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.”
The complete record
Every one of 2,807 lines we hold for Richard Hu Tsu Tau, in date order, each linked to its source. Free to read, in full, without an account. Page 41 of 57.
“With regard to other major fee increases, such as the revisions to utilities, tariffs and postal rates, these were necessary to meet rising operating costs. That being the case, it is not appropriate to postpone them until the budget. Having said that, Government shares the concern that cost increases, whether originating from the public or private sector, should not unduly undermine our international competitiveness. On the Government's part, it will continue to monitor its statutory charges and fees so that increases occur, when they do, in a gradual manner. Corporate Tax Some Members were disappointed that no reduction was made to the corporate tax rate to offset the increases in business cost. The business community should not always look to Government for tax breaks for this purpose. Tax breaks, particularly reductions in corporate tax, are expansionary fiscal measures. They are appropriate if our economy has excess capacity. But with a tight labour market and a fully-employed economy, they will just add to the pressure on labour costs and prices. As it is, our corporate tax structure is already very competitive. This is due to several features in our corporate tax system. One of these is that we have a very low corporate tax rate. The present rate of 31% is among the lowest in the world. For shareholders, the effective tax rate could be even lower than this because of our imputation system. We have also very generous depreciation allowances in comparison with most other countries. The presence of various incentive schemes further enhances the tax competitiveness of certain sectors of our economy. In addition, our extensive network of 26 tax treaties alleviates substantially double taxation of income.”
“It is therefore important that the increase in the employers' contribution rate be taken into account in wage negotiations. If this is done, our overall competitive position should not be adversely affected. Some Members have asked Government to review the long term CPF contribution rate of 40%. They felt that this rate might be too high, considering its impact on wage cost. I do not propose to address the issue here, but will leave it to the Minister for Labour to take it up in the Committee of Supply. Moving on to the broader issue of rising business costs, I would say that most of these increases were inevitable because of our rapid economic growth. I would like to stress the importance of allowing such increases through if we want to send the correct signals to businesses to optimise the use of our scarce resources. Several Members have expressed concern that many Government-mandated cost changes have been made outside the budget. As I have explained in last year's budget debate, it is not the intention of Government to deliberately introduce major cost increases outside the budget. Wherever possible, Government will time the announcement of major fee revisions to coincide with the budget cycle. Members of the House should, however, understand that it is not always possible to do this, especially if the changes involved were not introduced specifically for revenue or budgetary reasons. Take the case of the upward revision in the foreign workers levy for the marine industry. Prompt action was necessary in that instance to contain the sharp increase in demand for foreign workers. Government also had to give those from the industry affected sufficient advance notice so that they can make the necessary adjustments to their operations.”
“Government development spending is 22% higher, but mainly in areas of infrastructure which do not compete with the private sector or add to productive capacity. Some help is offered to the tourist and retail consumer sectors most hurt by the Gulf War and its aftermath via the cess reduction and the personal tax rebate. Let me now deal with the specific issues raised by Members. I will not address all of them, as some would be more appropriately dealt with in the Committee of Supply. Cost of doing business. Several Members have spoken about the rising cost of doing business in Singapore, and how the one percentage point increase in employers' CPF contribution would worsen the situation. Members will recall that the employers' CPF contribution rate was reduced from 25% to 10% during the last recession. This was a big sacrifice on the part of our workers to help the nation regain its competitiveness. Government recognises their contribution and is committed to restoring the cut in employers' CPF contribution in tandem with the nation's economic performance. Hence, the restoration of employers' CPF contribution. However, the restoration of employers' CPF contribution cannot be done overnight without seriously affecting the cost of doing business in Singapore. With good economic performance over the last four years, Government has gradually increased employers' CPF contribution to 16 1/2%. This year, our economy is expected to grow in the upper end of the 3% - 6% range. There is, therefore, no good reason to postpone a further cautious adjustment to CPF contribution rates. An increase in employers' CPF contribution will undoubtedly contribute to wage cost increases.”
“More importantly, another two to three years of head-long growth in which wages greatly exceed productivity will seriously undermine our competitiveness. If this coincides with a downturn of the external sector, we could easily see a replay of the 1985 recession. With the early end of the Gulf War and the stabilisation of oil prices, the outlook for the world economy has visibly improved. I believe that our economy should have no difficulty in achieving GDP growth rates in the upper end of the 3%-6% growth forecast. The settling back of GDP growth to the 5% to 6% range should take pressure off the labour markets, remove speculative frenzy, and allow the economy to consolidate after four years of high growth. Against this background, businessmen should not expect the Government to provide stimulus to restore domestic GDP growth to the 8%-plus range. This, however, does not mean that we cannot grow at a faster pace. To achieve higher growth and yet not exert pressure on domestic factors of production, industries will have to move their labour intensive components into the other two legs of the Growth Triangle, or deploy their surplus capital farther offshore into the industrial markets. This growth path is well-trodden by small but highly developed countries like Switzerland. For the service industries which cannot readily export their activities, the path for non-inflationary growth has to be via the upgrading of skills and diversification into higher value-added areas. The emphasis in this budget is hence on overseas investment, offshore markets, and the promotion of areas of low labour intensity and high value-added. The budget is mildly stimulative in specific areas.”
“Mr Speaker, Sir, I would like to begin by thanking Members for the keen interest they have shown in this year's budget debate. Although Members are generally supportive of the budget, many have commented that it was rather cautious, and some have reflected businessmen's concern over the planned increase in CPF contribution in a year when the economy is expected to slow down. Let me explain Government's thinking in formulating this year's budget. For the past four years, our economy has expanded at an average rate of more than 9% annually. This far exceeds our sustainable long term growth rate of between 4% and 6%. Growing at such a fast pace has led to over-heating of our economy and a severe shortage of labour. The unemployment rate has fallen sharply from 3.3% in 1988 to 1.7% last year. The result is strong pressure on wages and annual real wage increases have risen from 2.4% in 1987 to 6.4% last year. Of the four years, wages in the last two years grew faster than productivity. Inflation which was at half a percent in 1987 has gone up to 3.4% in 1990. An appreciating Singapore Dollar has largely neutralised the effects of imported inflation so that wage rises accounted for a large part of the rise in inflation. With a labour force growth of around 2% and productivity increases of between 3% and 4%, our domestic economy can only support non-inflationary growth in the 5% to 6% range. Significantly higher growth rates, as we have seen in the last four years, must eventually feed through into higher wage inflation, with its all undesirable side effects. Job-hopping has already become very widespread, especially among the young. This, in time, will erode the work ethic.”
“Mr Speaker, Sir, the answer to both questions is "Yes". Details of the conversion exercise will be announced by my Ministry as soon as they have been finalised. MEDICAL PRACTITIONERS (Displaying rates of charges) 4. Mr Chng Hee Kok asked the Minister for Health if he will consider requiring all medical practitioners to display their rates of charges.”
“The Asia Pacific region is also expected to show rapid growth. This will offset some of the adverse effects of the expected slow-down in the major developed economies. Nevertheless, we should be mindful that the situation in the Gulf remains highly volatile. We must, therefore, remain vigilant. The fiscal measures introduced in this Budget are designed to enable us to broaden our economic base and to tap into regional growth. This will build greater resilience into our economy. Our economic policies will also be kept flexible to counter any major problems that may arise. Government will continue to invest in its people. Our economy has performed well for four consecutive years now. We cannot expect such progress to continue without a hitch. There will always be occasional difficulties which will slow us down. But these should not distract us from our long term goal of becoming a developed nation by the turn of the century. I am confident that with a well-educated and highly motivated people working in close co-operation with the Government, this goal can be achieved. Sir, I beg to move. [Applause].”
