S. Dhanabalan
Singapore
“Mr Speaker, Sir, on a point of clarification. I said in my intervention on Tuesday that the general election is the right forum to determine the electorate's support because it puts the issue in a total and correct context.”
“Mr Speaker, Sir, with hindsight, of course, we can be very wise. But since one of the three islands was excluded, it was a substantial reduction in the scope of works. The assessment then, which I agreed with, was that if you called for a re-tender, you would get a substantially reduced tender.”
“To the extent that we can, we should work with countries that have a common interest, to come together and form economic groupings targeted at trade liberalisation. We have started this process within ASEAN under the AFTA Scheme. Economic linkages in groupings like APEC are also growing in significance.”
“Mr Speaker, all these questions make a lot of sense when the events are finished, and you look back. But the officer looking at the case at that time had to deal with the facts as they were at that time.”
“ASEAN countries agreed to publish all the Inclusions and Exclusions lists, as well as the full list of actual tariff reductions. The ASEAN Secretariat had since followed up and released, as scheduled, on 1st November 1993, the publications showing these lists.”
“Kallang Theatre was closed for five months in 1992 for cyclical maintenance and upgrading costing $3 million. This included a major upgrading of the toilets, recarpeting the auditorium, rewiring and repainting.”
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“Sir, perception is one thing. But one must try and assess the accuracy of the perception. Therefore, economists and statisticians collect a lot of data. This table on page 145 was not dreamt up by somebody sitting in the office to determine how much people spend on food. Thousands of households were interviewed, and records were kept daily on what they spent. That is how this was derived. Regardless of what the man-in-the-street, the average man, the layman, thinks, I want to know what Mr Chiam thinks. If he agrees that this is an accurate reflection, that overall the CPI is an accurate reflection of the inflation rate, then what is he doing to correct the misperception of the layman? Is he trying to correct the misperception or is he trying to worsen it?”
“Sir, I thought we started off by trying to clarify, and Mr Chiam admitted that an item should be reflected in accordance with the proportion that the household spends on that item. Of course, some items go up more than other items. If brandy goes up a hundred times, does it mean that, overall, the average household will spend a hundred times more? Surely not, because brandy is probably an insignificant part of a household's expenditure. Therefore, an item must be reflected in the basket in accordance with the proportion that a household spends on that item. Mr Chiam agreed to that. I assume he still agrees to that. Does Mr Chiam agree that an item must be reflected in accordance with the proportion that a household spends on that item?”
“Please point out the part of the Report which says that there are no cost rises. Mr Chiam has repeated many times that the Government says that there are no cost rises. Where in the Report does it say there are no cost rises?”
“Can Mr Chiam point to the part of the Report which says that there are no cost rises? Please quote.”
“Would Mr Chiam agree that if somebody goes to hospital or buys a car or a house, it is an expenditure that is incurred once in many years, and therefore it should be averaged out? Would he agree?”
“So what does "heavily weighted" mean? Are we trying to skew the CPI?”
“It does. So it is accurate to say that 40% should go towards food?”
“What does "heavily weighted" mean? Does it reflect the expenditure of a household or not?”
“Sir, let us stick to the subject at hand. Mr Chiam made a very serious allegation that the CPI does not reflect what the average family incurs in terms of costs for various items. He said that food should not be 40%.”
“Would Mr Chiam refer to Annex E, page 145 of the Report, which sets out the weighting pattern? In other words, how important different items are in the average household expenditure. Does he say that this is not an accurate reflection of the average household expenditure in Singapore?”
“Point of clarification, Sir. Would Mr Chiam agree that an item should be reflected according to how important it is to the family's expenditure? Would he agree with that?”
“The Research and Development Fund (RDF) was set up only in 1991. It has not been used to finance any R&D farmed out to overseas institutions. The RDF is intended to fund the development of R&D capabilities and the build up of experienced R&D manpower in Singapore, in areas which will enhance Singapore's economic competitiveness. Therefore, one of the principal conditions for RDF financial assistance to companies is that the R&D must be carried out in Singapore. The financial assistance may cover overseas attachments, but only in so far as they are for on-the-job training and capability upgrading. RDF-funded research institutes and research centres do collaborate with their overseas counterparts in joint projects, which involve the exchange attachments of R&D personnel. These collaborations provide avenues for technology transfer and the training of our R&D manpower. They are undertaken on the basis of the benefits to be derived from such collaborations. CATEGORISATION OF INDIAN STUDENTS IN THE MATRICULATION FORM OF THE NATIONAL UNIVERSITY OF SINGAPORE 9. Dr Kanwaljit Soin asked the Minister for Education why Indian students were categorised into "Sikh", "Sri Lankan" and "Other Indian" categories in the 1993/94 matriculation form of the National University of Singapore while Malay and Chinese students have only "Malay" and "Chinese" categories respectively.”
“The objective of the training voucher scheme is to ease the cashflow problem of companies, particularly the smaller ones, when they invest in training. The scheme allows the companies to claim the benefits of SDF subsidies immediately upon registration at pre-qualified courses, without having to go through a refund procedure. However, because this involves an upfront payment from the SDF, the scheme is only applicable to shorter courses. NPB launched the voucher scheme on a pilot basis in April 1990 with the issue of 20,000 vouchers to SMEs to generate widespread publicity. The vouchers were valid for 182 pre-qualified courses. Since then, based on the experience and feedback from the pilot run, NPB has refined and expanded the scheme. The following improvements were made to the scheme to increase the use of vouchers: a) opening the scheme to all companies, regardless of size; b) increasing the number of pre-qualified courses to 300; c) introducing open-dated vouchers; and d) distributing vouchers also through the self-help organisations for them to sponsor workers for training. In addition, NPB has also organised seminars for some 500 small companies to acquaint them with its grant programmes and the voucher scheme for training and upgrading their workers. There will be more of such seminars. The results have been encouraging. The number of training vouchers used has increased from 808 in FY 1990 to 6,188 in FY 1992, an increase of more than seven and a half times. In the first half of this year, 5,303 vouchers have been used. RESEARCH AND DEVELOPMENT FUND 8. Dr Kanwaljit Soin asked the Minister for Trade and Industry what percentage of the Research and Development Fund was subcontracted out to overseas institutions during the years 1990 to 1992.”
