, we ended the year with an inflation rate of 2.6%. This was down from a high of about 4% in the first 3 quarters of 1991. The labour market was still tight, with an unemployment rate of 1.9% as at June 1991. 64,000 new jobs were created in the economy, mainly in the construction and commerce sectors. Nominal wages in 1991 rose by 9.2%, slightly lower than the 9.3% in the previous year. With general inflation as measured by the GDP Deflator at 1.6%, real wage growth was 7.6% compared with 5.9% in 1990. As labour productivity grew by only 1.”
“Mr Speaker, Sir, I beg to move, That Parliament approves the financial policy of the Government for the financial year 1st April, 1992 to 31st March, 1993. I - REVIEW OF THE ECONOMY ECONOMIC PERFORMANCE IN 1991 The Singapore economy grew by 6.7% in 1991, slower than the 8.3% growth in 1990. This slowdown reflected both domestic supply-side constraints and more adverse conditions in our external markets. Compared with the other Asian NIEs and ASEAN economies, Singapore performed moderately well. South Korea expanded by 8.6%, Taiwan by 7.2%, Hong Kong by 4%, Malaysia by 8.6%, Indonesia by 6% and Thailand by 7.9%. The slowdown in the economy was a result of slower growth in two major sectors: manufacturing and financial and business services. The manufacturing sector grew by only 5.3% in 1991, down from 9.5% a year ago. This was due to a softer computer market and weaker growth in the industrial countries. The three largest industries - electronics, transport equipment and petroleum products - grew by only 0.4%, 4.4% and 3.4% respectively. Growth in the financial and business services sector also slowed. It grew by 5.4%, much lower than the 13% in 1990. While business services in general remained buoyant, growth in the financial subsector fell from 19% to 2.9%. This was mainly due to a decline in offshore banking and foreign exchange activities. Total assets of the Asian Dollar Market contracted by 8.4% in 1991, while the average daily volume of foreign exchange transactions declined by 5.8% from US$79 billion in 1990 to US$75 billion in 1991. The general slowdown in the volume of financial activity was in line with the consolidation of international banks, especially those of Japan and the US, to meet the Bank for International Settlements' capital adequacy requirements.”
“Resolved, That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44) resolves that the Schedule to that Act be varied by deleting the figures "$849,700", "$50,000", "$1,868,900", "$311,800" and "$31,900" in the second column and substituting the figures "$868,800", "$51,000", "$2,013,200", "$393,000" and "$55,700", respectively.”
“Mr Speaker, Sir, I beg to move the Motion* standing in my name under item 2 in the Order Paper. *The Motion reads as follows: That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44) resolves that the Schedule to that Act be varied by deleting the figures "$849,700", "$50,000", "$1,868,900", "$311,800" and "$31,900" in the second column and substituting the figures "$868,800", "$51,000", "$2,013,200" "$393,000" and "$55,700", respectively. Sir, it is proposed to increase the provisions for the Privy Purse, entertainment allowances and salaries of personal staff to $868,800, $51,000 and $2,013,200 respectively. These marginal increases for FY 92 are necessary to provide for normal salary increases, anticipated higher entertainment expenditure, a possible increase in the employers' CPF contribution rate, and more staff to cope with anticipated workload increase. A higher sum of $393,000 is required to meet Expenses of the Istana household in FY 92. The increase is to cater for additional expenditure on gifts and entertainment and for the President's visits overseas. The allocation for Special services in FY 92 is increased from $31,900 to $55,700. The higher expenditure in FY 92 is for the replacement of machinery and equipment beyond economic repair. It is, therefore, necessary to vary the provisions in the Schedule to the Civil List as indicated in the Motion before the House. Sir, I beg to move. Question put, and agreed to.”