“Both domestic and non-domestic water consumption have gone up by 4.4% annually over the past 10 years, despite periodic Water Conservation Campaigns and tariff revisions. Early last year, following an unusually dry spell, water stocks in our reservoirs fell to very low levels, highlighting our acute dependence on adequate water supplies and the need for measures to curb the demand for water. To slow down growth in water consumption, a Water Conservation Tax will be introduced with effect from 1st April, 1991. Residential premises which consume more than 20 cubic metres of water per month will pay a 5% tax on the excess amount. The Water Conservation Tax will be in addition to the existing 5% tax on PUB bills of domestic consumers that exceed $40 per month. The majority of households, about 60%, will not be affected by the tax as they consume less than 20 cubic metres of water monthly. The Water Conservation Tax for the non-domestic and shipping sectors will be set at 10% as these sectors do not now pay the 5% PUB tax. Government is actively exploring and developing new sources of water to meet Singapore's future needs. The Linggui dam project in Johor is currently in progress and future requirements may have to come from as far afield as Pahang and the Riau islands. Building reservoirs, dams and pipelines involves heavy capital expenditure. These must eventually be recovered through higher water tariffs. Regular revisions of water rates can, therefore, be expected within the next few years. CONCLUSION In conclusion, Mr Speaker, Sir, the outlook for Singapore this year is one of guarded optimism. Singapore's economic fundamentals remain sound. The ending of the Gulf war has removed a major cause of uncertainty.”
“The revenue loss is estimated at $7 million a year. Appendix I - ENTERTAINMENTS DUTIES (Cols. 265 - 266) Tourism Cess Our economy is expected to perform reasonably well on an overall basis this year. However, some sectors, such as hotels, restaurants and tourist-related retailshops, have been adversely affected by the secondary effects of the war in the Gulf. To assist these sectors, the tourism cess rate will be reduced by 1 percentage point from 4% to 3%. The reduction will take effect from 1st April, 1991 and will be for a period of one year. It will cost the Government about $22 million in cess revenue. This concession should help hotels and restaurants to tide over their current difficulties. Duties on Cigarettes and Tobacco Duties on cigarettes and tobacco were last revised in March 1989 to discourage smoking. Although a decline in smoking among older adults has resulted in an overall decline in consumption, there has been a marginal increase in smoking among our youths. In support of the national effort to turn Singapore eventually into a nation of non-smokers and in particular to discourage smoking among our younger population, the import duty on cigarettes will be raised by $15 per kilogram to $100 per kilogram. The import duty on tobacco and excise duty on cigarettes will also be increased by $8 per kilogram and $10 per kilogram respectively to $50 per kilogram. With your permission, Sir, I would like to table Appendix II (Cols. 267 - 268) showing details of the increases. These increases will take effect from today. Appendix II - DUTIES ON CIGARETTES AND TOBACCO (Cols. 267 - 268) Water Conservation Tax With economic progress and a rising standard of living, Singaporeans have been steadily consuming more water each year.”
“With the revision in the employer's CPF contribution rate to 16(r)% on 1st July, 1990, the tax deduction for voluntary contributions of self-employed will be raised to 16(r)% of assessable income, subject to a maximum of $11,880 per year, with effect from Year of Assessment 1992. This will be further increased to 17(r)% of assessable income, subject to a maximum of $12,600 per year with effect from Year of Assessment 1993, in line with the increase in employer's CPF rate to 17(r)% with effect from 1st July, 1991. TAX ON PROPERTY Property Tax Refund on Vacant Residential Buildings Undergoing Building Works Government's objective has always been to promote home ownership in Singapore. It is in support of this, that property tax on owner-occupied residential properties is levied at the concessionary rate of 4% of annual value as against the full rate of 16%. This year, I intend to give a further concession by allowing a refund of property tax on vacant residential buildings undergoing building works provided the building will be owner-occupied following completion of the works. The tax refund will be limited to a maximum period of two years. This concession will take effect from 1st April, 1991. The revenue loss arising from this concession is estimated to be about $5 million a year. OTHER TAX CHANGES Entertainments Duty At present, the duty on entertainments, with the exception of racing of horses and vehicles, is 10% of the payment for admission. In keeping with our commitment to create a more vibrant cultural and entertainment scene in Singapore, the duty will be reduced to 5%. The duty on admission to horse and vehicle races will remain at 35%. Details of the changes are in Appendix I (Cols. 265 - 266). The change in duty will take effect from 1st April, 1991.”
“For this purpose, an initial sum of $1 billion from our surplus this year will be set aside to establish an Edusave Endowment Fund. The investment income from the Fund will be used to make annual contributions to the Edusave accounts of the first three children of a family. The initial amount per child will be $100. This will be increased to $500 eventually. Parents will be able to contribute the same amount to the Edusave account of their fourth child. This amount will be tax deductible. The tax deduction will take effect from Year of Assessment 1993. Tax Relief for Handicapped Spouse Government encourages families to look after their handicapped dependants by providing reliefs to taxpayers for supporting their handicapped parents, children and siblings. In this connection, I have decided to extend the handicapped dependant relief of $3,500 to include support of a handicapped spouse, provided the handicapped spouse does not have an income of more than $1,500 in that year. Where a husband is claiming handicapped dependant relief for his wife, he will not be able to claim normal wife relief. The new relief will take effect from Year of Assessment 1992. The revenue loss is expected to be about $1 million. Tax Deduction for CPF Contributions of Self-employed Persons Self-employed persons who have made voluntary contributions to CPF, including payments to Medisave, are currently allowed to deduct such contributions from their assessable income. In last year's Budget, the limit for such deductions was raised to 15% of the assessable income from self-employment, subject to a maximum of $10,800 per year.”
“To develop Singapore further as an international financial centre, we need to promote not only the trading of international securities, but also the issuance of such securities from Singapore. The strong growth in the Asia Pacific region has resulted in a greater demand for funds from regional businesses. Investment banks and securities companies should be encouraged to take advantage of this development by providing services for the issuance of international securities from Singapore. I have, therefore, decided to extend the 10% concessionary tax rate available to ACUs and Approved Securities Companies to cover income derived by them from arranging, underwriting, managing and placing international securities issued from Singapore. These securities should be issued by non-resident companies in non-Singapore dollars and placed with non-residents. The incentive will take effect from Year of Assessment 1992. TAX ON INDIVIDUALS Personal Income Tax As our personal income tax rates remain competitive, I do not propose to alter the tax schedule. However, to reward individuals who have contributed to make the past year another successful one for Singapore, I have decided to give an across-the-board and one-off rebate of 5% on personal income tax for Year of Assessment 1991. The estimated revenue loss is $65 million. Tax Deduction for Contributions to Edusave Scheme In line with Government's commitment to invest in our people and to provide equal opportunities for each new generation, the Edusave Scheme will be introduced in January next year. Under the Scheme, funds will be made available for students to pay the second tier miscellaneous fees, as well as expenses for extra-curricular activities and enrichment programmes.”
