Tharman Shanmugaratnam
Singapore
“EDB conducts regular reviews to GIP to ensure its effectiveness in attracting only top-tier business leaders who are interested to drive the growth of their businesses and investments from Singapore.”
“MAS may vary the size of the additional capital requirement imposed on the bank and take other regulatory actions depending on the outcome of ongoing reviews. MAS requires all retail banks in Singapore to ensure that their mission critical systems supporting digital banking are resilient.”
“This question will be answered in the reply to Dr Tan Wu Meng's Parliamentary Question filed for tomorrow's Sitting. [Please refer to "Probe into Recent Disruptions of DBS' Digital Bank and Physical ATM Services and Preventive Measures Implemented", Official Report, 5 July 2023, Vol 95, Issue 107, Written Answers to Questions for Oral Ans…”
“Borrowing from the banks is one of the ways in which MAS carries out MMOs to soak up such excess liquidity. Like other central banks, MAS does this daily through an auction system, enabling MAS to withdraw liquidity through the Primary Dealers that submit the most competitive prices.”
“To mitigate consumer over-indebtedness, the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement a range of safeguards when extending mortgage loans and unsecured credit.”
“The Monetary Authority of Singapore imposes on external asset managers the same stringent regulatory standards for anti-money laundering and countering the financing of terrorism that it imposes on banks.”
The complete record
Every one of 2,416 lines we hold for Tharman Shanmugaratnam, in date order, each linked to its source. Free to read, in full, without an account. Page 21 of 49.
“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. Column No : 4683 SUPPLY BILL Order for Second and Third Readings read.”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions. First Resolution reported – "That the sum of $58,227,732,257 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Main Estimates for the financial year 1st April, 2011 to 31st March, 2012, contained in Paper Cmd. 1 of 2011." Second Resolution reported – "That the sum of $20,656,869,000 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Development Estimates for the financial year 1st April, 2011 to 31st March, 2012, contained in Paper Cmd. 1 of 2011."”
“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. [Mr Speaker in the Chair] ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 2011 TO 31ST MARCH, 2012 (Paper Cmd. 1 of 2011) Order read for consideration in Committee of Supply [2nd Allotted Day]. [Mr Speaker in the Chair] Head N – Ministry of Foreign Affairs ASEAN”
“Mr Speaker, Sir, I beg to report that the Committee of Supply has come to certain resolutions. First Resolution reported – "That the sum of $2,773,456,820 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Supplementary Main Estimates of Expenditure for the financial year 1st April 2010 to 31st March 2011 contained in Paper Cmd. 2 of 2011". Second Resolution reported – "That the sum of $280,807,100 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the Supplementary Development Estimates of Expenditure for the financial year 1st April 2010 to 31st March 2011 contained in Paper Cmd. 2 of 2011".”
“All our long-term programmes, the most important ones, like Ms Jessica Tan, Mdm Halimah Yacob, and everyone were talking and making suggestions on – how we can improve them. Those were not his concerns. His panacea was 7% down to 5%, food bring it down to zero. Voila! [Interruptions]. The Japanese, in fact, are now in the middle of a debate. They have 5% GST, but because they have extremely high income taxes and there are many other inefficiencies in their fiscal system, they are now in a fiscal bind. They anticipate having to raise their GST to 15%, some people say even more. Even those who are not fiscal conservatives in Japan are now increasingly recognising this. That is what happens when you do not keep the system as a whole in balance where you retain the drive to excel and to grow incomes and, in the meantime, fund your expenditures by borrowing on future generation's accounts. That is what happens. So let us not pursue easy giveaways without a means to finance them. First, it is not fiscally possible or sustainable; secondly, more fundamentally, it is the way we decalcify our society. Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 2011 to 31st March, 2012.”
“I think Mr Low has repeated his question in a slightly different way, not that very differently but slightly different. So, I will try and give the Member an answer in a slightly different way. First of all, the trade-off I was talking about by the way is not a trade-off between taking something from you and giving something back to you. It is a trade-off between taking out a source of revenue that comes from a broad base of people and being able to provide benefits to where you feel it is most important for the low income, for the elderly, for the disabled and for all those whom we feel we have to do more for. It is also a trade-off between providing benefits and retaining the urge to improve and succeed, which is at the core of Singapore success. All countries, including those in Europe which are best known for having built up a system of welfarism are now having to address this because of the persistence decline in the work ethic that came about because they gave more and more benefits on an entitlement basis. It is a real trade-off that all governments have to assess. As I mentioned, it is a trade-off which any Opposition has to address. The alternative policy cannot be about giving more and more. It is also has to see where you can to get the money from, and in the Member's case, if he is going to take less money from the rich, he has to explain how he is going to give more to the poor. So, we do not see the GST is a panacea. We see it as part of an efficient and equitable system because it is part of GST plus. On the contrary, Mr Low did see reducing the GST as a panacea because, as I mentioned, he commented on nothing else in our Budget.”
“That is why everything that Deputy Prime Minister Teo was talking about yesterday, everything that the MPs were talking about, will not be easy work. It is not going to come easily, whether it is the Inclusive Growth Programme (IGP) scheme, or all the other schemes we are doing, starting from young and helping kids discover their strengths. This is going to be hard work and we may not succeed, but we want to give it our best shot and we are putting significant Government resources to support our businesses and our workers to try and achieve this.”