“Mr Speaker, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." Question put, and agreed to. Resolutions accordingly agreed to. CIVIL LIST”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions. Resolutions reported --- "That the sum of $492,937,900 shall be supplied to the Government under the head of expenditure for the public services shown in the First Supplementary Main Estimates of Expenditure for the financial year 1st April 1991 to 31st March 1992, contained in Paper Cmd. 8 of 1992." "That the sum of $557,705,600 shall be supplied to the Government under the heads of expenditure shown in the First Supplementary Development Estimates of Expenditure for the financial year 1st April 1991 to 31st March 1992, contained in Paper Cmd. 8 of 1992."”
“For the benefit of taxpayers who are usually not at home to receive the registered mail, clause 16 amends section 76(1) of the Income Tax Act to allow the Inland Revenue Department to send Notices of Assessment by ordinary mail. However, the Department will continue to send such Notices by registered mail to taxpayers who specifically request for such service. This will take effect from 1st January 1993. Clause 6 amends section 14(1)(e) of the Income Tax Act to raise the limit imposed on the deduction allowed in respect of an employer's contributions to an approved pension or provident fund from 16 1/2% to 17 1/2%. This would enable the limit to be in line with the increase in the employer's CPF contribution rate. The change will take effect from 1st July 1991. Clauses 4 and 12 are consequential amendments relating to the tax incentive for services provided by Trust Companies. Clause 8 is a consequential amendment pertaining to tax deduction for general provisions made by banks. Clause 9 allows the Minister to delegate his authority to approve certain industrial buildings or structures for the purpose of qualifying for capital allowances under sections 16 and 17 of the Income Tax Act. Finally, clause 17 is a technical amendment in respect of section 90(3) of the Income Tax Act which deals with the recovery of tax and penalty imposed under the Act. Sir, I beg to move. 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. INSTITUTE OF TECHNICAL EDUCATION BILL Order for Second Reading read. 2.20 pm”
“For taxpayers who have not submitted their returns by the due date, a second return has to be issued as a reminder by AR Registered post. Over the last three years, the number of AR Registered returns sent has increased from 242,000 to 330,000. This represents about 30% of total individual taxpayers. Paying taxes is a social obligation of every citizen. Taxpayers in developed countries, such as the United States, Canada and Australia, are required to submit their Income Tax Returns by a fixed date. To promote greater social responsibility among taxpayers in filing their returns, it is proposed that all individual taxpayers be required to submit their Income Tax Returns by a date to be specified in the Gazette. This will be 15th April of each year. Subsequent to this, IRD will no longer issue AR Registered returns to taxpayers. The amendment will in fact provide greater convenience to taxpayers who are not at home to receive the registered mail. Also many taxpayers would not have received their statements of remuneration from their employers by the first two months of the year. The new gazetted deadline of 15th April will now allow taxpayers sufficient time to prepare their returns. Clauses 13, 14 and 18 amend section 63(1), section 71(1), section 94(2) of the Income Tax Act to provide for the submission of Income Tax Returns by a specified date. As this will take effect from 1st January 1993, the Department will inform the public of the new procedure towards the end of this year to prepare them for the change. The fourth amendment concerns notices of assessment. Currently, a Notice of Assessment is raised and served by registered post after a Return is received from a taxpayer, specifying the amount of tax the taxpayer has to pay for a certain year.”
“The remaining three are consequential amendments needed as a result of our tax incentive for services provided by Trust Companies; tax deduction for general provisions made by banks; and deductions allowed in respect of an employer's contributions to an approved fund. The first tax change relates to the waiver of small assessments. Currently, section 73A of the Income Tax Act empowers the Comptroller to waive assessments where the amount of tax does not exceed $5. This waiver limit is now revised upwards to $15. Clause 15 amends section 73A such that the Minister will be given the discretion to vary the limit periodically via subsidiary legislation in response to changes in the cost of assessment. The second amendment relates to the recovery of penalties. It is expressly provided in section 33 of the Limitation Act that recovery of tax and interest on the tax will not be subject to the limitation of time in the Act. However, the sum imposed on non-payment of tax is currently defined as "penalty" under the Income Tax Act. As a result, recovery of such interest penalty is subject to the limitation period of one year. To remove the anomaly, clause 19 amends section 98A of the Income Tax Act to treat the penalty interest as if it is interest on tax for the purpose of the Limitation Act. This will enable the sums imposed on outstanding tax on or after 1st January 1992 to be recoverable in the same manner as the tax due. The next amendment relates to the submission of Income Tax Returns by a specified date. At present, Income Tax Returns are sent by ordinary post to all taxpayers at the beginning of each year and taxpayers are required to submit their returns within 21 days from the postmark date.”