“Further details relating to the deduction will be announced by the Monetary Authority of Singapore. Tax Incentive for Services Provided by Trust Companies Trustee services are important supporting services to fund managers and investors. Trustee companies act as custodians, nominees, trustees or agents in investments transactions. The promotion of trust business will thus support the development of fund management and securities trading activities in Singapore, and contribute to the growth of our financial sector. At present, a 10% concessionary tax rate is available only to Approved Securities Companies and banks, for income from financial trustee activities. I have decided that with effect from Year of Assessment 1992, a concessionary tax rate of 10% shall also apply to income of Approved Trust Companies from providing specified trust services to non-residents in respect of their non-Singapore dollar investments. With this incentive and our strategic location in the rapidly growing Asia Pacific region, our financial sector would be in a good position to develop as a centre for international trustee activities for investments in the regional financial markets. Tax Incentive for Underwriting and Managing International Securities Issues At present, Asian Currency Units (ACUs) and Approved Securities Companies are taxed at a concessionary rate of 10% on certain types of qualifying income from trading in non-Singapore dollar securities on behalf of non-residents and on their own account. This incentive has significantly promoted the financial sector's development as a centre for trading of international securities.”
“As a result, banks which have not maintained adequate provisions to cushion themselves against unforeseen losses in their loan portfolios had to report large loan losses. If such losses are incurred by an increasing number of banks, the ensuing loss of depositor confidence will have adverse consequences on overall economic activity. Unlike other sectors of the economy, banks have a unique role in mobilising depositors' savings for productive investment, and facilitating payments in the national economy. Given the increased volatility of the international financial markets, and the need to ensure confidence in our financial system, it is crucial for banks operating in Singapore to build up adequate provisions. This will give the banks more latitude to withstand losses and diminution in the value of their assets. In view of the special role which banks play in the economy, I have decided to allow the general provisions made by banks and merchant banks in Singapore to be tax deductible. This is aimed at encouraging banks and merchant banks in Singapore to build up their reserves, and promote the overall soundness and stability of our financial system. This, in turn, will promote the further development of Singapore as an international financial centre. Allowing tax deduction for general provision is not a revolutionary measure, as a number of industrialised countries already provide for it. The amount of provisions eligible for tax deduction will be limited to 2% of each institution's total loans and investments, excluding Government securities. The amount deductible each year will be limited to a quarter per cent of such loans and investments. The deduction will be allowed with effect from Year of Assessment 1992.”
“However, many of the shipping companies now in Singapore are merely operational arms which act on decisions made by their headquarters or holding companies located outside Singapore. There is a need to build up a critical mass of shipowners if Singapore is to develop into an international maritime centre. The presence of such a critical mass will bring technical expertise and economic spin-offs. It will also foster developments in ancillary maritime services. To encourage major international shipowners to locate in Singapore, I propose to introduce a tax incentive for resident shipping companies called the Approved International Shipping Enterprise Scheme. Under the scheme, the income of an approved international shipping enterprise (AIS) from the operations of its non-Singapore flag ships outside Singapore will be exempt from tax. Qualifying dividends from approved subsidiaries and associated shipping companies of the AIS will also be granted tax exemption. Income derived by the AIS from the uplift of freight in Singapore by its non-Singapore flag ships will be subject to normal corporate tax. AIS status may be granted for a period of up to 10 years in the first instance, and may be extended thereafter. The scheme will take effect from Year of Assessment 1992. It will be administered by the Singapore Trade Development Board. Tax Deduction for General Provisions made by Banks Recent developments in the financial markets have highlighted the growing fragility of the international banking system brought about by deterioration in the loan and investment portfolios of banks. Major international banks have experienced a rise in bad debts because of sudden declines in the financial condition of their borrowers.”
“In this case, the reduced Singapore tax will not provide the company with sufficient franking credit to distribute the entire foreign income to its shareholders. The effect is that shareholders will not be able to benefit from the foreign tax credit given to the company. To resolve this, I propose to exempt from tax, dividends paid out of foreign income for which there is insufficient franking credit due to the foreign tax credit given. Where the foreign tax paid is equal to or higher than Singapore's, the entire foreign income, net of foreign tax, will be allowed to be distributed as tax exempt dividends to shareholders. Where the foreign tax is lower than Singapore's, only dividends paid out of a part of the foreign income will be exempt from tax. That part shall be computed by dividing the tax credit by our corporate tax rate and subtracting from it the foreign tax paid. For the remaining foreign income, the Singapore tax will be sufficient to frank dividend payments. Where a recipient of the tax exempt dividends is a holding company, it can in turn distribute tax exempt dividends out of those it has received. This tax concession shall apply to dividends paid out of foreign incomes assessable to tax from Year of Assessment 1992. I hope it will encourage more of our companies to invest overseas and to repatriate their profits. Approved International Shipping Enterprise (AIS) Scheme Owing to our strategic location at the crossroads of East-West trade, Singapore has developed into one of the busiest ports in the world. Our free shipping policy has been very effective in encouraging ships to register in Singapore, and attracting shipping companies and marine-related businesses to locate here.”
“By venturing abroad, our companies will gain access to new markets, resources and technologies. Last year, I indicated my intention to introduce legislation on a comprehensive goods and services tax or GST but to defer its implementation for as long as Government's revenue position permits. In this regard, I would like to inform the House that work on a draft GST legislation has been completed. A White Paper together with the draft legislation will be tabled in Parliament when it is ready. Let me now deal with the tax changes for FY91. TAX CHANGES TAX ON COMPANIES Corporate Tax As I indicated earlier, our corporate tax rate is amongst the lowest in the world and will therefore remain unchanged at 31%. Tax Exemption on Dividends Paid Out of Foreign Income We have in Singapore an imputation system which passes back to shareholders of a company the amount of tax it has paid, when its taxed profits are distributed. This is to remove double taxation which would otherwise have occurred if tax were levied first on corporate profits and then again on the dividends paid out of such profits. However, the imputation system does not completely eliminate the problem of double taxation in the case of foreign income. There is a franking mechanism in our tax law which ensures that the tax imputed to shareholders upon payment of dividends must have already been paid by the company. If the company has not paid sufficient tax to frank dividend payments, it must pay a tax to meet the shortfall in franking credit. This creates a problem where a company received foreign income and the Singapore tax on this income was reduced by a tax credit allowed in recognition of tax already paid on it overseas.”
“This year, our economy is expected to slow down because of uncertainties created by the Gulf war and slower growth in the major developed countries. Revenue in FY91 is therefore expected to show a modest increase of 1.9% to $17.2 billion. However, with total expenditure estimated at $15.8 billion, a surplus of $1.4 billion is still expected. This amount will go towards augmenting our pool of reserves, which we can draw upon in bad times. Over the years, we have gradually reduced our corporate and individual tax rates. Singapore's tax structure is now among the most competitive in the world. There is therefore no need for us to lower tax rates further to maintain our competitive position. Although growth in FY91 will slow down, the economy should have no difficulty achieving a growth rate of 3-6%. A fiscal stimulus for FY91 is therefore also not indicated. However, our revenue position does offer Government scope to pass part of its surplus back to individuals who have contributed to make this another successful year for Singapore. I will elaborate on this later. The state of our economy is visible evidence of the success of Government's fiscal policies. Government will continue to provide a conducive environment for business to thrive and prosper. As in the past, we will use tax incentives to promote the development of specific industries. These industries will include those with high potential, in particular those which are knowledge- and skill-intensive. Amongst the tax incentives for this Budget, I will be introducing a change to our tax system which will further encourage our companies to invest and expand overseas. With our small domestic market, it is imperative that we be export-oriented and outward looking.”