“I do not think that was intended. I do not think it was his intention to deliberately favour the wealthy. But this illustrates the forming of policies that do not address trade-offs, that do not address how we have to fund expenditures and that concentrate only on trying to give and give away. I do not think he intended to do this but it illustrates the danger of ignoring trade-offs and ignoring the fact that if you want to do something good, you need some revenue and you have to decide on the most efficient way of raising the revenue. The Member also asked the question about raising incomes of Singaporeans. I am glad that I get the chance to clarify. I have shown a chart to compare with other countries for 2000 to 2009, what was happening to median households. I must first explain two things. This chart is for the purpose of comparing with other countries. It is looking at all resident households, not just employed households. Therefore, the growth rate of incomes that Members see here, 1.7% per year, is a little lower than what we get for employed households because the chart includes retirees, it includes people who are temporarily not working, so on and so forth. For all countries, Members will find that is the case that when we include all households, the income growth rate is a bit lower because there are many people who are not actually in the income-earning group. So it is 1.7%, better than other countries. Secondly, this is only up to 2009. I did not include 2010 because there is no comparable data for the other countries. If you want the 2010 data, look at the Budget speech. It showed a 20% increase in median incomes over that decade from 2000 to 2010, and it will be a challenge to raise our incomes by 30% in the next decade. It is a real challenge.”
“That is what First World government and First World opposition has to be about, addressing the real trade-offs in every public policy, including what I was talking about earlier, which Mr Hri Kumar has spoken about yesterday. The real trade-offs that we always face between doing something to reduce inequality and doing something to keep up the drive to upgrade and improve, and raise incomes. Casino taxes: that has been built into my projections already, that is, built into the 17% of GDP revenue that we feel will comfortably assure us of being able to pursue all the important programmes we want to do over the next five years. It is not as large as some people imagine, and I think Ms Denise Phua's point is a very important one. Besides our core taxes, let us not assume too much for taxes that we get from specific business activities, nothing is secure. Competition, growths and shifts, do not bank on large casino revenues forever and base your fiscal policies on that by making permanent changes that assume the casino revenue will continue to grow rapidly. The Member asked about the middle-income group. First, I think he has misunderstood the chart I showed. The 16% of GST that is being paid is not from the low-income group. It is from the lower end middle-income group. Sixty percent of our population, the bottom 60% pays 16% of GST. That is the chart [indicating ] – 16% is paid by 60%, and the remaining 84% is paid from upper-income groups and foreigners. A remarkably efficient system and a fair one. I recognise Mr Low's desire, particularly at this point in time, to emphasise that he serves a wide spectrum of Singaporeans. I recognise too that the wide spectrum includes, in particular, the wealthy which his proposals would serve even better, as I have explained.”
“Secondly, I really have to emphasise that the more fundamental issue that concerns us in Government when we think through these schemes – and it has to concern any government – is that there are trade-offs in everything we want to do. Ideally, we should be able to reduce taxes on the lower-income group, if possible, also the middle-income group, and perhaps even some of the higher-income group. Foreign domestic maid levies, why not? And still do everything that we are doing – Workfare, enhance the support for the poor, plus investing in the future. It does not work out that way. The arithmetic is simple. You have to balance your budget. If you are taking out these revenues, you also have to put back less expenditure, and you have to decide what to cut. 2.30 pm What we are doing is having a broad-base type tax system in the GST that thereby allows us to have much lower GST rates than most developed countries. In fact, the US is the only developed country without a consumption tax and most reasonable observers will tell you that it is a matter of a few years, not even a decade by which they are going to have to introduce one. But our GST rate is far lower than the VAT rates that apply across the developed world. Why? Because we kept it simple, flat across the board, collect as much as possible from the upper-income group through the GST and use that revenue to subsidise and help uplift the lower-income group. That is the basic trade-off we have to address, and I would say it is a trade-off not just for the Government to address but for any responsible Opposition to address.”
“Sir, I would like to thank Mr Low for his questions, which I will take in turn. First, I think I will have to go over very briefly what I have just explained about how the GST together with GST plus – Workfare and the other transfers we provide – amounts to a highly progressive tax system. Mr Low may not have followed everything that was on the chart I showed. Essentially, what I had shown is that first, the GST being a flat tax impacts all in society. Secondly, the wealthier groups pay more of the GST. Third, we use the revenue thereby collected to provide more benefits to the low-income group. This is not limited to the GST Offset Package. The Offset Package is not permanent although it lasts for several years for the lower-income group. The real part of GST plus that I am emphasising is not the Offset Package. It is Workfare and the other enhanced permanent schemes to benefit the lower-income group. Sir, I have displayed a chart which showed that the permanent benefits, introduced together with the GST after 2007, themselves exceed the increased GST costs that the low-income group has to pay. And when we add that to the Offset Package, we have a very substantially larger number. As Members can see, the bar comprising the green and the yellow components which consist both permanent and one-off transfers significantly exceed not just the GST but all taxes they pay. That is the GST plus system. GST alone is a flat tax; it is not a progressive tax. But the GST plus which came with it and motivated it, is a highly progressive system.”