“For purpose of claiming handicapped spouse relief, the handicapped spouse is not required to stay in the same household as the taxpayer as a person has the legal obligation to provide for the maintenance of his spouse, regardless of where the spouse stays. Such residential requirement is currently imposed for claiming the relief for the aged dependants, handicapped children and siblings. However, in recognition that such dependants may require institutional medical care, it is proposed that the residential requirement be liberalised also for claiming the relief for aged dependants, handicapped children and siblings. Hence, with effect from the Year of Assessment 1992, the taxpayer may claim tax relief for supporting his aged or handicapped dependants who are confined to hospitals or nursing homes on medical grounds, provided that their doctors certify that they are in need of such institutional care. Clause 10 amends section 39 to give effect to these changes. To encourage a self-employed person to save more to provide for his own needs when he retires, Government has allowed tax deduction for his voluntary contributions to the Central Provident Fund, subject to a limit. I have announced that the limit for the tax deduction for Year of Assessment 1992 will be raised to 16 1/2% of assessable income from self-employment, subject to a maximum of $11,880. The previous limit was 15% of assessable income, subject to a maximum of $10,800. Clause 10 amends section 39 to increase the limit for such tax deduction. I shall now deal with the other nine tax changes not announced in the 1991 Budget Statement. Six of the amendments are necessary to fine tune the existing provisions in our tax legislation.”
“Currently, tax deduction is only allowed for specific provisions for bad and doubtful debt. To further encourage banks to maintain adequate provisions to cushion themselves against unforeseen losses in their loan and investment portfolios and thus promote the overall soundness and stability of our financial system, I have announced that with effect from Year of Assessment 1992, general provisions made by banks and merchant banks will be tax deductible. Clause 7 inserts a new section 14I to provide for this change. At present, approved securities companies and banks are taxed at a concessionary rate of 10% on their income from financial trustee activities. To develop Singapore further as a centre for international trustee activities for investments in the regional financial markets, I have announced that the 10% concessionary rate will be extended to cover income derived by Approved Trust Companies from providing specified trustee services to non-residents. This will take effect from the Year of Assessment 1992. Clause 11 inserts a new section 43J to provide for this extension of the incentive. To reward effort and enterprise, I have announced a 5% one-off and across-the-board rebate on personal income tax payable for Year of Assessment 1991. Clause 20 provides for this rebate. To encourage families to care for their aged and handicapped dependants, a relief of $3,500 is currently available to a taxpayer who maintains his aged dependants, handicapped children and siblings. This relief is now extended to include support of a handicapped spouse with effect from the Year of Assessment 1992.”