“It may be subsumed under Phase Two if manpower resources permit. To identify costs accurately under the MAS, additional financial systems will have to be introduced to supplement the Government's cash basis of accounting. A Fixed Assets System, acronymed FAST, has been installed to record the stock of Government's capital assets and to compute depreciation expenses. FAST will also allow Government to compute how much money to set aside to provide for the replacement of capital assets. Most Ministries have been trained on the use of FAST. They are now entering their asset records into the system. Following the corporatisation of the Management Services Department in July last year, the responsibility for undertaking the planned zero-base reviews of Ministries and Organs of State has been assumed by the Auditor-General's Office. These reviews are an integral part of our efforts to keep Government programmes and practices up-to-date, relevant and cost-effective, and to weed out inefficiencies and waste. In FY90, zero-base reviews of the Ministries of Community Development and Communications and Information were completed and a similar review of the Ministry of Home Affairs initiated. Zero-base reviews for another four Ministries and two Organs of State will be carried out over the next one and a half years. III - REVENUE AND TAX CHANGES Mr Speaker, Sir, I shall now turn to Government's revenue position and proposed tax changes for FY91. Revenue collection for FY90 is expected to reach $16.9 billion, an increase of 9.7% over the FY89 collection of $15.4 billion. The increase is a result of the strong and broad-based economic growth in 1990.”
“The projected development expenditure includes a contingency provision of $318 million for new development projects that may be approved for implementation in FY91. A sum of $200 million is also provided for Public Sector R&D expenditure in FY91, of which $117 million has already been committed. The balance of $83 million will be available for new R&D projects. The newly established National Science and Technology Board, under the Ministry of Trade and Industry, will co-ordinate all R&D projects with effect from the new financial year. MANAGEMENT AND CONTROL OF GOVERNMENT EXPENDITURE Last year, I informed the House that my Ministry had embarked on a programme to set up Management Accounting Systems in all Ministries. These Management Accounting Systems, or MAS for short, will allow Ministries to track and analyse the cost of their services, products or activities and to gauge their cost-effectiveness. Under the Block Vote Allocation System introduced in FY89, Ministries are accountable for the way they deploy their manpower and funds, and for the results they produce. In this regard, the MAS will serve as an important tool for the Ministries to identify poor performance, inefficiencies and waste and to take remedial actions. Phase One of the MAS Project is under way and will be substantially implemented before the end of FY91. This phase of the project covers the Ministries of Finance, Education, Health, National Development and Environment. Phase Two, which will begin in FY91, will cover the Ministries of Home Affairs, Communications, Law, Information and the Arts and Foreign Affairs. The MAS project for the Ministries of Trade and Industry, Labour and Community Development is originally scheduled to be undertaken in Phase Three.”
“The increase is to meet interest payments on new domestic loans expected to be raised in FY91 and to cater for higher interest charges on floating rate stocks issued to the CPF Board. Development Expenditure Development expenditure in FY91 is projected to be $4.9 billion. This represents an increase of nearly 22% over FY90. Excluding expenditure on public housing, direct Government development expenditure will rise to $2.2 billion, an increase of nearly 60%. Major development projects include reclamation at Buran Darat, Telok Ayer Basin and Changi East; and the construction of the Senoko Refuse Incineration Plant, the new Institute of Health and National Dental Centre, hospitals, polyclinics, single session secondary schools, roads, and civil defence facilities and shelters. Capital subsidy for public housing is projected to be $819 million. This includes a capital subsidy on the sale of HDB flats, and provisions for specific works and the upgrading programme, as well as capital grants to Town Councils. Capital grants to other statutory bodies will amount to $1.5 billion, an increase of 20.2%. The major items of capital expendi- ture include payments for the MRT system and Changi Airport Terminal Two; development of infrastructural facilities and attractions at Sentosa and the Singapore Zoological Gardens; development of university campuses and staff quarters, independent schools, aided schools, junior colleges and vocational institutes; and the upgrading of facilities for the Singapore Broadcasting Corporation. Grants are also provided for the Economic Development Assistance Scheme administered by EDB and to meet depreciation expenses of facilities attributable to subsidised patients in the restructured hospitals.”
“Staff increases are, however, allowed for some Organs of State and Ministries, including the Ministries of Education, Home Affairs, Foreign Affairs, Communications and Trade and Industry. These increases are required for new programmes. Other Operating Expenditure or OOE is projected to increase by 4.6% to $985 million. The increase is relatively low because of the exceptionally high "one-off" expenditure in FY90 arising from Government's $88 million contribution towards the 25th Anniversary Charity Fund. Excluding this item, the increase is $132 million or 15.4%. This is mainly due to higher provisions for investment management fees, cash grants to stallholders in markets and food centres affected by HDB's redevelopment programme, child care subsidies and financial assistance to voluntary institutions. Higher capitation grants to special education schools and financial assistance schemes in independent schools also account for the large increase. A sum of $18 million has been budgeted as Government's dollar-for-dollar contribution to the endowment fund for the newly approved Singapore International Foundation. An additional sum of $7 million is also set aside to match contributions to be received in FY91 for the 25th Anniversary Charity Fund from public pledges made in 1990. Grants-In-Aid or GIA will increase by 4.7% to $1.3 billion. The increase is largely to meet higher operating deficits of the tertiary institutions. Pensions expenditure is expected to rise by 6.3% to $318 million. This is mainly due to the increase in the number of pensioners and the rising cost of medical subsidy to pensioners. Debt servicing costs are projected to increase substantially, from $2.0 billion in FY90 to $2.7 billion in FY91. This represents an increase of $636 million or 31.3%.”
“This reflects Government's priorities which are national security, quality education, affordable housing, a clean and green environment, good healthcare services, and improved facilities for the arts, sports and recreation to raise the quality of life in Singapore. Statutory expenditure on debt servicing will be $2.7 billion or 16.9% of total expenditure. Recurrent Expenditure Total recurrent expenditure for FY91 is projected to be $11.0 billion. This represents an increase of $1.3 billion or 12.9% over the revised FY90 expenditure. The rate of increase for FY91 is lower than that in FY90 over FY89, but as a percentage of GDP it is one percentage point higher at 16.6%. Expenditure On Manpower or EOM is projected to rise by 11.1% to $2.2 billion. EOM for FY91 constitutes 3.3% of GDP, marginally higher than the 3.2% recorded in FY90. The increase is mainly to cater for normal salary increments and the provision for essential vacancies. This has, however, been mitigated by a reduction in the total staff establishment, largely the result of efforts by Ministries to optimise manpower resources. In March 1988, I announced in this House that Government should aim to maintain 'zero-growth' in its staffing level as at 1986. I am pleased to inform the House that the total authorised establishment of Ministries and Government-funded statutory boards in FY91 will be trimmed by about 1,300 posts or 1.2% to slightly over 99,400 posts. This is 7.4% below the actual staff strength as at 31st December, 1986. The staff complements of the Ministries of Health, National Development and Finance will be reduced owing to restructuring or privatisation of some of their functions.”