“Mr Speaker, Sir, in the response, I said that, if necessary, we will consider legislation for price tagging, but not at the present moment. Question put, and agreed to. Bill accordingly read a Third time and passed. Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.10 pm. Sitting accordingly suspended at 2.40 pm until 3.10 pm Sitting resumed at 3.10 pm [Mr Speaker in the Chair] APPLICATION OF ENGLISH LAW BILL Order for Second Reading read.”
“Ultimately, the best possible defence against profiteering is not legislation or the threat of punishment, but the existence of abundant supplies of goods and free competition together with a well-informed public. The Government will work on these basic principles to ensure that prices remain stable in Singapore, despite the introduction of GST.”
“Far from that, I think the few stories that we have been reading in the papers talked of various hawkers slashing their prices in order to compete. A price feedback hotline will also be set up in the Department of Statistics before the implementation of GST for consumers to report any instance of sharp price increases which they encounter. Similarly, CASE will also be tracking price movements more closely. Fourth, public pressure will be brought to bear on those who seize the opportunity of GST to increase their prices sharply. As I have said, I do not think this will happen. But if it does, we will have to generate certain public pressure. We will work with CASE, consumers' watch groups and the media to publicise such errant traders. Checks will be conducted on shops suspected of profiteering. In cases where licensing is required to carry on a trade, for example, a coffeeshop which requires a beer licence, we can revoke or suspend the licence, if necessary. IRAS will also be asked to conduct closer tax audits on errant traders. If necessary, we can also consider legislation to require compulsory price tagging. Finally, as a last resort, and only if the situation warrants it, the Government will be prepared to use its powers under the Price Control Act to control any widespread profiteering in any particular commodity. But I must emphasise that price control measures should not be resorted to except in very special circumstances. Singaporeans can also do their own part by being well informed and vigilant. They must know their rights as consumers, learn to shop wisely and boycott high-price outlets.”
“CASE has been asked to provide a price information service to disseminate prices of common household items to consumers, while the press will be encouraged to publish price watch columns to compare prices of consumer goods across different outlets. As to the amount of Government support for CASE, CASE has been asked to put up a detailed paper on its requirements and my colleague, the Minister for Finance, has told me that the extent of Government support will be determined after the paper is studied. So we will give adequate support to enable CASE to carry out its function. Third, monitoring of prices and consumer feedback will be stepped up ahead of the implementation of GST. The Department of Statistics has already started to track more closely the prices of various consumer goods and services to see whether traders are increasing prices ahead of GST. The Department already routinely for its CPI collects prices from thousands of outlets and as part of this exercise to track the events leading to GST, it will track some of the prices more closely. There is no evidence so far of any unusual price increases. There have been reports of very sharp increases, but when we checked out on these reports, there was no foundation to these reports. Prices go up and down. For example, if there is a long rainy spell, prices of leafy vegetables go up. If the weather is good and supply of leafy vegetables increases, prices go down. We know this. And if you go to the market, or you speak to your wife who goes to the market, you will know that this happens all the time. When the price of anything goes up due to the normal seasonal reasons, people at once jump up and say it is because of GST. The tracking so far has not shown any special movement up in preparation for GST.”
“And traders cannot take advantage of the introduction of GST to raise prices excessively because they will risk losing their customers to other competitors. The possibility of widespread profiteering as a result of GST is therefore remote. Nevertheless, the Government has to take note of the public's concerns, as well as the recommendations of the Cost Review Committee, on how to counter profiteering. Through the Committee on Profiteering and Inflation set up in MTI, we will undertake certain measures to ensure that there is price stability before and after the GST is implemented. First, we will ensure that there is adequate supply of essential goods in the marketplace, especially before the date of implementation of GST, so that any speculative increase in demand can be accommodated without exerting pressures on prices. We expect that many people would try and buy essential goods before 1st April 1994, and there is bound to be a surge in demand. And if shopkeepers stock supplies in the usual way, they will not be able to meet the surge in demand. So we will ensure that there will be adequate supplies. We already have, for example, a rice stockpile policy to deal with contingencies and sudden increases in demand or a shortage of supply. And this policy and system proved its effectiveness during the Gulf War period when there was a short spell of panic buying of rice. MTI will soon meet major importers, wholesalers and retailers of household and other consumer goods to get their support and cooperation in ensuring adequate supplies before 1st April 1994. Second, we will step up our consumer education efforts by working closely with CASE and the media to release price information to the consumers.”