“Mr Speaker, I beg to move, "That the Bill be now read a Second time." The Income Tax (Amendment) Bill 1992 gives legislative effect to the income tax changes announced in the 1991 Budget Statement and nine other tax changes not announced in that Statement. One of the tax incentives announced was to allow tax exemption on dividends paid out of foreign income. Under our current tax laws, Singapore tax paid by a company will be imputed to its shareholders upon payment of dividends. However, the tax to be imputed to its shareholders must have already been paid by the company. If the income of the company has not been subject to full Singapore tax, the company will not be able to distribute the entire income as dividends without incurring additional tax. This would happen in the case of foreign income remitted to Singapore where a foreign tax credit has been given against Singapore tax payable. To resolve the problem, I have announced that dividends paid out of foreign income, for which there is insufficient franking credit due to the foreign tax credit given, will be exempt from further Singapore tax with effect from Year of Assessment 1992. Clause 5 inserts a new section 13E to provide for tax exemption on dividends paid out of foreign income. Another incentive introduced was to develop Singapore into an international maritime centre and to encourage major international shipowners to locate in Singapore. The income of an approved international shipping enterprise derived from the operations of non-Singapore flag ships outside Singapore will be exempt from tax with effect from 1st April 1991. Dividends declared out of such income will be exempt from tax. Clauses 3 and 5 insert new section 13(1)(o) and 13F and clause 2 amends section 10(4) to provide for this incentive.”
“(c) The procedures relating to the payment of interest, redemption of Government securities and the creation of a sinking fund. (d) The prescription of regulations setting out the terms of issue of Government securities. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Dr Richard Hu Tsu Tau]. Bill considered in Committee; reported without amendment; read a Third time and passed. INCOME TAX (AMENDMENT) BILL Order for Second Reading read.”
“To resolve these problems, it is necessary to rationalise the accounting treatment of future Government borrowings from the CPF Board and the Government Securities Market. In this regard, it is proposed that a Government Securities Fund be created to account for all future borrowings, other than those for financing development projects, raised through the issue of Government securities. Following the current practice, the Monetary Authority of Singapore will be authorised to act as the agent of the Minister for Finance in raising loans through the issue of Government securities. The proceeds from the issue of Government securities will be credited to the Government Securities Fund. The moneys standing to the credit of the Fund will be invested and the resultant income used to meet the debt servicing cost and other related expenditure of the Fund. There will be a safeguard whereby any deficiency in the Government Securities Fund will be met from the Consolidated Fund. This will ensure that loans raised under the Government Securities Fund will be as secure as those raised under the Development Loan Act. In the event that it is necessary in the future for Government to borrow in order to finance new development projects, the borrowing will continue to be carried out under future authorisation in the Development Loan Act and not under the Government Securities Fund. Among other things, the Bill also provides for the following: (a) The requirement of a parliamentary resolution for the maximum amount which the Government could borrow through the issue of Government securities. (b) The accounting requirements for the loan proceeds, investment income, debt servicing charges and other related expen-ses.”
“Mr Speaker, I beg to move, "That the Bill be now read a Second time." The Bill seeks to create a Government Securities Fund which would be used to account for all future loan proceeds raised through the issue of Government securities, other than those for financing development projects. Under the present system, Government's domestic borrowings are all carried out under the Development Loan Act through the issue of Government securities. These borrowings, mainly from the Central Provident Fund (CPF) Board, are credited to the Development Fund and used to finance Government's development expenditure. The moneys standing to the credit of the Development Fund are invested, with the income credited back to the Fund. The investment income attributable to the Fund is sufficient to meet debt servicing charges. However, under current legal and accounting arrangements, the debt servicing on these borrowings must be charged to the Consolidated Fund. This arrangement has created unnecessary demands on the Consolidated Fund. The volume of domestic borrowings has been maintained over the years. But not all the proceeds were needed to finance Government development expenditure. This is because a substantial portion of such expenditure has been funded through annual operating surpluses. This has led to a build-up in the Development Fund, as the moneys in the Fund can only be used for development expenditure and cannot be used for any other purpose. In addition, when the Government Securities Market was launched, the proceeds from the issue of Government securities were similarly channelled to the Development Fund while the debt servicing costs were charged to the Consolidated Fund.”
“The National Arts Council Bill provides for the repeal of the National Theatre Trust Act. Sir, I beg to move. Question proposed.”