“The best way for us to deal with slower growth in our main markets is to trim our sails and remain internationally competitive. The private sector must continue to play a leading role in our economic development. Government will provide a fiscal environment conducive for the growth of this sector. On the revenue side, our policy will be to raise sufficient revenue to finance expenditure while maintaining a competitive tax structure. On the expenditure side, the public sector will be kept lean and trim so as to contain its share of the nation's financial and manpower resources. For this year's Budget, Government will concentrate on manpower and infrastructure development. Growth in operating expenditure will be restrained so that more funds can be channelled towards education, investments in infrastructure and improvements to the quality of life in Singapore. THE FY91 BUDGET ESTIMATES Development expenditure is expected to increase from 6.4% of GDP in FY90 to 7.3% of GDP in FY91. Operating expenditure, on the other hand, is kept at 12.5% of GDP, below the medium term ceiling of 13.0% of GDP. Overall, Government expenditure as a proportion of GDP will increase, from 22% of GDP in FY90 to 23.9% of GDP in FY91. This is still within the 25% limit that Government has set for the long term. Total expenditure in FY91 is projected at $15.8 billion, an increase of $2.1 billion or 15.4% over the revised FY90 expenditure of $13.7 billion. Recurrent expenditure accounts for $10.9 billion or 69.3% of total expenditure, whilst development expenditure accounts for $4.9 billion or 30.7% of total expenditure. The Ministries of Education, National Development and Defence will account for half, while Social and Community services will take up almost a third of total expenditure in FY91.”
“Instead of rigidly applied annual increases, we seek to pay our workers more when times are good and their productivity and company profitability grow. In return, when the economy is less well off, workers who accept lower pay or even reductions in pay to overcome economic difficulties benefit through greater job security. That is how we got out of the last recession. The lessons have been learnt well. Now, more than 70% of companies have some form of flexible wage system in place. This enables us to react to any falls in demand without having to resort to retrenchment as a first response. If the economy performs better than expected, workers also get to share in the fruits by bringing home bigger bonuses. In other areas too, we should move more towards greater reliance on the market to be the balancing wheel or stabiliser. Although the market mechanism is not a panacea, in many instances it can help us to allocate scarce resources efficiently, whether the resource is industrial land, or road space, or the right to employ foreign workers. It will take some time to work out proper schemes to harness market forces constructively, and design mechanisms which are as distortion free as possible. Our ability to make full use of the market to operate efficiently is one of our competitive advantages which we should preserve. II - THE FY91 BUDGET Mr Speaker, Sir, I shall now move on to the Budget for the next financial year. FISCAL POLICY OBJECTIVES War in the Gulf, political unrest in the Soviet Union and the stalled GATT negotiations have created considerable uncertainty for the world economy. The United States is now in a recession. Germany, the rest of Europe and Japan are also expected to grow at a slower rate.”
“Building a Flexible Economy Having well-diversified linkages is only half the story. Domestically, we must be nimble and respond quickly and flexibly to changing circumstances. Both business and Government have had to make quick adjustments to cope with situations arising from the Gulf war. In addition to allowing financial institutions to install satellite dishes, the Government will also be taking steps to help the hotel and restaurant sector cope with the current short-term problem caused by the Gulf war. I will elaborate on this later. Quick and nimble policy responses will help us weather any external shocks. However, the Government cannot change its policies so frequently that the business environment becomes unpredictable. The market is a much more responsive and flexible mechanism for making these constant adjustments, and should be exploited wherever possible. A good example of this is the introduction of the quota system for vehicle COEs. When the quota system was first introduced, quota premiums were high, reflecting the strong demand to buy cars. Now that demand has decreased, quota premia have dropped equally fast. Car-buyers benefit by paying less taxes (ie ARF, COE). In fact, some cars cost less today than they did before the quota system was introduced. All road-users benefit, because the car population is controlled and roads are less congested. The market has worked for the common good. If we had depended on increased ARF to control the car population, as we used to do, we could not have adjusted the ARF rates as quickly and accurately as the quota system automatically did. We have also sought to link wages to economic growth and the contribution of workers.”
“Let me use the Growth Triangle as an example. Singapore, Johor and Batam have all benefited from having closer economic linkages with each other. Johor has the potential of becoming a growth centre in Malaysia, just like the Klang valley and Penang. It also benefits from the higher purchasing power of Singapore - Singaporeans travelling to Johor by car alone are estimated to have spent more than half a billion dollars there last year. Singaporeans can in turn enjoy the attractions offered by Johor - beautiful beaches, land for industrial estates, lower labour cost for manufacturing operations. Similarly, Batam benefits from its proximity to Singapore - it can make use of Singapore's infrastructure to develop its industries, even while building up its own facilities. On its part, Singapore encourages more of our labour-intensive industries to re-locate to Batam. Had Batam not been so close to Singapore, or had it not been able to access Singapore's services and infrastructure, companies would have been understandably reluctant to move. By building linkages to different countries, regions and groupings, we can keep the Singapore economy on a steady course. The Singapore economy is like a ship sailing in choppy waters. External linkages are like stabilisers; the greater the number of stabilisers, the greater is our security. Some observers see a parallel between the present economic situation in Singapore and the previous recession in 1985. But there is one major difference. Whereas in 1985 the regional economies were in difficulties because of falling commodity prices, this year the region is expected to do well. So although we will undoubtedly be affected by the current US recession, the impact will be buffered considerably by the overall buoyancy of the region.”
“Internally, we must be nimble and flexible. Building External Linkages Building external linkages is not a new concept to Singaporeans. International networking has been and will remain the key to economic growth and prosperity. We have seized opportunities to place ourselves in a position to be of service to others, be they multinational corporations looking for a value-for-money production location, or shippers looking for frequent connections and efficient port clearance, or businessmen looking for loans or even private individuals seeking medical treatment. We have built networks of varying sizes in different sectors and with many countries. Some of these networks are bilateral and geographically close, eg, day-trippers to and from Peninsular Malaysia, and more recently Batam island. Others are multilateral and global, eg, international air-courier services. In recent years, a number of economic groupings have been formed in our part of the world. These include the Growth Triangle, the Asia Pacific Economic Co-opera-tion (APEC) forum, and the East Asian Economic Grouping (EAEG) suggested by the Malaysian Prime Minister Datuk Seri Dr Mahathir Mohammed. Then of course we have ASEAN and arrangements that spring from ASEAN, eg, the ASEAN-US Initiative which links the six members of ASEAN with the US. Singapore is also an active member of GATT which counts as its members almost all trading economies. These economic groupings are not trade blocs. They are a more institutionalised form of networks. They help like-minded countries come together, in order to speak with one voice at international forums. They also provide a framework within which countries can take action to maximise their economic advantages. That is why we support and promote them.”