“The Bill itself does not address the problem of profiteering for the simple reason that the Bill is a GST Bill. While the Bill itself does not address this, the Government understands this concern and would take various measures to address it. I think the fears are more psychological than real. The majority of countries which have introduced GST did not experience inflation higher than the GST rate. In a few countries where the inflation was higher than the GST rate the cause of the inflation was not the introduction of the GST itself but other fundamental economic problems such as excessive wage demands and loose monetary policy. As long as we in Singapore continue to adopt prudent economic policies in these areas, prices should increase only moderately when GST is introduced, and this increase will be a one-off increase. Fears about profiteering, I think, are over-blown. Profiteering can only exist - and I want to repeat this, because I have stated this many times before, but I keep hearing the same arguments again and again - if the seller has a monopoly on the supply of that commodity, or, if there is a real shortage. The supplier can therefore hoard whatever he has and release it only to those consumers who are prepared to pay exorbitant prices. In this situation, of course, the consumer has no choice and the seller can dictate the price. But in Singapore there is no shortage of goods. We have no problem in importing any amount of essential items that we require, and we have many suppliers and competition is very keen. The consumer, therefore, has many choices as to where he wants to buy the goods that he wants.”
“The tourist then goes to the airport and presents the form together with the receipts at the Customs' Inspection Counter. The Customs officer at the counter will inspect the goods and stamp the form. The tourist will then drop the refund claim form into a mail box next to the counter. After the tourist has left the country, the shop would mail the refund to the tourist which - the retailers who have been speaking to us have said - would generally be not later than two weeks from the date of the tourist's departure from Singapore. The Customs Department will also be looking into the problems of heavy and bulky check-in goods which obviously they cannot carry with them into the plane, and cannot be produced after Immigration checks for verification. We will have to have a special system for that. The Customs Department is looking into how to resolve this problem. For the longer term, the retailers are studying the feasibility of setting up a company to make refunds at the airport. In other words, the tourist can collect his refund before he leaves the country. The Singapore Tourist Promotion Board will facilitate the setting up of this refund company by the retailers. The retailers have also decided that the minimum qualifying value for GST refund will be set at $500 for the refund system to be viable. Based on this minimum limit, the amount refunded will be $15 less any administrative charge that the retailers may want to impose. Some retailers have already indicated that they will waive the administrative charge for a start. To-date, about 300 retailers have indicated that they would have the system ready by 1st April 1994. These include major retailers like Emporium Holdings, The Hour Glass, Robinson, Tang, and so on. I turn now, Sir, to the question of profiteering.”
“Mr Speaker, Sir, the Bill, as amended, after the Select Committee meetings, takes into account all the various concerns of our businesses which were not sufficiently addressed in the Bill that was originally presented. As the Minister for Finance has explained, amendments have been made to ensure that our export industries, shipping, air services and the re-export trade are not adversely affected by the GST Bill. The procedures for these types of businesses to be outside the GST net will be fine-tuned in the light of experience. I think the important point that we should note is that the Government's thinking is fully in accord with that of business, ie, the GST should not affect our export competitiveness. I would like to address two issues, Sir: that relating to refunds for tourists and the concerns over profiteering. The Bill provides for exports to be zero-rated. The question is: how do we deal with exports which are in the nature of tourist purchases in Singapore which the tourists take out of Singapore? The Government has agreed, in principle, that the GST imposed on tourist purchases should be refunded. We have asked the Tourist Promotion Board to work with the retail industry on a suitable GST refund system. While the Government will facilitate the setting up of a refund system, retailers themselves will have to operate the system. Retailers have indicated that they support the GST refund system and that they will implement the system with effect from 1st April 1994, that is the date on which the GST comes into effect. The retailers propose to start with a system similar to the old United Kingdom system of refund where the tourist pays the GST to the shop and fills in a GST refund form containing details of the items of purchases and the amount of GST paid.”
“The House immediately resolved itself into a Committee on the Bill. - [Mr S. Dhanabalan]. Bill considered in Committee; reported without amendment; read a Third time and passed. CUSTOMS (AMENDMENT) BILL Order for Second Reading read.”
“This new section provides for a broader definition of electrical services to include all aspects of work connected with the wiring of electrical installations or the rectification of electrical power failure. It will require any person who advertises by any means the supply of such electrical services to state expressly in his advertisement whether or not he is a licensed electrical worker or a licensed electrical contractor and, if so, the number and date of expiry of his licence and the address of the place at which he carries on his business. This will ensure that only properly qualified and licensed electrical contractors and workers attend to electrical faults. The new sections 11A and 11B will help PUB enforce the Act more expeditiously and effectively. The new section 11A empowers PUB's authorised officer to require any person to furnish to PUB any knowledge of information or evidence which PUB may require for any purpose under the Act. This will assist PUB in their investigations into complaints of unsatisfactory electrical services or other offences under the Act. The new section 11B will facilitate the service of notices, orders, documents and summonses on offenders. The new section 11C provides for a general penalty for offences under this Act or its Regulations where no penalty has been expressly provided. Section 14 is amended to raise the maximum amount payable for composition of offences from $200 to $500. The existing maximum penalty of $200 is too low to be an effective deterrent in the present circumstances. All these amendments are to come into operation immediately. 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.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Bill proposes to amend the Electrical Workers and Contractors Licensing Act (Chapter 89) by introducing provisions to safeguard the interest of members of the public when they require assistance in attending to electrical faults in their homes. The Bill will also enable the Public Utilities Board (PUB) to enforce the Act more effectively. PUB has received complaints from the public of unsatisfactory electrical services performed by unlicensed tradesmen. Under the present Act, PUB can take action against unlicensed electrical workers and contractors who advertise or hold themselves out as persons qualified to do "electrical work" as defined in the Act. However, where the services advertised do not fall specifically within the meaning of "electrical work" under the Act, PUB has no power to take any action. "Electrical work" is presently defined as only work carried out on an electrical installation. The present definition does not cover services, such as the design and planning of electrical system in a household, office or factory. Nor does it include checking of the electrical system and general servicing where no actual "work" is "carried out". This situation is not desirable as it has given rise to unscrupulous, unlicensed contractors advertising their services in a misleading way. Very often, these contractors make misleading or unsubstantiated statements about the qualifications and experience in their advertisements. This should be stopped. A new section 6A is being added to the Electrical Workers and Contractors Licensing Act.”