“There is a shortage of trained and experienced arts administrators in Singapore, a shortage that is beginning to retard the development of the arts. The Arts Council will help to build up such a core of administrators to meet the growing needs of the arts sector. In addition to Government financial support, the Arts Council will be free to raise its own revenue. An endowment fund, called the Singapore Arts Endowment Fund, will be formed under the Bill for the Arts Council to receive donations from the public. Interest from this fund will be used to help arts groups and to organise arts activities. The Bill also gives the Arts Council the power to form companies and to participate in joint ventures. Membership of the Council Sir, the Arts Council will comprise a Chairman, a Deputy Chairman and 10 to 25 other members. To carry out its public mission well, the membership must be broad-based. We will need representatives from the arts community, the private sector and the public sector. We have to strike a balance between supporting art for art's sake and subjecting art to the test of the market. To ensure that the Arts Council is well-advised on matters pertaining to the arts in Singapore and the rest of the world, the Bill enables the Council to appoint advisory committees. They need not all be composed of Singaporeans. We should also include foreigners who can help us. These committees will cover the major fields, including the literary arts, the visual arts and the performing arts. Absorption of staff and property The Arts Council will absorb the staff and property of the Arts Division of the Ministry of Information and the Arts; the National Theatre Trust, which is a statutory board; and the Singapore Cultural Foundation, an endowment fund now under the Ministry.”
“Although the Government will give full backing to the Arts Council, it is very important that the private sector, both private citizens and corporations, also give their full support. For the arts to flourish, we need a tripartite working relationship between thearts community, the private sector and the Government. It will be the job of the Arts Council to help build up this tripartite relationship. Much has already been done but much more needs to be done. As a hub city of the world, our ambition should be to make Singapore an international centre of the arts. If the arts are only by Singaporeans for Singaporeans we will at best be mediocre. Our basic approach must therefore be to supplement local talent with foreign talent, especially Asian talent, and target not just the Singaporean market but also the region. In this way, we will also make our contribution to the development of the arts in the region. We should invite eminent foreigners in the arts world to help us in the Arts Council either as members or as advisors. Structure of the Council Sir, in April 1989, the Advisory Council on Culture and the Arts recommended the formation of the Arts Council. The Advisory Council proposed that the Arts Council should be a company to give it maximum operational flexibility. Such an agency need not be subject to civil service constraints. Instead of a non-profit company, we now propose to form the Arts Council as a statutory board. This will better reflect its public purpose and national character. A statutory board formed by Parliament will enjoy higher public status than a company. The Government will give maximum autonomy to the Arts Council. It will formulate its own personnel policies, so that the right people can be engaged, retained and developed.”
“Finally, section 18 of the Act is proposed to be amended in keeping with Article 147(5) of the Constitution. This imposes a duty on the Minister to furnish, togetherwith the annual financial statements, a statement of outstanding guarantees and other financial liabilities of Singapore at the end of the financial year. It also requires the Minister to present to the President the audited accounts and financial statements together with a statement stating whether the audited accounts and statements show any drawing, or likelihood of drawing, on the reserves of the Government not accumulated by the Government during its current term of office. Sir, I beg to move. 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. NATIONAL ARTS COUNCIL BILL Order for Second Reading read. The Acting Minister for Information and the Arts (BG George Yong-Boon Yeo): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The proposed National Arts Council Bill seeks to establish a statutory board which will enable the Government to better support the development of the arts in Singapore. The development of the arts in Singapore is an important part of the next phase of our overall national development. The Arts Council will serve as a catalyst. It will support arts groups directly and indirectly and encourage other organisations and members of the public to do likewise. It will promote widespread appreciation of the arts in Singapore and encourage public recognition of artistic achievements in our society.”