“Beyond our expenditure in sports, the overall MCYS's budget, too, has increased significantly, and I am mentioning this because there is some misperception coming out of one or two charts that were produced in the media, which showed a drop in MCYS's budget this year compared to last year. Our overall MCYS budget has increased significantly over the years. Over the last five years, the budget has increased on average by 13% per year. So the reduction in the budget in Fiscal Year 2011 compared to last year is simply because we are not holding another YOG this year, at least Minister Vivian Balakrishnan has not told us we are. Finally, GST and income taxes. Mr Low Thia Khiang had asked a question on this. He had noted that GST as a percentage of total tax revenue had increased from Fiscal Year 2005 to Fiscal Year 2011. However, direct taxes, specifically personal income taxes, had not gone down as a share of personal tax revenue. This is no surprise because we have not cut Personal Income Tax rates. We only cut Personal Income Tax rates this year and, in the meantime, income growth has been rapid, so Personal Income Tax collections have naturally increased. No cuts in tax rates but high income growth, so Personal Income Tax collections have increased. What we did cut was Corporate Income Tax rates effective from Year of Assessment 2010 and, indeed, Corporate Income Tax has gone down as a percentage of total tax revenue. So if you add together our direct taxes, our Income Taxes; Corporate and Personal Income Taxes; their share of tax revenues has gone down, from 41.9% in 2005 to 41.5% now [Table 1* ]. Strong income growth has helped to bolster them as well.”
“But the Singapore system is one that is well-recognised, is one that delivers superior healthcare outcomes per dollar spent by tax payers and by patients. Our national expenditure on healthcare – that is both Government spending and patients' own spending – is about 4% of GDP, less than the OECD countries' average of 9%, but we achieve better outcomes than most. On a whole range of indicators – infant mortality, life expectancy, cancer deaths and so on. Today, two-thirds of surgeries in our hospitals are day surgeries, which cut down significantly on expensive hospital stays. And most fundamentally, our 3M framework encourages Singaporeans to take personal responsibility for maintaining a healthy lifestyle. So when you look at it all together, it allows us to limit the use of tax dollars as well as patients' dollars, while achieving superior outcomes. Minister Khaw Boon Wan will be elaborating on this at the COS. Mr Ong Ah Heng had asked if we should spend more on MHA's budget, and highlighted the need for adequate counter-terrorism resources. I can assure Mr Ong that we are providing adequate funding for counter-terrorism efforts. However, MHA's budget is not the only one involved, as MINDEF, Ministry of Transport and MTI, too, have set aside significant resources annually for our counter- terrorism initiatives. Assoc. Prof. Fatimah Lateef and Er Lee Bee Wah and Ms Joscelin Yeo have likewise asked about sports and MCYS will be addressing this during the Committee Of Supply (COS). But I just want to add that expenditure on sports – both from the Government budget and Tote Board – has in fact increased significantly in recent years, and this is without taking into account the YOG.”
“They were aimed at allowing us to build new capabilities and infrastructure for Singapore's future in education and training, health and long-term care, transport, housing and neighbourhood rejuvenation; and allowing us to intervene decisively to help the lower-income groups through Workfare and other means. *Cols. 3405-3406. 2.15 pm Our expenditures are increasing. Expenditures were around 14.5% of GDP in the last five years from 2006 to 2011 – that excludes special transfers. In fact, by the last two years, expenditures had increased to about 16% of GDP. And is expected to go up further to about 16.5% of GDP over the next five years, reflecting the major investments that we are making for our future. So from 14.5% over the last five years to 16.5% over the next five years, a significant 2% of GDP increase. As a result of the changes we have already made in our revenue structure, we will be able to fund these projected expenditures over the next five years. Our overall revenues have increased from around 15% of GDP before we made the changes to around 17% of GDP currently. We expect to sustain our revenue at this level over the medium term. Dr Amy Khor has asked if we should be spending more on healthcare. Indeed, we expect to invest considerably more in healthcare in the next few years. We are expanding both the acute and step-down care sectors, which Minister Khaw Boon Wan will elaborate on at the COS. We have also provided in this budget a significant top-up to Medifund to ensure that the needy are well taken care of. Dr Amy Khor has compared us with some other countries, and at face value, it appears that we are spending significantly less.”
“The UK is spending already 3% of GDP to service their government debts; Japan is spending more than 4% of GDP; and the United States, by the end of this decade, is projected to spend more than 3% of GDP taken out of tax dollars to service their debts. So we are in a very different situation. How do we sustain this revenue stream of about 2% of GDP? To do it, we have to preserve our reserves and ensure that they grow in line with our economy. This is why when we amended the Constitution in 2008, we limited the Government to spending no more than 50% of the long-term expected real returns on the reserves. The remaining returns accrue to the reserves, and we can keep growing our reserves. It is also why the GIC and Temasek have to keep their focus on the long term. Their objective is to achieve good long-term investment returns, across economic cycles. Mr Ong Seh Hong and Mr Liang Eng Hwa have asked how our reserves have performed, having gone through this crisis. Both GIC and Temasek saw significant drops in their portfolio values during the crisis in line with the decline in the markets, and similar to other large funds. They have both recovered their pre-crisis values and have done creditably relative to comparable market indices. Ms Jessica Tan has asked a very fundamental question which is whether our revenues will be sufficient to meet our increasing expenditure needs in the future. The two major changes that we made to our revenue structure in recent years, raising the GST to 7% and implementing the NIR framework were, in fact, aimed at meeting our growing expenditure needs in the future. They were not to plug a short-term gap in revenues.”