“Bill considered in Committee; reported without amendment; read a Third time and passed. ELECTRICAL WORKERS AND CONTRACTORS LICENSING (AMENDMENT) BILL Order for Second Reading read.”
“To enhance STPB's ability to effectively implement the Travel Agents Act, STPB should be empowered to suspend licences of travel agents and to compound offences committed by travel agents for minor breaches of the Act or Regulations, and this is what this Bill now provides. I will now elaborate on the provisions of the Bill. Clause 5 of the Bill provides for the dissolution of the Compensation Fund. Clause 8(1) and (2) provides for the transfer of the balance of the Fund to a special account under the Singapore Tourist Promotion Board. This balance, which now stands approximately at $1.3 million, will be used for consumer education, marketing and promoting activities to assist travel agents, and projects to raise service standards among the local travel agents. Transitional provisions are provided under clause 8(3) and (4) to enable STPB to hear and decide on claims arising prior to the operational date of this Bill. Clauses 3 and 4 provide for the power to suspend licences, while the power to compound offences is in clause 6. Grounds for suspension will be gazetted in the Travel Agents Regulations after the Bill has been enacted. Revenue collected from the compounding of offences will go into the Tourist Promotion Fund established under the Tourist Promotion Board Act. Mr Speaker, Sir, the proposed amendments will dissolve the Compensation Fund and enhance STPB's capabilities to implement the Travel Agents Act effectively by empowering it to compound offences and suspend licences for minor offences. 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. - [Mr S. Dhanabalan].”
“A better safeguard is to have sufficient conditions in the licensing requirements to minimise defaults. This is what STPB has done. Travel agents, for example, are now required to have a minimum capital investment and to provide STPB with additional financial security in the event of poor financial performance. Such additional security will be, for example, a bank guarantee. They are also required to submit audited accounts on an annual basis to STPB, which has the power to revoke an agent's licence on grounds of financial insolvency and/or professional misconduct. These requirements, as I mentioned earlier, have weeded out the shakier travel agents in the industry. With these safeguards, it has thus been decided that the Compensation Fund be dissolved. Under the existing Act, STPB can revoke the licences of travel agents for breach of the Act or Regulations, but there is no power to suspend the licences or compound minor offences. Revocation is a severe penalty for minor offences. The result is that minor offences are not effectively dealt with. In practice, therefore, revocation is rarely carried out, and such revocation prosecutions also involve long drawn-out court proceedings. Revocation will also inconvenience existing customers as the affected travel agent must cease business. Power to suspend licences and compound minor offences will ensure better enforcement of the Act and Regulations without inconveniencing consumers. Suspension of a licence only prevents solicitation of new business during the suspension period, but allows current business to continue.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." Before I describe the contents of the Bill, Sir, let me brief Members on the background to this Bill. The Travel Agents Act (Chapter 334) came into effect on 1st December 1976. It empowers the Singapore Tourist Promotion Board (STPB) to license and regulate all travel agent activities. The Compensation Fund was also established under the Act which I will discuss in a moment. In the last 17 years, the licensing requirement has helped weed out the shakier travel agents in the industry. The number of default cases has also reduced significantly. The Compensation Fund, which I mentioned earlier, was established under the Act and is funded by a one-off contribution of $1,500 each by all licensed travel agents. The Fund is administered by a Compensation Fund Committee under the STPB and is used to compensate travellers in the event of fraud or loss. The Fund, as it currently stands, is not sustainable as the contributions to the Fund are not determined on an actuarial basis, and bear no relationship to the associated risk exposure. It is merely $1,500 from each licensee. So an occasional large claim could wipe out the whole Fund. For the Fund to act as an insurance scheme, contributions would have to be much higher than the existing one-off payment of $1,500 per licensed travel agent. This is not desirable, as it would amount to a levy on the travel industry to provide protection for the travelling public. Besides, it is not the Government's role to provide insurance to buyers of goods and services against defaults by the sellers. Government does not take on such a role for other consumer or business groups, and should not do so for tourists.”
“They too are conscious of the challenge posed by the new investment locations, and the need to ensure that Indonesia continues to be attractive. We are certainly moving in the right direction. We are optimistic that the Growth Triangle will continue to attract its fair share of investments within an increasingly competitive marketplace. GOVERNMENT RESTRUCTURED HOSPITALS (Waiting time of patients) 14. Mr Teo Chong Tee asked the Minister for Health what measures are being taken to reduce the waiting time of patients seeking treatment at Government restructured hospitals.”
“Mr Speaker, Sir, Phase 1A of the Batam Industrial Park covering 23 factory buildings and 70 hectares of land have been completed and all factory space is fully utilised. When Phases 1B and 2A are completed by August 1993 and December 1994 respectively, there will be another 66 factory buildings. There are currently 37 manufacturing companies in operation at the Batam Industrial Park, employing 16,000 workers. This figure is expected to rise to 20,000 by the end of the year. Over the past year, we have also witnessed smooth progress in projects in Bintan and Karimun. Ground breaking ceremonies were held for two Bintan tourist resort projects. There were also similar ceremonies for the Bintan Industrial Estate and the Karimun Industrial Complex. The Government's interest and commitment in the Growth Triangle has not shifted. We believe that the Growth Triangle will continue to offer attractive opportunities for our businessmen, especially when they are more familiar with operating conditions in Indonesia and Malaysia. Geographically, Johor and the Riau Province are also much closer to Singapore. Ultimately, private sector businessmen will invest in locations which they find most profitable. They will continue to invest in the Growth Triangle as long as the conditions remain comparatively attractive. Singapore and its partners must therefore recognise the challenge posed by the new opportunities elsewhere - in China, Vietnam, and India - and do their best to compete for the investment dollar. A conducive business environment with predictable regulations must also prevail to give investors more certainty in planning their investments. During my visit to Indonesia last month, I had the opportunity to talk to a few of my counterparts in the Indonesian Cabinet.”