“Currently, there is no specific authority for the opening of deposit accounts for accounting of moneys like confiscated gambling money and security deposits. Section 9 of the Act is proposed to be amended to reflect the current practice of including moneys for the purpose of making advances in the Annual Estimates submitted to Parliament for approval. An amendment is proposed to section 11(2) to provide that the Minister may make advances from the Contingencies Fund only with the concurrence of the President. This amendment is consequential to Article 148C of the Constitution. Consequential amendments are also proposed to section 12 of the Act to provide that the Minister may authorise issue of moneys from the Consolidated Fund in the following circumstances:- (a) to meet expenditure appropriated by a Supply or Supplementary Supply law or any other law or approved by resolution of Parliament in accordance with Article 148A(2) of the Constitution; (b) to meet expenditure approved by a resolution of Parliament in accordance with Article 148B(1) or Article 148B(2) of the Constitution with which the President concurs; (c) to meet expenditure approved by the Cabinet in accordance with Article 148B(4) of the Constitution should there be no Supply Law by the first day of a financial year. Section 15 of the Act is proposed to be repealed and re-enacted to provide that no guarantee shall be binding on Singapore unless it is given with the written authority of the Minister with the President's concurrence or in accordance with law. The section also provides that no loan raised by the Government shall be binding unless it is raised in accordance with Article 144 of the Constitution.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Constitution of the Republic of Singapore (Amendment) Act 1991 was passed by Parliament on 3rd January 1991 and assented to by the President on 18th January 1991. Arising from this, it is necessary to amend the Financial Procedure Act (Chapter 109) to take into account the newfinancial provisions introduced by the constitutional amendments. As Members know, the purpose of these new financial provisions is to protect Government's reserves. This Bill seeks to make the necessary consequential amendments. It also proposes some other amendments that either reflect current practice or are of a drafting nature. With your permission, Sir, I will now highlight the principal amendments. The words "other than land" in the long title of the Act are proposed to be deleted. This is so that public property referred to therein would include immovable public property. This is necessary as immovable public property such as land will be included in determining Government's reserves. A new section 2A is proposed to provide for the appointment of the Accountant-General. This is in line with the new Article 22 of the Constitution. New section 2B spells out the duties of the Accountant-General. Section 7 of the Act is proposed to be amended to include gold and bullion in the list of assets that public funds may be invested in, and to disallow investment in any stock, bond, fund or security issued by the Government. This is to reflect current practice. Section 8(1) of the Act is proposed to be amended to allow the creation of deposit accounts for the proper accounting ofmoneys received but which are not revenues of Singapore.”
“The third amendment concerns tax exemption for a shipping enterprise. Currently, section 13A provides for tax exemption on the income of a shipping enterprise derived from the carriage of passengers or goods by Singapore ships. As a logical extension and in order to encourage Singapore ships to provide similar offshore services, clause 3 amends section 13A to extend the tax exemption to include income from towing or salvage operations carried out by Singapore ships. The extension will take effect from Year of Assessment 1991. Finally, capital expenditure incurred on installing a stand-by generator will be allowed to be written off in one year. A stand-by generator would be useful in providing electrical power in an emergency situation as well as for normal business operation. As an encouragement for the installation of a stand-by generator in an office or factory to supply electrical power in the event of a power failure, clause 7 amends section 19A to provide for an allowance of 100% in respect of the capital expenditure incurred. This will take effect from Year of Assessment 1990. Sir, I beg to move. 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. FINANCIAL PROCEDURE (AMENDMENT) BILL Order for Second Reading read. 2.25 pm”
“I have announced that the limit for the tax deduction for Year of Assessment 1991 will be raised to 15% of assessable income from self-employment, subject to a maximum of $10,000. In comparison, the previous limit was 10% of assessable income, subject to a maximum of $7,200. Clause 10 amends section 39 to increase the limit for tax deduction. I shall now move on to four other tax changes which were not announced in the 1990 Budget Statement. Two of them are consequential amendments needed as a result of the reduction in the corporate tax rate to 31%. The other two amendments are necessary to fine tune the existing provisions in our tax legislation. First, clause 9 amends section 35(2A) to provide for Singapore dividends derived by a person during 1989 to be assessed to tax at 32% for Year of Assessment 1990 in cases where such dividends would otherwise, by virtue of his accounting period, be assessed to tax at 31% for Year of Assessment 1991. This is to avoid a mismatch arising from the reduction in the corporate tax rate whereby dividends derived in 1989 are taxed at 31% while tax credits of 32% are allowed on such dividends. This is a consequential amendment required to be made together with a reduction in the corporate tax rate. Another amendment consequential to the reduction in the corporate tax rate limits the highest effective tax rate imposed underPart B of the Second Schedule to the Income Tax Act to 31%. This will ensure that those who are taxed under the existing Part B rates, such as management corporations and clubs, will in effect not be taxed above the corporate tax rate of 31%. This was announced in a press release immediately following the 1990 Budget Statement. Clause 11 amends section 42(5) for this purpose.”