“Many countries had to borrow and spend heavily just to try and stay afloat during the crisis, and had to cut back on important programmes for their long-term future. We raised the GST when we were not under strain. We did not wait till we were under strain to raise the GST. That allowed us, first, to provide a strong package of offsets to help the lower- and middle-income groups, full offsets, for several years. Second, by doing it in time – not that we had perfect foresight and knew the crisis was coming – we were able to intervene forcefully during the crisis to help our businesses and workers and avoided an even larger draw on past reserves. In particular, we did it in time, we were able to address needs during the crisis whilst retaining our focus on the long term. We were unique in being able to cut corporate income tax rate during the crisis to enhance our competitiveness, and make substantial investments for the future, building public infrastructure, rejuvenating our neighbourhoods, implementing sustainable development initiatives, ramping up the quality and capacity of our educational institutions, boosting healthcare provisions. Kept our focus on the long term whilst addressing short-term crisis needs. Our second major move was to revise our NIR framework. It is an important part of our revenues, the NIR. Our Net Investment Returns now provide us an income stream of our budget of around 2% of GDP per year – significant part of our total revenues. Significant contrasts with the developed countries which each now have to spend a growing part of their annual budget just to service their debts. In other words, they have to take away from what they get in tax monies, a growing amount just to service their debts.”
“They pay much higher taxes than the benefits they receive. They pay more GST than everyone else, they also pay more income taxes, property taxes and other indirect taxes than everyone else. And they receive less benefits. So it is a highly progressive system. A fair and efficient fiscal system does not and should not mean that every tax is progressive. It means that taken together, our system of taxes and transfers should provide significantly more benefits for the lower- and middle-income groups. It should do so whilst rewarding work and ensuring income growth across the board remains healthy, in other words, ensuring that we retain a dynamic economy and society. The GST on its own is a flat tax, not a progressive tax, but what we have introduced is not just the GST but the "GST plus". In other words, the GST plus Workfare and other schemes to benefit the lower-income groups. Taken together, they make up a highly progressive system. We were able to arrive at this fair and efficient system because of two important changes that we have made in recent years. First as I have mentioned, we increased the GST, from 5% to 7% in 2007. Second, we implemented the new Net Investment Returns (NIR) framework in 2009. We made the constitutional changes in 2008, implemented in 2009. We were fortunate that we did this in time, ahead of the financial and economic crisis in 2008 and 2009. In fact, many Members including MP Josephine Teo and others have contrasted our situation now, through the crisis and now, with what has happened with most developed countries. Their public finances are under severe strain. Their people will have to go through wrenching adjustments in the coming decade.”
“So taxes in Singapore are in fact significantly lower than that paid in most developed countries. Second, the system is pro- growth. Income taxes are low and the majority of the workforce does not pay income taxes, so that they reward effort, enterprise and the constant urge to move up. Third, the system is fair. Taking all our taxes together with the transfers that we make to the population, the overall system is highly progressive. That means that those who are well-off pay the bulk of the taxes, and the low- and middle-income groups receive the bulk of the benefits. For the lower-income groups, the permanent transfers they receive – leaving aside special transfers – significantly exceed the total taxes they pay. I will take Members through Chart 8*. If we just look at the second decile first. Those between the 10th to 20th percentile of incomes pay GST – that is a significant component of the total taxes they pay. But the permanent transfers that they receive through Workfare and other schemes are far in excess of the GST they pay. If we add up all the taxes they pay, that is also significantly lower than all the transfers they receive. I have shown earlier what happened after we introduced the GST but my earlier chart had to do with the increases after we increased GST in 2007. It shows that the increased GST paid was more than offset by increased benefits. Chart 8, however, looks at the total picture, not just the increases in recent years but what the total picture is if we took a snapshot now. Total benefits received are far in excess of total taxes paid including GST for the lower-income group. For the upper-income group, we choose the eighth decile as an example – the picture will be even stronger if I choose the topmost decile.”
“So they could completely offset the increased VAT to be paid by the poor by raising means-tested benefits, plus have an extra ￡11 billion pounds to spare, which could also be used to help the poor. The Mirrlees study concluded that the UK tax system was "costly and inequitable." Mr Low Thia Khiang's proposals have precisely this drawback – they would be costly and inequitable. They would mean that the better-off in society pay less taxes, leaving us with less resources to help the lower-income groups. As Mr Christopher de Souza and Assoc. Prof. Koo Tsai Kee have also asked, who exactly is Mr Low trying to help when he proposes to cut the GST or exempt some items from GST? The same point applies to the foreign domestic worker levies, which a few Members of Parliament have raised. The bulk of the levies are borne by higher-income households. Removing or lowering it will benefit them more than anyone else. It is not that they are the only ones hiring maids, but the bulk of the levies are borne by the higher-income households. The levy helps to control the growth of the foreign domestic worker population, which is a large population even compared to Hong Kong on a per capita basis. But we provide targeted help where it is needed, particularly for those who care for elderly or young children. Progressive fiscal system that can meet future needs GST is part and parcel of an overall system of taxes and transfers that is efficient and equitable. The system has three major features. First, the overall tax burden is one of the lowest in the world. The total taxes paid by a Singaporean are on average about two-thirds that paid in the United States. You have to bear in mind that the US has somewhat lower taxes than most European countries.”
“When France reduced the VAT rate on restaurants by 14 percentage points – a very significant reduction from 19.6% to 5.5% – in 2009, suppliers absorbed most of the savings and prices hardly fell. And that is a typical story. There is also the legal uncertainty created by multi-rate GST systems. In the United Kingdom, there are endless disputes on the classification of food products. Recently, the Courts had to decide on whether smoothies were beverages or liquid food in order to determine its VAT rate. There are many other examples, by the way. The Courts in Belgium had to decide on whether shops that show pornographic films could be classified as cinemas or cultural venues and, hence, have a lower GST rate. It went all the way to the European Court of Justice before it was, fortunately, settled not in favour of the pornographic shops. That may sound funny but there is a whole set of similar examples that have arisen. There is great legal uncertainty as to what to classify as essential, and what is not. Switzerland recently had a public consultation, and the result was that most people preferred moving from their multi-rate GST system to a single-rate GST. A major study in November last year in the UK, led by a Nobel Laureate Sir James Mirrlees. The study concluded which that the poor would be much better supported if the government were to remove the lower tiers of VAT on various items that the poor consumed, and instead help the poor more directly instead. Ending these reduced rates would mean more government revenues, which could be completely returned to the bottom 30% via means-tested benefits, with another ￡11 billion to spare.”