“If it needs to be increased to 4% because of the situation I have described, it will have to be increased to 4%. I think there is some misunderstanding about what I have stated. Secondly, the figures I gave on the private consumption expenditure, of course, is before GST.”
“Mr Speaker, Sir, I am not sure whether I understand the first two questions. I think the question is if a situation arises where the Government expenditure increases to a point where additional taxes have to be imposed, will GST be increased? I thought that was the whole burden of my statement. So I do not understand how the question arises.”
“For example, we can revoke a hawker's licence if a hawker is found to be increasing his prices unfairly. And as Dr Ow pointed out, perhaps we should be ruthless in picking a few who profiteer and making them an example to frighten the rest. We can, of course, use the Price Control Act, but I will be very loath to resort to this. Because this is not the best way to ensure that prices do not go up in a situation where basically there are many suppliers who compete with each other. The best solution is still the free market. It will be far easier for the consumers to boycott any company which charges more and by such boycott bring prices down rather than use the Price Control Act. Sir, to summarise, now is the right time for GST. Government finances are healthy. We can afford to offset and help the lower-income group. There is a need now to put in place a system of taxes which affect all but very lightly, so that if Government revenues have to be increased as a result of pressures to increase subsidies and services, everybody will know that they have to pay a part of it. It is important for Singaporeans to realise that. Secondly, Sir, tax reductions, offsets and rebates are focused on those who really need help and are more than sufficient to compensate for the GST. Lastly, Sir, in our system, there is little danger of inflation or profiteering.”
“In fact, we now live in a world which has an over-supply of the essential commodities that we consume. We do not also have a situation where suppliers can get together to form a monopoly or a cartel. We have a situation where there are many independent suppliers and the chances of them ganging up are very small. Far from it, I think they will compete furiously one against another. If necessary, as we did during the Gulf War, we can increase the supply of essential items and flood the market with essential goods through NTUC Fairprice and other such organisations. This will undermine any cartel and prevent it from making unfair profits at the expense of the public. MTI will monitor the prices, as Dr Soin has suggested. We should, of course, monitor it right from now and will ensure that steps are taken and measures are put in place for adequate supplies to be in Singapore when the GST is introduced. We can also, of course, organise consumer groups and clubs which will help advise the public on the cheapest outlets. We can enlist the assistance of CASE and help CASE to monitor prices and publicise those retailers who profiteer. I think consumers must learn to support CASE, must learn to organise themselves. I know that many of our Backbenchers here will be organising groups within their constituencies to monitor and to keep consumers informed and to put pressure on those who increase prices unfairly. Lastly, and I would say that this is the the very last type of measure the Government should consider, as Dr Ow has already pointed out, price control is not a good way to proceed, the Government does have powers to be tough on those who blatantly profiteer. And in extreme cases, we can revoke their Government licences or permits to operate.”
“But in the process of imposing this 3% GST, we are giving away, by way of indirect tax reductions, a total sum of $162 million, because adjustments have been made for indirect taxes, PUB tax, telephone tax, entertainment duties, petrol duties and so on, and those have been offset by the GST. So we have to take that out because that is not an additional expenditure. It is already there in the system and that is $162 million, giving a net revenue of $598 million. If you apply that on the gross private consumption expenditure, we get 1.8% effective GST. This, as I have said and I must emphasise, is the total picture. But it is an important element in trying to assess what is the impact of GST on the total economy. Of course, in some cases, prices may increase more because of rounding off. In other cases, prices may not increase at all because companies may decide to absorb a part of it because of reduced income taxes or because of competitive position in the market. We are not the first country in the world to impose GST. Every country where GST has been imposed has gone through this process of price adjustments. Studies have been made on the impact of GST on overall inflation. In most of the cases, the impact of GST is much less than the GST rate. In other words, if the GST is 3%, the GST contribution to the inflation rate is less than 3%. And there is no reason to believe that we will be different. We have strong institutional measures to check profiteering and the impact should be less. As I have pointed out before, there is no reason to assume there will be profiteering. Profiteering is a term that is used when people hoard and extract obscene profits because of a shortage. There is no shortage.”
“1645 - 1646) Sir, we can make a broad estimate of the impact of GST on the total economy. My view is that there is little to fear from profiteering and inflation for many reasons. One reason is that the actual impact of GST on the total economy is, in fact, less than the 3% GST. The Department of Statistics has estimated that even if companies pass on the full 3% GST to consumers, the total impact on the economy should not be more than 2% I have given a handout. Let me just run through the handout very quickly to explain what it is all about. This, as I said, shows the impact on the total economy. First of all, the gross private consumption expenditure. This excludes the expenditure by tourists on various items on which they do not pay cess. This is just the local private consumption expenditure. This is $32,948 million. Not all of this expenditure is subject to GST. We must deduct those types of expenditures which the Finance Minister has already exempted from GST and these will be the financial services, rental on housing and so on. When we exclude all these, there is a net private consumption expenditure of $28,168 million. This private consumption expenditure is on all establishments, big and small. And we know that establishments with a turnover of less than $1 million per year will be exempted from GST. If we estimate that these small establishments account for 10% of the total value added in Singapore, then the effective rate is, in fact, on only 90% of the value added. That means GST on 90% of the net private consumption expenditure. So we apply the 3% on 90% of net private expenditure and get the GST of $760 million. That is the GST collected.”