“To encourage families to have their second child earlier, a special tax rebate will be given from Year of Assessment 1991 for a second child born on or after 1st January 1990 before the mother reaches 31 years of age. The rebate will be $20,000 if at the time of birth of the child, the mother is below 28 years of age, or $15,000 if she is below 29, $10,000 if she is below 30, and $5,000 if she is below 31. The rebate can be used to set off against either or both of the parents' income tax liabilities, but must be utilised within seven years. The time limit within which the existing tax rebates in respect of a third child and a fourth child may be claimed is also extended from five years to seven years. Clause 12 amends section 42A to give effect to these changes in tax rebates. From Year of Assessment 1991, the tax relief in respect of an aged parent or grandparent or a disabled sibling or child will be increased from $2,500 to $3,500. This is to further encourage families to care for their aged and handicapped dependants. Clause 10 amends section 39 to increase the tax reliefs. To encourage married women to continue working and raise families, a relief for the foreign maid levy will be given against the earned income of a married woman. This relief is also available to separated, divorced or widowed women with children. It is twice the amount of maid levy paid in a year in respect of one foreign maid and is available from Year of Assessment 1991. Clause 10 amends section 39 to provide for the relief. To encourage a self-employed person to save more to provide for his own needs when he retires, tax deduction has beenallowed for his voluntary contributions to the Central Provident Fund, subject to a limit.”
“With effect from Year of Assessment 1991, a concessionary tax rate of 10% will apply to offshore interest and dividends derived by an insurance company from investing its offshore life fund and shareholders' funds supporting the offshore life business. Clause 14 amends section 43C to enable the Minister to make regulations providing for the incentive. Clause 8 amends section 26 to deal with income from offshore life insurance business and to require insurance companies to maintain separate accounts for such income. Currently, Approved Operational Headquarters (OHQs) are taxed at a concessionary rate of 10% on their income from providing management, technical or other supporting services to their related companies. In the course of providing such services, OHQs may also derive income from trading in foreign exchange and offshore investments, on their own account. To encourage these high value-added treasury, investment and financial activities, the 10% concessionary rate will be extended to income derived from such activities with effect from Year of Assessment 1991. Clause 15 amends section 43E to provide for this extension of the OHQ incentive. Tax incentives are given to OHQs and FTCs to service the needs of their related companies, including managing their funds. However, overseas companies would not have their funds managed from Singapore if income arising from these funds were to be taxed. Therefore, as a feature of the OHQ and FTC incentives, income of a non-resident person arising from funds managed by an OHQ or FTC will be exempt from tax. Clause 5 amends section 13C to enable the regulations to be made to provide for the tax exemption.”