“Mr Low Thia Khiang had raised it again in 2008 and I had addressed it then too. Let me go over it again. Exempting basic necessities from GST is an extremely inefficient way to help the poor. It sounds good, but it would be counterproductive. Firstly, even for bottom 20% of Singaporean households, the commonly cited eight essential food items – rice, salt, sugar, edible oil, soya sauce, vegetables, flour and fish, comprise only 6% of their total household expenditures. Including all other uncooked food items, the total is still only about 15% of their total expenditures. Secondly, even when we look at basic necessities, the bulk of the GST comes from the better-off groups. They consume more of everything, not just luxury items, but basic necessities as well. It is therefore much better to collect the GST on essential goods from everyone, and use the resources to support the poor directly. There is much evidence, too, from other countries that a multi-rate GST ends up raising business costs significantly, and we know that this means that the costs are passed on to consumers. In fact, the OECD did a recent comprehensive study including countries with a broad-based and flat-rate GST system and concluded that a broad-based and flat-rate GST system is the best policy choice. *Cols. 3403-3404; 3405-3406. Its reasons were exactly the same as ours when we decided to go for a flat rate system. 2.00 pm The experience of many countries showed that a multi-rate GST system subsidises the consumption of the higher-income groups more, distorts consumption and production, and raises administration and compliance costs for businesses. Exempting or reducing GST on certain goods and services also does not mean that these tax savings will be passed to the consumer.”
“So when we add it all up and see what happened with the introduction of the GST – how much more they have to pay, and what additional benefits they are getting, let us have a look. When we raised the GST from 5% to 7% in July 2007, first, we provided a substantial package of GST offsets to help take care of the higher costs for the low-income group as well as the middle-income group. So for a household in the bottom 20%, the annual increase in GST paid was itself fully made up for by the GST Offset Package. The annual increase in GST paid, $370 per year, but the GST package per year was $910. On top of that, we introduced permanent programmes to help the lower income group, including Workfare [Chart 7* ]. When you add it all up, this bottom 20% household, if you include both the GST Offset Package and the permanent programmes, would have received five times their increase in GST costs. The GST Offset Package by itself was adequate to offset the increase in GST. But of course, the GST Offset Package is not forever, hence, we have permanent programmes which are far larger than the increase in GST costs for the household. For middle-income households, similar picture, they received roughly five years of full offsets for higher GST costs. Less permanent benefits, but full offset for five years. And for all Singaporeans, the GST was part of the fiscal changes we made to enhance growth – to invest in capabilities, reduce corporate taxes and encourage investments so that incomes could rise over time. And that is exactly what we have succeeded in doing. It will also be the wrong solution to have different GST rates for different items, such as to have a zero percent rate for basic necessities. I had addressed this fully in 2007.”
“More importantly, he had nothing to add on to the longer-term strategies that we had introduced and reinforced through the Budget, strategies to strengthen our economy, raise productivity and incomes; to strengthen our society for the future; develop long-term care for the elderly; substantially enhance bursaries for lower- and middle-income students; and lower income taxes for the middle income. His solution to the rising cost of living was instead to control prices. He did not specify what mechanism would be used to prevent prices of items like food from rising. But he proposed reducing GST by two percentage points from 7% back to 5%, and waiving GST for basic necessities. That is his solution. Let me explain why this is the wrong solution, and would only involve giving more money back to wealthier groups, while taking something away from the poor. First, the bulk of the GST we collect, in fact, comes from higher-income groups and foreigners. It does not come from the lower- and middle-income groups. Based in fact on our 2010 collections, the bottom 20% of Singaporean households contributes only about 4% of all GST paid. The first 60%, in other words, from the lowest end to the 60th percentile of households, pays about 16% of all GST [Chart 6* ]. Furthermore, the GST is a core part of a fiscal system that provides substantial transfers to our lower-income group, including Workfare, which we introduced together with the GST; including bursaries, healthcare subsidies, housing grants for low-income families; and also including special transfers which we do from time to time to help the lower- and middle-income groups, as we have done this year.”
“The figures I have given are excluding the permanent changes that we implemented this year, such as the removal of Radio and TV licence fees, the revision of Public Assistance (PA) rates, enhanced bursaries and so on. I should mention that contrary to Mr Low Thia Khiang's observation that our PA rates have lagged inflation, we have increased Public Assistance (PA) rates by 21% since 2009. For a single-person household, the rate increased from $330 per month to $360 per month in 2009, and again this year from $360 per month to $400 per month. There will invariably be some needy families with unique circumstances for whom the package does not fully cover the increase in cost. Not large in number but there will invariably be some such families. For those who need extra help, we have other schemes to help them. We all know about these schemes, such as ComCare and other local as well as national schemes. But as Mdm Halimah Yacob has emphasised, the lasting solution is not these transfers that we are able to provide because we have a good budget this year. The lasting solution is the most important part of Budget 2011, which is to raise incomes and productivity – in other words grow incomes on a real basis so that purchasing power goes up over the next 10 years. Mr Low Thia Khiang dismissed all that we are doing to help families fully offset the cost of living increases this year. And I have shown Members the chart, it is more than a full offset.”