“I would like to remind them that CPF increases are part of wages, and encourage them to conduct their collective bargaining accordingly. THE GLOBAL VILLAGE Recent events have vividly reminded us that we live in a global village. Distant happenings have an instantaneous impact on us. I was told that when the Iraqi Foreign Minister Tariq Aziz and US Secretary of State James Baker met in Geneva just before the war, dealers in financial markets started to trade as soon as they saw live TV pictures of the two emerging from their talks. Even before the ministers made any statements at the press conference, CNN viewers around the world could see from their faces that the talks had not gone well. In the few seconds between the pictures and the statements, the financial markets moved. Those dealers who had not seen the two ministers' expressions obviously lost out. This is why the Government has decided to allow financial institutions to put up their own satellite dishes, and why it encouraged them to sponsor the relay of CNN over Channel 12. The war has also caused many travellers to cancel their travel plans to Singapore. Tourist arrivals in Singapore have fallen by one-quarter between the first and second halves of January. Consumers too have responded - first by rushing to stock up essential food commodities, and later by being more cautious in their spending. MAS has reported that withdrawals of cash from banks during the recent festive season were below normal. These examples show us how quickly information travels and how immediately it can affect our lives. How should Singapore respond to the challenges of living in a fast-changing and inter-connected world? We need a two-pronged strategy. Externally, we must build as many linkages as possible with other economies.”
“Taking all these factors into account, in 1991 the economy should have no problem in achieving the originally forecast growth rate of 3-6%. However, we need to remain vigilant as future performance will depend on how quickly the Gulf situation is resolved. We must be prepared for quick changes in the economic environment. I urge employers and employees to continue with their efforts to adopt a flexible wage system so that rewards for workers can respond quickly and flexibly to changing economic circumstances. Although Singapore does not expect to enter a recession in 1991, wage increases this year should be moderate in the face of the general slowdown and uncertain economic prospects. In addition, wage increases should take into account adjustments in CPF contribution rates. Since 1986, the employers' contribution rate has risen by 6(r) percentage points to reach 16(r)%. Employees' contributions now stand at 23%. We are still some way from the long-term target of 20% contributions from both employers and employees. As we expect the Singapore economy to grow moderately this year, we should not postpone a further cautious adjustment to CPF contribution rates. Therefore, with effect from 1st July, 1991, the employers' CPF contribution rate will be increased by 1 percentage point to 17(r)%. The employees' rate will be reduced by half a percentage point, from 23% to 22(r)%. The total contribution rate will increase by half a percentage point, to 40%. On their own, these adjustments will raise labour costs, but the effect will be small compared to the annual rise of around 9% in prevailing wages. Furthermore, provided employees and employers take the CPF adjustments into account in wage negotiations, our overall competitive position should not be adversely affected.”
“The major uncertainty in November was the possibility of a war and its impact on economic growth especially the price of oil. War broke out in January. However, it did not have the impact on oil prices and industrial production which had been expected. In fact, oil prices fell, and stock markets around the world rose. The recession in the US is expected to be short and mild. Germany and Japan are expected to register positive growth in 1991. Combined with strong growth in the ASEAN region, the outlook for economic growth in 1991, although still far from certain, is on the whole less gloomy than it was in November 1990. The latest surveys of business expectations conducted in December 1990 before the beginning of the war show industrialists and businessmen to be generally pessimistic about the economic conditions in the next six months. Since the start of the Gulf war on 17th January, the number of travellers to Singapore fell significantly. Business in the commerce and retail sectors has been adversely affected, with hotel occupancy rates dropping sharply and retail sales down. Our export-oriented sectors will be directly affected by any slowdown in global demand. Overall growth in the manufacturing sector is likely to be steady, but lower than that of 1990. Prospects for the commerce sector are dampened by slower growth in tourist arrivals and lower consumer confidence. However, regional trade is expected to grow in line with growth in the regional economies. The construction sector is expected to perform well because of orders contracted in the previous year. Finance and business services, which has been the fastest growing sector, should perform well even if it does not register the high growth rate achieved in 1990.”
“Regional economies like Indonesia, Malaysia and Thailand will increasingly move into our markets. The Government will continue to monitor our relative competitiveness vis-a-vis the Asian NIEs and the regional economies. The private sector must do its part to restrain cost increases and increase productivity. ECONOMIC OUTLOOK FOR 1991 In November last year, the Ministry of Trade and Industry's forecast is that growth for 1991 would be 3-6%. A slowdown was expected in view of the general decline in growth rates in the major industrial countries. Since the 1985 recession, our economy grew at 8-11% each year during 1987-90, which is above our long term sustainable growth rate of 4-6%. However, growth has been slowing down gradually since the first quarter of 1988, when it was 12%, to 7.8% in the second quarter of 1990. It would have slowed down further even without the Gulf crisis. The Gulf crisis added more uncertainty to prospects for 1991. When Iraq invaded Kuwait in August, one of the immediate effects was a jump in oil prices. As oil price hikes contributed directly to two previous world recessions, fears that the world would be plunged into another recession were widespread. The slowdown of the major economies was confirmed by the fourth quarter results of the US which recorded its largest negative growth of 2.1% since the 1982 recession. The major OECD countries all experienced slower growth in 1990 and the trend is expected to continue into 1991. Fortunately, the regional economies, particularly Thailand, Indonesia and Malaysia, are growing strongly. Their buoyant economies will help to sustain economic growth in this region. This was one reason Singapore's growth remained fairly steady in the second half of 1990.”
“While this was partly due to the increase in oil prices which led to increases in petrol prices, utility charges, MRT and bus fares, it was also partly due to the underlying pressure on resources, particularly labour. The strong economy created 60,100 jobs, mainly in manufacturing and commerce. The labour market continued to be tight with the unemployment rate at a record low of 1.7%. Nominal wages rose by 9.4%. With inflation as measured by the GDP deflator at 3.0%, this translates into a real wage increase of 6.4%. In 1990, business costs rose by 7.3%, bringing us back to the level of 1982. A big factor was labour cost. Real wages rose by 6.4%, above productivity growth of 3.4%. As a result, the wage share in GDP rose from 42% in 1989 to 44% in 1990. Although this is still below the previous peak of 48%, we should watch it carefully. Increases in labour and fuel costs have also pushed up costs of other services like transport and utilities. Rentals have also risen. Many of these cost increases are inevitable because of the rapid growth of our economy. Neither should we try to avoid them since it is important that cost increases that reflect the relative scarcity of a resource should be allowed through if our economy is to function efficiently. This will send the right signals to entrepreneurs to take steps to conserve the resource or to make better use of them. The Government cannot cocoon businesses from the resource constraints that we face as an economy. It must be stressed that while absolute cost levels in Singapore have increased, our competitive position vis-a-vis the other Asian NIEs has been maintained. Of course, we recognise that Singapore is not only competing with the Asian NIEs.”
“Mr Speaker, Sir, I beg to move, "That Parliament approves the financial policy of the Government for the financial year 1st April, 1991 to 31st March, 1992." I - REVIEW OF THE ECONOMY ECONOMIC PERFORMANCE IN 1990 In last year's Budget speech, I announced that the economic performance in 1989 was excellent with growth of 9.2%. The expansion was broad-based; "we had firmly left the shadows of the 1985 recession behind us". Although it seems that I may have spoken too soon, I am pleased to report that, notwithstanding the slowdown in the developed countries, the Singapore economy turned in a good performance in 1990 with growth at 8.3%. This was the fourth year in a row that we have achieved growth that exceeds the growth in indigenous labour and productivity. Our performance was comparable to the other 3 Asian NIEs and the economies of ASEAN. Korea grew by 9%, Taiwan by 5%, Hong Kong by 3%, Malaysia by 9%, Indonesia by 6-7% and Thailand by 10%. The financial and business services sector was again the leading sector. It grew by 15%, slightly higher than in 1989. The expansion was fuelled by offshore banking and treasury activities. The manufacturing sector also did well with growth of 9.5%. The growth was broad-based with several industries like chemicals and petroleum showing double-digit growth. The good performance of the manufacturing, and financial and business services sectors generated greater demand for transport and communications services. The transport and communications sector grew by 8.8%. Buoyed by entrepot trade, the commerce sector expanded by 7.8%. The construction sector grew by 7.2%. Although growth was strong, there were signs that strong demand had led to some overheating in the economy. The inflation rate of 3.4% was higher than in recent years.”