“Countries, including Japan, Thailand and New Zealand, which have recently introduced GSTs, have also chosen to have a comprehensive system, like the one that we are adopting in Singapore. For countries which have introduced GST very early, like Britain, they have a fairly complex exemption system. And many people, including those who are studying the tax system in the UK today with its complicated multiple rates and zero-ratings, have come to the conclusion that it is far better to reform the system by removing all these exemptions and replacing them with a single but lower VAT or GST. The latest issue of the Economist, if some of you have seen it, has an article making a strong case for a low broad-based GST. The article points out the bizarre anomalies that can arise from exemptions. It quotes an example. `Side by side on supermarket shelves are chocolate, digestive biscuits (which attract a GST or VAT of 17 1/2%) and Jaffa Cakes (where the VAT is 0%);' Why? Because Jaffa Cake is classed as food and therefore zero-rated; and chocolate and digestive biscuits are classed as snacks which I assume you eat while you are watching TV, therefore, you pay 17 1/2%. It is completely arbitrary. These exemptions have inevitably led to higher costs for everybody, and quarrels over precisely which items should be exempt and how much and when. It ends up with a lot of cheating and without much benefit for whom it was intended. The third fear or criticism of the GST is one that centres around inflation and profiteering. Sir, with your permission, may I ask the Clerk to distribute the Table (Cols. 1645 - 1646) that I have given to him? [Copies of Table distributed to hon. Members.] Table - COMPUTATION OF PRICE INCREASES USING 1990 PRIVATE CONSUMPTION EXPENDITURE (PCE) DATA (Cols.”
“If companies spend their time on trying to find ways to dodge the tax rather than ways to produce more efficiently what they are doing, then they are directing their resources, energy and interest in the wrong direction. For all these reasons, Government has chosen to help the lower income households directly through measures outside the GST system. As we have said, we will reduce personal income taxes which will benefit more than one million taxpayers because with the tax rebates, three-quarters of households will not need to pay income tax any more. We will provide rebates for service and conservancy charges for 1-, 2- and 3-room flats and rental rebates for 1- and 2-room HDB flats. We have given property tax rebates for the smaller properties so that the lower income households can benefit. As a final safety net, we have also promised that we will give a grant to the Citizens' Consultative Committees to help those who do not benefit from all these tax changes and offsets that we have provided. The cost of all the offsets, when you tot them up, is not large precisely because these measures are well focused on those who really need help. Whereas a general exemption of so-called essentials will cost a lot because it is not focused on those who need the help. It will not be possible to completely offset the GST for the lower-income groups by zero-rating essentials, because there will always be some items on which they have to pay GST. The only way to ensure that the lower-income groups do not pay any GST will be to zero-rate all that they consume which, in fact, means no GST. Sir, our way of helping the lower-income households has, in fact, not been plucked out of the air, but something that has been drawn up as a result of studies of the system operating elsewhere.”
“Secondly, zero-rating certain goods and services will distort people's spending choices by making some commodities artificially cheaper than others. People want to consume a whole host of goods and services which are important to them and each family decides for itself what is important and what is not important. We cannot, as a Government, put all these into the exemption list. So we have to make choices. For example, if we exempt rice, do we exempt wheat flour? Because if we do not exempt wheat flour, then we are favouring rice against bread. And those who like to eat bread will complain against those who are exempted because they eat rice. The Government should not be asked to decide what is it that each family should consume or need to consume. Thirdly, exempting "basic essentials" creates definitional disputes and encourages people to cheat and misdeclare items to benefit from lower or zero-rate items. For example, does exempting rice or wheat flour mean that we should also exempt char siew pau, buns, pastries, biscuits, or confectionery? Or should we only exempt cakes sold in the HDB estates but not cakes sold in Shangri-la? On what basis do we make the differentiation? How do we decide? What should be exempted and what should be zero-rated and what not zero rated? Compliance and administrative costs for both businesses and tax administrators increase very sharply as we begin to exempt and zero-rate more and more items because we have to keep track of these items. And this will defeat the whole purpose of this GST exercise which is to make our companies more competitive.”
“Suppose we define "essentials" as basic foodstuffs, public transport, education and health. These four items form 40% of the consumption of households earning less than $1,500 per month. The total expenditure of these households earning less than $1,500 per month on these four items amounts to $870 million per year. This is derived from the survey on private consumption expenditure. So if we term those who earn less than $1,500 as among the lower income group, they together spend $870 million on these four essential items - food, public transport, education and health. But the total expenditure of all households on these four items is ten times this amount. It is $8.6 billion. If we zero-rate these items and we say that these are essentials that should not be subject to GST, the Government will forgo $260 million of revenue. But only one-tenth of this, that is, $26 million, will go to the lower income groups. All the rest will go as benefits to those earning $1,500 or more, the middle and higher income groups. The fact that the lower income groups get such a small portion of the revenue forgone is not the end of the matter. The Government has to make up this $260 million of revenue forgone. And how does it make up? The GST rate, therefore, cannot remain at 3%. It must go up. And since $260 million is about one-third of the total revenue that is expected from GST, the GST must go up from 3% to, say, 4%. But this 4% will, of course, again have a greater impact on the lower income groups because 60% of the expenditure of the lower income groups is on these "non-essentials". So the more items we exempt, the higher the GST has got to be and the higher the lower income groups will have to pay on the non-exempted items.”