“So if you look at the overall food basket for the average household, it costs 2.8% more in January compared to a year ago. Likewise in health, Members can identify some costs such as certain in-patient bills which have gone up significantly, depending on the type of illness and treatment. But overall healthcare costs have gone up by just 3% in January. Still unsettling, but the increase is not as much as often perceived. We have to look at the entire basket of expenditures of the average household, which is what the CPI is about. The "Grow and Share" Package in this year's Budget provides more than what is required for lower- and middle-income households to tide over this temporary period of high inflation. We are providing more than required to offset the increases in cost of living for lower- and middle-income households this year. Take for example a retiree household living in a 3-room flat, because that is the type of household that would be most hurt by the rising cost of living. Not working anymore, so they have to rely on their savings and some other forms of support from their children. Their expenses are expected to increase by about $400 for the entire year. They will receive more than six times this amount in transfers in 2011 from the "Grow and Share" package – $2,750 [Chart 5* ]. This holds true for most other types of households, for example, if you look at a larger, lower-income household with two children, they will receive about five times the increase in cost of living this year. Their costs go up by about $650, but they will receive more than $3,000. And if you look at a middle-income household, with three generations, they will receive about 1.8 times more than their cost of living increase.”
“Our schemes will enable this family to receive about $490,000 over their lifetime – or about 60% of their lifetime income. This is not a small-minded Government when it comes to intervening to help the lower income group. Not small-minded at all. Sixty percent of lifetime income coming from the Government. The difference is how we do it, not how much we do. We are doing a lot but we are doing it a way which ensures that we retain the drive to upgrade, keep improving. The majority of the benefits – about 60% – will come in the form of investments to their children's education, their continuous education and training, and in their assets. Forty percent comes in the form of cash and other subsidies. I should mention that the $490,000 figure that I gave excludes discretionary transfers – the special transfers that we give from time to time which are, in fact, a further part of our subsidy framework. They are quite significant – if we look at the last 10 years alone, for this type of families, although they are young, they would have received more than $10,000 in the last 10 years in discretionary transfers. Cost of living and GST The cost of living issues and, in particular, whether we should reduce the GST. We are all concerned with the rising cost of living, and know that it affects particularly our retirees and those with lower income. Overall, we expect inflation to be 3% to 4% in 2011, although higher in the first half of the year. Sometimes, in public perception, we think that it is much higher than that because we are looking at the items that have gone up faster, for example, coffee, sugar, garlic, and cabbage. However, other items in the food basket have not gone up much or have declined, such as bread and tomatoes.”
“But I think we have to bear in mind what Mr Hri Kumar mentioned yesterday, which is that there are real trade-offs involved in all our assistance schemes, including Workfare. We want to provide assistance to the low-income group; and in Workfare, we are topping up their wages. We want to prevent income inequality from widening. But we also want to make sure that we retain a strong incentive and reward for people who upgrade their skills and raise their income so they move out of the Workfare net. And that is a real trade-off that any Government has to face, regardless of how you intervene, whether it is regulated minimum wages or topping up wages through Workfare as we do. *Cols. 3401-3402. That is a real trade-off between helping people more and, at the same time, making sure that we retain the drive to upgrade, which is the basis of dynamism in our society. When we review Workfare holistically in two years' time, we will have to look at this very carefully – what is the right balance? 1.45 pm When we add up all the planks – education, Workfare training, housing and assets – how do they add up? In the bottom 20% of household incomes, we choose a young family because I wanted to trace how much they will be getting over a lifetime. Husband and wife still young, in their late 20s or so. One of them earning $1,000, another one working part time, say, $500, very low income family. They purchase a 3-room HDB flat near their parents. Let us say they have two children, one makes it to polytechnic, one makes it to ITE – I am not saying that is all they will achieve, but I am using it as an example. Add up all the benefits that we are providing, including what we have introduced in this year's Budget.”
“Because owning their flats gives them that addition sense of belonging and makes them feel that they too benefit from Singapore's success. We are also constantly improving and rejuvenating the estates in which they live. That also keeps up the value of the flat. It keeps a unique feature of Singapore, which is common space of a very high quality – where the broad spectrum of Singaporeans, low-income group, all the way to at least upper middle-income group, live in the same estates, enjoy the same facilities, the same parks, the same playgrounds, the same new sports complexes that are coming up under our Remaking Our Heartland programme. High quality common spaces: that, too, is part of an inclusive society. Mr Lim Biow Chuan and Er Lee Bee Wah have also asked about the private housing estates. We are not neglecting them. In fact, MND has set aside $46 million over the next three years to upgrade our private estates – improving the parks, the playgrounds, footpaths, drains, rain shelters and so on. The third plank is what we do to reward work. Workfare and everything we are doing to help workers keep training and keep upgrading while they are in the workforce. We are putting a lot of resources into it. Many Members of Parliament had suggestions on how we should refine our schemes. Mdm Halimah Yacob, Ms Irene Ng, and Mr Lim Biow Chuan suggested various refinements to Workfare – raising the income ceiling, making permanent some of the changes we introduced in this year's budget, such as some aspects of the Workfare Special Bonus and the Special Employment Credit – whether we should not make it permanent. We will consider these holistically when we next review Workfare in two years time.”