“- [Mr Wong Kan Seng]. ANNUAL BUDGET STATEMENT 3.39 pm”
“Mr Speaker, Sir, I beg to move the Motion* standing in my name under item No. 2 on 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 "$837,400", "$1,744,400", "$310,000" and "$94,800" in the second column and substituting the figures "$849,700", "$1,868,900", "$311,800" and "$31,900", respectively. Sir, it is proposed to increase the provisions for the Privy Purse and salaries of personal staff to $849,700 and $1,868,900 respectively. These marginal increases for FY91 are necessary to provide for normal salary increases, a possible increase in the rate of employers' CPF contribution, and more staff to cope with the anticipated workload increase. A higher sum of $311,800 is required to meet Expenses of the Istana household in FY91. The increase of $1,800 is minimal. The allocation for Special Services in FY91 is reduced from $94,800 to $31,900. Expenditure in FY90 was high because of the need to replace the First Lady's car. 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. 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 "$837,400", "$1,744,400", "$310,000" and "$94,800" in the second column and substituting the figures "$849,700", "$1,868,900", "$311,800" and "$31,900", respectively. EXEMPTED BUSINESS (Motion) Resolved, That the proceedings on item 3 on the Order Paper today be exempted at this day's sitting from the provisions of Standing Order No. 1.”
“Mr Speaker, Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." Question put, and agreed to. Resolutions accordingly agreed to. 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 $82,664,820 shall be supplied to the Government under the heads of expenditure for the Public Services shown in the First Supplementary Main Estimates of Expenditure for the financial year 1st April, 1990 to 31st March, 1991, contained in Paper Cmd. 4 of 1991." "That the sum of $494,549,300 shall be supplied to the Government under the heads of expenditure for the Public Services shown in the First Supplementary Development Estimates of Expenditure for the financial year 1st April, 1990 to 31st March, 1991, contained in Paper Cmd. 5 of 1991."”
“What we discourage is Singaporeans going to Johor just to take advantage of the cheaper petrol there. Some Members may ask why Government does not reduce the tax on petrol as an alternative means to curb Singapore motorists uplifting petrol in Johor. I must emphasize here that this option is not feasible, as tax on petrol is imposed in Singapore not only to raise revenue but to achieve other objectives, namely, to discourage vehicle usage as a means to curb traffic congestion; to encourage the conservation of energy; and to encourage motorists to convert to the use of unleaded petrol. In the event of world-wide oil shortages, the need to conserve fuel will become even more important as Singapore imports all the oil it consumes. The switch to a three-quarter tank rule is not expected to add to the inconvenience of motorists leaving for Johor as Customs officials will continue to enforce the new regulation with the same discretion as they have under the existing half-tank rule. Sir, I beg to move. Question proposed.”
“The duty loss arising from this amounts to around $2 million per month, about the same level just before the introduction of the half-tank rule. With the introduction of unleaded petrol, tax on petrol will be adjusted from 4th February 1991 such that unleaded petrol will cost 10 cents per litre less than leaded petrol, despite the fact that it costs more to produce unleaded petrol. With this, we expect the pump price to increase by 15 cents per litre in the case of leaded petrol because of the additional tax imposed to discourage its usage, and 5 cents per litre more in the case of unleaded petrol because of its higher production cost. This will cause the pump price gap between Singapore and Johor to widen further to 63 cents per litre for leaded petrol and 53 cents per litre for unleaded petrol. The availability of substantially cheaper petrol in Johor from February will undermine the conversion to use of unleaded petrol in Singapore and make petrol taxes less effective in restraining car usage and also cause significant loss of revenue. For these reasons, once the Amendment Bill is passed, we will require Singapore registered vehicles leaving Singapore by road to carry a minimum of three-quarter tank of fuel instead of the present half a tank. This will take effect from 4th February this year. Mr Speaker, Sir, at this point, I would reiterate that it is not the Government's intention to discourage Singaporeans from visiting Johor. On the contrary, Government is committed to the development of close economic ties with Johor. Soon a ferry link to south-west Johor will be established and a second causeway is being planned. We encourage more Singapore motorists to commute to Malaysia for business or social reasons.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Customs (Amendment) Bill seeks to allow the Minister to specify, by order, the minimum amount of motor spirit that a Singapore registered vehicle must have in its fuel tank before leaving Singapore by road. At present, the requirement for the vehicle to have at least half a tank filled with motor spirit is spelt out in the principal Customs Act. Mr Speaker, Sir, Members would recall that the present half-tank rule was introduced on 17th April 1989 to ensure that cheaper Johor petrol would not undermine our use of petrol tax as one of the measures to curb vehicle usage in Singapore and to reduce the loss of Government revenue on petrol purchased outside Singapore. The rule was chosen among several alternatives considered as a measure which would not discourage Singapore motorists from visiting Johor. Up until August 1990, the half-tank rule has worked satisfactorily in achieving our objectives. Statistics at the Woodlands Checkpoint had shown that the introduction of the rule had curbed the trend of Singaporeans uplifting cheaper petrol in Johor without reducing the flow of Singapore motorists visiting Johor. Following the Iraqi invasion of Kuwait, the price of premium petrol has increased from approximately $1.12 per litre to as high as $1.54 per litre in mid-October 1990, and to approximately $1.20 per litre as at present. Consequently, the difference in pump price between Singapore and Johor has now widened to 48 cents per litre. This has led to a surge in Singapore registered cars crossing to Johor to uplift the cheaper petrol there, despite the half-tank rule.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." Under the existing provisions of the Singapore Totalisator Board Act, the surplus funds of the Board can be invested only in trustee instruments. This stipulation is unduly restrictive, considering the substantial size of the surplus funds held by the Board. As at 31st March 1990, the total liquid assets of the Board stood at $311 million. For the efficient management of funds of this size, it is necessary that the Board be given greater flexibility. Clause 2 of the Bill will allow the Board to invest in such stocks, funds, securities or investments as may be authorised by the Minister for Finance. The Act is also amended to require the Board to submit its annual reports to Parliament. Clause 3 will provide for the presentation of such reports to Parliament. Clause 3 will also allow the auditor to submit directly to the Minister and the Board reports on any matter arising out of the performance of his audit. The existing provision requires the auditor to submit such reports to the Minister through the Board. 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. ADJOURNMENT Resolved, "That Parliament do now adjourn to Thursday, 3rd January 1991." - [Mr Wong Kan Seng]. Adjourned accordingly at Twenty Nine Minutes past Two o'clock pm to Thursday, 3rd January 1991.”