“Dividends declared out of such income will be exempt from tax. Clause 16 inserts a new section 43H to enable the Minister to make regulations providing for this incentive and clause 4 amends section 13B to provide for tax exemption on dividends. Guidelines were drawn up to regulate the tax treatment of finance leasing transactions. They would determine, for example, whether a finance lease of a machinery or plant should be treated for tax purposes as a genuine lease or as a sale, and whether capital allowances for the asset should bemade to the lessor or lessee. Clause 2 inserts a new section 10D to enable the Minister to make regulations relating to the tax treatment which will apply to finance leases entered into on or after 1st April 1990. To encourage offshore leasing activities, clause 16 inserts a new section 43I to provide that the income of a leasing company derived from offshore leasing of machinery or plant shall be taxed at the concessionary rate of 10% with effect from Year of Assessment 1991. Dividends declared out of such income will be exempt from tax and clause 4 amends section 13B for this purpose. Currently, underwriting profits derived by an insurance company from insuring offshore general risks and the interest and dividends derived from investing such profits are taxed at a concessionary rate of 10%. To promote further growth, I announced that with effect from Year of Assessment 1991, the 10% concessionary rate will apply to offshore interest and dividends derived from investing the whole of the shareholders' funds which are used to support the offshore insurance business. Clause 8 amends section 26 to provide for this change. A similar incentive was proposed to promote offshore life insurance business.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Income Tax (Amendment) Bill 1991 gives legislative effect to income tax changes announced in the 1990 Budget Statement and four other tax changes not announced in that Statement. I announced a reduction in the corporate tax rate from 32% to 31% with effect from Year of Assessment 1991 to ensure that our tax structure remains competitive. The reduced rate will also apply to trustees and non-residents. As a corollary to the reduction, any dividend paid on or after 1st January 1990 will carry a credit of 31%. Clauses 13, 17, 18 and 19 amend sections 43, 44, 45 and 46 respectively to give effect to these changes. A tax incentive was proposed to encourage multinational corporations to setup Finance and Treasury Centres (FTCs) in Singapore to perform their treasury, investment and financial services for their own account and for companies in their group. With effect from Year of Assessment 1991, income accruing to an approved FTC from trading in foreign exchange, offshore investments and provision of financial services to related companies will be taxed at a concessionary rate of 10%. Dividends declared out of such income will be exempt from tax. Clause 16 inserts a new section 43G to enable the Minister to make regulations providing for this incentive and clause 4 amends section 13B to provide for the tax exemption on dividends. Another tax incentive was introduced to develop Singapore as a global entrepot and to promote international trading of major commodities in Singapore. The income of an approved international commodity trading company derived from transactions in commodities and commodity futures will be taxed at a concessionary rate of 10% with effect from Year of Assessment 1991.”
“The total amount of outstanding credit on credit cards is about $2.7 billion currently. The rate of default so far is not unduly worrying, although it is rising. It amounts to about $11 million write-off per year by the credit card companies, accounting for about 0.4% of total credit extended. Com- pared to this, the situation is much more worrying in the United States where bad debt write-offs can amount to something between 4% and 5% of credit extensions. FOREIGN WORKERS LEVY (Amount collected) 10. Dr Wong Kwei Cheong asked the Minister for Labour how much money was collected from foreign workers levy for each of the years 1987 to 1990 and for the first four months of 1991.”
“Mr Speaker, Sir, yes, of course, the Government is concerned about the social implications. As I said earlier, it is not the Government's job to determine how the consumer should spend his money. However, we would in fact advise all Singaporeans not to spend excessively on credit, but the control has to be a personal issue. The regulator's problem is to ensure that credit is not excessively given and against conditions which would lead to excessive credit creation and ultimately leading to defaults and frauds. As I mentioned earlier, these issues are being looked at by MAS.”
“The issue of the least able to pay is determined by the income limits which are imposed, and this is an issue which we are now looking at. I did overlook the question which Mr Heng Chiang Meng raised, which is the high interest rate charged. I do not consider that necessarily as a bad thing, because high interest rate would automatically restrict the amount of credit taken on the cards. On the credit cards, the cardholder is required to pay a minimum sum every month and interest is charged on the outstanding balance. If the card company were to charge a very low rate of interest on outstanding balances, I would suggest that it would in fact increase the tendency to use more credit on the cards.”