“We are doing more in early intervention, we are doing more for our SPED schools, we are doing more to achieve barrier-free access. By the end of this year, 70% of our MRT stations will have at least two barrier-free access routes. We are spending a lot of money on this, $116 million. By 2020, all our public buses will be wheelchair-accessible. It takes some time but, in fact, by end of last year, 40% of our public bus fleet already comprised wheelchair-accessible buses. In this budget alone, we have done more for the disabled. We have extended the financial assistance scheme that MOE has to help needy children to our SPED schools; provided additional funding to the schools directly for them to decide on how best they can help needy pupils. And importantly, the Community Silver Trust will include the disabled adults. I quite agree with Ms Sylvia Lim that we have to do more for our disabled adults. The Community Silver Trust will enable us to do that by bringing in donors, bringing in charitable organisations, bringing in passionate volunteers. With the Government putting in significant resources to help match every contribution that is made. We need to do more, and we intend to do more. So that is the first plank – education. Next – housing, which I am not going into detail on, Minister Mah Bow Tan will be talking about this in the COS. We are helping the lower-income group own their houses so they can have an asset that appreciates over time. It goes beyond that. It is also about what MP Muhammad Faishal Ibrahim mentioned, which is about providing a sense of stability and a sense of belonging to the community amongst everyone.”
“Since 2006, our expenditure on childcare and primary school education has grown much faster than for secondary and tertiary education. Childcare – 150% increase per child. Primary school – 60% increase per student. Pre-school fees are extremely low for lower-income groups so that no family need worry: $6 per month for childcare." Even less for kindergarten. Improve teaching quality. Since 2006, primary schools have seen a 15% improvement in the number of teachers per students, and a 60% increase in Allied Educators and executive and administrative staff complement teachers. What New York Times columnist, Thomas Friedman, observed one month ago about Gan Eng Seng Primary School, is true of our neighbourhood schools generally. We have principals and teachers who are passionate about what they do, and try to make learning interesting for each student. This is unlike many other countries with huge disparities in facilities and teaching standards, between schools in poor and wealthy neighbourhoods. So, that is education. I want to briefly address what NCMP Ms Sylvia Lim had mentioned about the disabled. The disabled are indeed a part of our vision of an inclusive society. In fact, we are doing, frankly speaking, far more than many other countries that have signed on to the CRPD that she spoke about. But we want to do more. MCYS will be elaborating on this in the COS. It has the Enabling Masterplan that addresses the needs of the disabled comprehensively, not just the hardware aspects, barrier-free accessibility, but also the software – education, employment opportunities, the whole spectrum of issues that we want to address satisfactorily.”
“If Members would look at today's PSLE students, today's generation of young kids, amongst those who are in the bottom one-third of socio-economic backgrounds – defined by parents' education and type of flat they are living in – half of them end up in the top two-thirds of PSLE scores. There is still significant mobility working through the system. But it will get more difficult in each successive cohort. As Mr Sin Boon Ann rightly pointed out, it is precisely because of the success of past generations, precisely because we achieved a very high degree of mobility in the past. This means that we have to put much more effort into our mobility efforts as we go forward, to prevent a cycle of disadvantage for those from lower-income backgrounds. This has been and remains our approach to helping the lower-income group. Ms Indranee Rajah gave an interesting example of the type of work required. Intensive scheme involving eight children, all had failed Primary 5. A lot of effort went into mentoring them and providing additional support. Of the eight children, six managed to get into the Express stream. That is the type of work that is required, but it is also the type of results we can still get out of our system. How we go about this is somewhat different from many other countries. How we go about ensuring that we keep up to this degree of social mobility, and try to alleviate the consequences of income inequality and reduce it whenever possible. First, education is fundamental. We invest heavily in education. Particularly at the early stages to reduce the disadvantages faced by students from low-income backgrounds. The more we do early on to help children discover their strengths, the more likely they will be able to move up and do better than their parents.”
“Social mobility is a crucial aspect of our inclusive growth model as MPs Mr Baey Yam Keng, Mr Zainudin Nordin, Dr Lily Neo, Dr Amy Khor, Ms Irene Ng and Mr Sin Boon Ann have argued. We maximise opportunities for everyone to do well. Our meritocratic system allows any Singaporean with drive and perseverance, and talent of different types to succeed. But we have to do more. In particular, we have to do more to prevent a permanent underclass from forming – an underclass that replicates its condition across generations. Let us put it in perspective. We have achieved phenomenal mobility in the last few decades. Very clearly since the 1960s but even since the 1980s. If we look at the generation that is now in their late 40s and 50s. Their parents started off with little. But many of the children have done well through a meritocratic system and moved up. Shift forward one generation, look at the present generation of young adults. They, too, have done far better than their parents. In 1980, less than 10% of those aged 25 to 39 young adults had diplomas or degrees. The proportion of 25- to39-year-olds with Polytechnic or higher qualifications has increased to 64% in 2010 [Chart 4* ]. So a significant shift even for that generation – not the first wave of mobility that happened in the 1960s and 1970s but what happened after. A very significant shift. Then move forward to today's generation of school kids. It is still happening. Not as fast as before, but still happening. The Minister for Education will be talking more about this in the COS and Minister for Community Development, Youth and Sports, Dr Vivian Balakrishnan, will be talking about it too – what we are doing to keep mobility going.”