“Or, two, outside the GST system, by other more direct tax reductions, rebates and grants. We have chosen the second approach. Exempting "essentials" is not only an inefficient way of helping the poor to tide over the GST, but it also creates numerous problems and these are not just theoretical, academic problems. Countries which have introduced GST with a host of exemptions face these problems and are, in fact, seriously examining how they can change the system to make the GST more general with less exemptions. We have chosen, as I have said, to offset the GST through a system of direct tax reductions, rebates and grants, and not through exemptions. Why? First, essentials are not consumed only by the lower income households. In fact, high income households consume far more of the "essentials" per household per month than lower income households. So exempting or zero-rating essentials will benefit higher income households more than lower income ones. It will also cost the Government much more than it will benefit the lower income households. In other words, the tax forgone by the Government would be far more than the benefit to the lower income households. The White Paper on GST has explained that on a per household basis, the top 10% of households, that is, the top 10% by income, spend 3 1/2 times more than the lower income households on food which we can assume as essential. Exempting food from GST will, therefore, mean that the top 10% will benefit 3 1/2 times more than the poor. Similarly, the top 10% of households spend eight times more on other items, which many of us will consider as essentials, such as health. If health is exempted, the top 10% will have eight times more benefit than the bottom 10%. This is true for all the other essentials also.”
“The progressive income tax system will remain in place and indirect taxes on petroleum, cars and all the sin taxes - tax on gambling, tobacco, liquor - will still continue to account for the major part of Government revenue. In fact, a rough calculation will show that, going by the figures given by the Finance Minister, the GST will not, in fact, account for more than 10% of the total Government tax revenue. So those in the higher income bracket will continue to bear a disproportionate part of the tax burden. But the GST is important. There is that component in the tax system which will ensure that every time there is a need to increase tax, everybody bears a part of the increase. And it is important that the Singapore population as a whole realises that public services cannot be increased without everybody having to pay for it. This is the best way to keep a lid on public expenditure. This is an important reason why we want to have the GST in place, a light but broad tax on all goods and services. It is an additional reason to those which have already been given in that, through GST, it is possible to reduce the income tax and corporate tax so that we make Singapore a more attractive place to invest, so that we encourage savings as against consumption, and so on. But a broad, light tax on the entire population is absolutely important and to always keep before the population this message: That you can't get more without paying a part of it. Let me now come to the regressive aspect of the tax and how the very poor should be assisted to cope with the GST. Government can help the lower income group offset the effects of GST in two alternative ways. One, through the GST system itself, that is, by exempting certain "basic essential" items.”
“In Wednesday's Straits Times, Sir, there is a letter in the Forum page which illustrates this point. An argument was made by the SDP that the less well-off should be taken care of by the state without they even having to ask or compete for it. Sir, it is this kind of soft-headed handout policy that has landed so many of the Western countries in such a mess. There, for years welfare workers have been going around forcing aid on people who were too proud to ask for aid and welfare workers persuaded them that they were entitled to the aid, they should ask for the aid, until we have a situation today where it is considered as an entitlement, a right, an obligation by the Government towards them. I hope that we will never become seduced by these arguments. We should be glad that we still have a people who have a strong sense of responsibility for self, and pride in taking care of their own interest. The state is made up of individuals and we cannot, by argument, by a sleight of hand, transfer the responsibility from the individual or collection of individuals to some impersonal, unconnected third person called the state. We must, therefore, have a tax system that will make an immediate and direct connection between demands for public service and the private purse. People must know that if Government is asked to provide more, then people must pay more. Of course, the GST is not intended to be the sole or even the major source of revenue. There will always be other taxes, other sources of revenue which will be very progressive, which will tax the well-off, the rich, more than the poor.”
“Because at this time when Government's position is in surplus and there is no need for additional revenue, we can package this broad, light tax in such a way that we can minimise the impact on the lower income group and do all the other necessary adjustments to give away through tax reductions and other measures which are sufficient to offset the revenue from GST. So this is the right time to do it and the right time to put in place a broad tax. It is only in the present situation that the Government can afford to package the GST in the way that it has. Our direct income taxes, as the Prime Minister has pointed out, fall on a few in the population. In 1991, for example, 10% of the taxpayers accounted for more than three-quarters of all the income taxes collected. Our indirect taxes too are narrowly based. They are basically on petroleum, tobacco, liquor and cars. Our economy has done well over the years. Government has had surpluses year after year and we have a situation where the tax burden is, in fact, very narrowly focused. A few bear the major part of the tax burden which means that a few carry the cost of all public services. Therefore, there is a great danger that the people may come to believe that Government can provide more and more, either through more Government services or through increased subsidies, and that Government can be pressured to provide more and more without any additional cost to them. There is a dangerous belief prevalent in Singapore that somehow the state is separate from the individuals who compose it. Thus, when the state is asked to pay, there is a belief that somebody, other than the people, will foot the bill. And evidence of this woolly thinking is before us all the time.”