“The Reserve Fund will enable this to be done without the administrative inconvenience of having to make transfers to and from the Consolidated Fund. To ensure that the Reserve Fund will not accumulate surpluses in excess of what is needed to maintain a stable currency backing, the Minister for Finance will monitor the size of the Reserve Fund. Amounts not required for the Reserve Fund will continue to be transferred to the Consolidated Fund annually. Clauses 12 and 13 of the Bill will legislate these changes. The other proposed amendments to the Currency Act are to improve the procedures and practices of the Board. These revised changes would include: (a) allowing the Board to provide such other services as it considers necessary besides the issuing of currencies. Clause 2 of the Bill will enable the Board to do this; (b) allowing the Board to appoint consultants and agents through clause 4 of the Bill; (c) clarifying that banknotes that are illegally dealt with shall not be legal tender, and providing a better definition of the phrase "illegally dealt with" in relation to notes and coins. These will be given effect by clause 6 of the Bill; (d) enabling the Board to repossess currency notes and coins that have been illegally dealt with. Clause 9 of the Bill provides for this; and (e) allowing the Board to seize counterfeit notes and coins. Clause 14 of the Bill is for this purpose. 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. SINGAPORE TOTALISATOR BOARD (AMENDMENT) BILL Order for Second Reading read.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." Amendments are proposed to the Currency Act to allow for the establishment of a Currency Reserve Fund. This Reserve Fund will act as a buffer against fluctuations in the external backing of the Singapore Dollar arising from volatility in exchange rate movements. Amendments to the Act are also proposed to improve the practices and procedures of the Board of Commissioners of Currency, Singapore. At present, the Board maintains two accounts. The first account, the Currency Fund, holds the external assets backing the local currency. By law, the Singapore Dollar is required to be backed at least 100% by external assets at all times. Income from these assets, together with the other operating income of the Board, is credited to another account called the Currency Fund Income Account. Fluctuations in foreign exchange rates will affect the Singapore Dollar denominated value of the external assets backing the local currency. Should the face value of the currency-in-circulation exceed the value of the Currency Fund, the difference must be met from the Income Account. If the Income Account is insufficient for the purpose, the shortfall will be met from the Consolidated Fund. In the reverse situation where the value of the Currency Fund exceeds that of the currency-in-circulation, the Board may transfer the excess to the Income Account. At present, the Board has to transfer all surpluses in the Income Account to the Consolidated Fund on an annual basis. It is proposed that the transfer no longer be made mandatory. The Board can then set aside a portion of its surpluses every year in a Currency Reserve Fund, and use these to maintain the Currency Fund at a stable level.”
“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 SCIENCE AND TECHNOLOGY BOARD BILL Order for Second Reading read.”
“The second tax change limits the tax exemption and deduction of contributions to CPF and other approved funds. This is to prevent the use of such funds as tax shelters. The change was first announced in my 1989 Budget Statement but was subsequently revised based on public feedback. The revised changes are as follows: (i) contributions by both employee and employer to CPF or designated funds in respect of the first $100,000 of total annual wages shall continue to be fully tax deductible and exempt to the employee; (ii) the deduction for an individual's contributions to approved funds, including the CPF, shall not exceed the statutory contributions under the CPF Act; (iii) in the case of additional wages, the deduction is limited to the statutory CPF contributions from additional wages not exceeding 40% of annual ordinary wages; (iv) where an employer's contributions to approved funds are in excess of statutory requirements under the CPF Act, or are based on additional wages in excess of 40% of the employee's annual ordinary wages, the employee shall be assessed to tax on the excess. Clauses 4 and 7 insert a new section 10C and amend section 39 to give effect to this. To reward effort and enterprise, I announced in my 1990 Budget Statement, a 5% across-the-board rebate on personal income tax payable for Year of Assessment 1990. Clause 10 provides for this concession. Finally, clause 5 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 15% to 16(r)%. 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 1990. Sir, I beg to move.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Income Tax (Amendment No. 2) Bill, 1990 gives legislative effect to income tax changes relating to unit trusts, contributions to the CPF and other approved funds, and a 5% rebate on personal income tax. These changes take effect from Year of Assessment 1990. The Bill also raises the limit on tax deduction for employers, in line with the increase in the employer's rate of CPF contributions from 1st July 1990. The first tax change relates to the tax treatment of approved unit trusts. Prior to my announcement in the 1988 Budget Statement, gains derived by a unit trust from disposal of securities could be treated either as trading income or capital gains depending on the circumstances of each case. To resolve this uncertainty, I announced in my 1988 Budget Statement, that a unit trust could elect for an alternative method of taxation whereby such gains would be taxed according to a schedule of rates based on the length of time for which the securities were held. This method was subsequently revised following representations from local unit trusts. Under the revised method, which takes effect from 1st July 1989, 10% of the gains derived by an approved unit trust from the disposal of securities shall be subject to tax at the prevailing corporate rate; distribution of the remaining 90% will not be taxable in the hands of individuals and foreign investors but be subject to tax if received by other persons; and when the gains are distributed to a taxable unit holder, the trustee has to withhold tax. The tax withheld will be available as a credit to the unit holder. Clauses 2, 4 and 8 insert new sections 10(11), 10B and 45C to provide for this.”
“The information regarding taxpayers who have assessable incomes of more than $500,000 for the years 1985 to 1989 are tabulated in Annex A. Annex A TAXPAYERS (RESIDENT AND NON-RESIDENT) WITH ASSESSABLE INCOME >$500,000 FOR THE YEARS OF ASSESSMENT 1985 TO 1989 Corporate Individual Gross Tax Gross Tax Payable as a Payable as a percentage of percentage of Year of No. of Gross Tax Assessed No. of Gross Tax Assessed Assessment Taxpayers Payable Income Taxpayers Payable Income 1985 1,293 1,867,174,489 37.3% 325 106,650,786 34.8% 1986 1,024 1,611,261,947 36.7% 283 99,336,174 35.0% 1987 1,072 1,478,834,224 30.4% 234 58,048,038 28.6% 1988 1,306 1,613,817,472 31.8% 333 77,339,063 28.1% 1989 1,711 1,960,551,206 29.9% 289 66,433,402 28.1% Note: For Years of Assessment 1985 to 1988, information is based on the cases processed over a 24-month period. For Year of Assessment 1989, information is based on the cases processed over a 12-month period.”
“Sir, I cannot speak for future Finance Ministers but this present Finance Minister would not do so. SINGAPOREANS MARRYING WORK PERMIT HOLDERS (Profile) 8. Mrs Yu-Foo Yee Shoon asked the Minister for Labour if he will give a profile of those Singaporeans who have applied for permission to marry work permit holders.”
“Mr Speaker, Sir, the annual value of a property is the estimated annual rental it could fetch if it is offered for rental. The existing annual values of HDB flats in the Valuation List were last determined many years ago. Since the market rentals of HDB flats have increased substantially over the years, their annual values in the Valuation List must also be increased, in accordance with the requirements of the Property Tax Act. Notwithstanding the new annual values which came into effect on 1st July 1990, HDB flat owners should have no reason for concern. From 1st July this year, all owner-occupied residential properties would be taxed at a concessionary rate of 4% of the annual values. As a result, the actual tax payable by HDB flat owners will, in almost all cases, not exceed the amount they are currently paying. The Government's policy is to lower the tax burden of individuals and businesses whenever our financial position allows. In line with this policy, the general rate of property tax was reduced from 36% to 23% over the period from 1979 to 1983 and was further cut to 16% from 1st July this year.”