“The second situation under which Government may need additional revenue is when its expenditure has increased to a point where it is not covered by the current taxes and current revenue yields. Such expenditure can increase as a result of Government being put under pressure by the people to increase public services, to increase public subsidies, and all the other things that people look to the state to provide. To try and raise additional taxes after public expenditure has increased to a point where it cannot be supported by current taxes and current revenue would be really to close the gates after the horses have bolted. We should take action before the situation gets out of hand to ensure that expenditure never increases to a point where we need to increase our taxes in order to meet public expenditure. Let me elaborate this a little bit more. The GST, as has been pointed out more than once, will change our tax structure. Presently, our direct taxes, that is, taxes on income and corporations, yield 60% of Government tax revenue and indirect taxes yield another 40% of tax revenue. We hope that, through the GST and through reductions of income taxes over the years, we will reach a balance of 50% direct and 50% indirect taxes. But the GST is more than a change in the proportion of direct and indirect taxes. It means an enlargement of the tax base to cover the whole population. And this, of course, is precisely why many people object to the tax. But this is the intention of the tax, and I will explain why it is necessary. It is important to put in place a light but broad tax at this time when Government finances are sound and there is no need for additional revenue.”
“It has been argued that Government's financial position is sound, healthy, that we have surpluses every year and, therefore, there is no need for GST and that even if there is a need, there are other sources that the Government should explore and that we should clearly demonstrate that there is a need for additional revenue before we impose GST. This reservation and criticism have been proffered in spite of the fact that the Finance Minister has said more than once that the GST is not being introduced at this stage to raise additional revenue and that, in fact, in the first five years, the tax deductions, offsets and rebates will exceed the estimated GST that will be collected. Nevertheless, I think we should examine this argument a little deeper. Under what circumstances will Government need to raise new taxes to raise additional revenue? The first situation will be one when the yield from existing taxes falls. And this, of course, can happen when the economy shrinks because of a recession, incomes are lower, profits of corporations are lower, the taxable base shrinks. Under such a situation when the Government is facing reduced revenue because the economy is shrinking, to introduce an additional tax would be the height of folly. That would be exactly the time when businesses and people need a boost of maybe a tax cut or some other incentive to promote business rather than a new tax to be loaded on them. And I am sure that those who have argued that we should wait until there is a clear need before a GST is imposed will be the first to argue against the GST when the need arises because the Government revenue is falling.”
“Mr Speaker, Sir, the GST is the first tax that will fall on almost every Singaporean. So it is not therefore surprising that reaction is rather negative. Nobody likes to pay taxes. And I think no government introduces taxes just for the fun of it. The GST is new for Singaporeans compared to people in other countries. In most countries you have general import duties and almost the whole population pays tax of one kind or another. We being a free port have never had most of our imports subject to tax and, therefore, the indirect taxes that we have actually fall on a very few items. The GST, being a tax on the consumption of almost every good and service, is the first tax that we will have which will fall on almost the entire population. If we examine many of the arguments against the tax, I think we can summarise them under three headings. First of all, there is the question as to whether we need this tax at all, both from the point of view of the timing as well as from the point of view of whether such a tax is necessary at all because there are other sources of revenue in Singapore. Secondly, those who accept the principle of the tax have grave reservations about the regressive nature of the tax and the measures that have been announced to offset the regressive impact of the tax on the poorer income group. Lastly, the criticism or misgiving centres around the question of profiteering and the impact of GST on inflation. I would like to just take these three aspects one at a time. First of all, on the need and timing.”
“Yes, Sir, R&D programme is audited. I entirely agree with Mr Koo that this is an activity that can swallow up a lot of money and that huge amounts of money can disappear without a trace, if we do not closely audit. Since much of the R&D funding by the National Science and Technology Board (NSTB) is through the public sector research institutes, we must have an auditing system. An Institute has to draw up a clear and deliverable programme before it gets the necessary funds. And NSTB ensures that the research programmes are relevant to the needs of the industries concerned. There are a number of committees that look at the programmes put forward for research assistance. There are expert committees with people from industries represented on the committees. There is also a panel of international advisors and this panel regularly reviews the Institute's plans and progress and the budget is periodically adjusted to ensure that the research is practical, applied and related to industrial needs. Of course, NSTB also funds private sector research. There, the auditing is a little simpler because the grants are only up to 50% of the requirements and the companies concerned have to foot the other 50%. That itself will ensure, in many cases, that the research activities are relevant to market needs. So both for public and private sectors, we do have auditing systems and I suppose, over time, we need to improve these auditing systems. We will be looking at this all the time to ensure that the funds are used properly.”
“We already have such schemes, both under the National Science and Technology Board as well as SISIR. If there are specific aspects that can be improved, I am open to suggestions. 3.30 pm”
“I do not think this would be acceptable to my colleague because, as we know, the dividend cover of most companies is quite large and if we tax only their dividends, I think we will have to make up for the loss of taxes by raising GST, and that is something that perhaps people would not welcome. But there are other ways of helping local companies which EDB has already put in place. If they can be made more relevant and more helpful, I am always open to suggestions from any Member in this House. Mr Chua talked about skills upgrading and in-house training schemes. We have such schemes and my colleague later will also elaborate. The National Productivity Board, in fact, wants to encourage, through the use of Skills Development Fund, in-house training schemes because these schemes are most effective and relevant to the needs of the particular industry. This has always been our approach to training. All the other list of requests - more liberal financial terms, margin of preference and lower start-up costs - I think there is no end to the kind of things that can be requested. We already have a whole list of things. I do not want to dampen the enthusiasm of those who champion the cause of local industries but I think we must be realistic. We are doing a lot. A lot of money is being poured into helping local industries. I think there is a very wrong impression that EDB only concentrates on attracting MNCs. I would say that that was probably the case in the initial years, but for at least more than 10 years EDB has been paying increasing attention to local companies and local businesses. And if there are specific good ideas where we can help them, certainly we are prepared to look at them, for example, access to consultants and grants to use consultants.”