“Mr Low Thia Khiang and some others have felt that the infusion of foreign workers has been to the disadvantage of Singaporeans. I did, in fact, address this last year and I am going to do it again now, updated to 2010. As I mentioned in the Budget speech, if Members would look at the blue bars first [Chart 3* ], we have had significant growth in incomes at the lower end of workforce in the second half of the decade. This fortunately helped offset the rough period they went through in the first half of the decade. The second half of the decade was, in fact, the same period where there was a significant growth in the foreign workforce. The share of foreigners in the work force saw a significant increase, by about eight percentage points in the second half of the decade. But it was not inconsistent with growing local incomes. Why? Because local incomes and, in fact, wages generally, are not just dependent on the supply of labour but also dependent on the demand for labour. Yes, there was an increase in supply of foreign labour, but it went hand-in-hand with increased demand for labour across the economy. As every firm that employs both foreign and local workers will tell you, if they did not have the foreign workers, they could not have more local workers. So demand for labour picked up, unemployment went down, wages went up. That is the basic story. But we know that we need to change the way we grow going forward because our local labour force is now going to grow much more slowly. And we want to avoid an ever increasing proportion of foreigners in our workforce. That is why we have shift to productivity-driven growth.”
“However, our median wages have not reached the levels of developed economies such as Switzerland and the US. If we grow incomes by 30% in the next decade, we will catch up with the developed countries' standards of living. Growth in incomes has been accompanied by growth in employment. Singaporeans have benefited from the growth in employment. From 2006 to 2010, 228,000 new jobs went to Singaporeans. In fact in 2010 alone, 44,700 new jobs went to Singaporeans. This has led to a higher employment rate among our citizens. If you look at the working age population and see what proportion of them are employed, we used to have a significantly lower rate than the developed countries, but we have now caught up. Our employment rate has caught up with most of the developed countries. The big difference, however, is that our high employment rate is a result of a very low unemployment rate among those in the labour force. Whereas the same employment rate in the developed countries is a reflection of higher labour force participation rates, particularly among women, but offset by a very high unemployment rate. So we are in the right place, high employment rate because we have got very low unemployment – and that is because we have a dynamic economy. One aspect of maintaining a dynamic economy is ensuring we have rational policies, and this includes our policies on foreign labour. Have a price mechanism to encourage upgrading, but recognise that foreign labour is part and parcel of the growth that can help Singaporeans raise incomes. *Cols. 3397-3398; 3399-3400. 1.30 pm Indeed, that is what we have seen. I have got another chart which I am going to show. I will focus now on the lower end, the 20th percentile household.”
“If we want to achieve this, we need a dynamic economy and society; opportunities for all; we need to generate sufficient resources so that we can make the required transfers to help the lower income to uplift themselves; we must maintain a sense of community where everyone participates, and those who have got more, give back to the community and try to help the others. Singapore has done well in growing incomes for our people; in fact we have done better than most countries with a much lower degree of income inequality, as measured by the Gini index. If we look at the median household across countries and growth of real median household incomes, real median household incomes in Singapore grew by 1.7% per year from 2000 to 2009. We have done better than the other advanced Asian economies [Chart 1* ]. Hong Kong, Taiwan and Japan have seen declines in median incomes over the decade. Median incomes in South Korea have risen, but by less: 1.1% per year. We did better than economies that have a lower degree of income inequality. Likewise, as a result of having grown our incomes, if we look at income levels, we are not doing badly either. When we compare median income levels in Singapore to other countries – and I compare here again to the more advanced Asian economies and a set of the most advanced nations – Switzerland, UK and US – median wages in Singapore are higher than in Hong Kong, Korea and Japan, when adjusted for purchasing power parity. There is no perfect method for comparisons across countries, but exchange rates based on purchasing power parity are what the IMF and World Bank use [Chart 2* ]. I will also include as an Annex* a comparison of median incomes using market exchange rate, which will show an essentially similar story.”
“They require a significant pool of highly skilled people who are also on the upper end of the income ladder – a significant pool of highly skilled professionals, executives and entrepreneurs. That is what makes the cities tick, and they compete with each other on that basis. Second, their entire economy, up and down the ladder as well as across the sectors are highly exposed to global competition, so wages are influenced by what competitors are offering. Each company you talk to, multinational or local, that is involved in the international market will tell you that they have got to track what the competitors are paying and what is being offered for the same type of talent or skill, so wages are significantly influenced by what is happening in the international markets and cities show this up in an accentuated way, which is why the Gini is high. Income inequality is not irrelevant. It is something we should be concerned with. What matters most is not income inequality itself, but whether we succeed in raising incomes and living standards for all Singaporeans, including and especially the lower income groups. Second, as Mr Sin Boon Ann and several other MPs said, whether we can keep providing opportunities – so that all Singaporeans regardless of their family background or starting points, have the chance to fulfil their potential and aspire to a better future. Those are the key issues. Can we keep raising incomes, and related to that, can we keep providing opportunities for everyone to realise their potential and their aspirations?”
“They also brought in two experts last year from Japan to teach them how to identify the different grades of tuna and use automated cutting technology from Japan to maximise the efficiency and quality of their cuts. I will not go into the details but real productivity improvement. We did not have the knowledge locally to be able to do this, so they got in some foreign experts, very helpful. Now they are expanding, so more demand for workers. They are opening up a new facility to increase their processing capabilities and diversifying as well into tuna sashimi processing – higher-value product. In fact, they are now planning to quadruple their output and this means more job opportunities for locals. Small firm. We are not talking about a huge number of job opportunities but multiply that example across the economy. No zero-sum game. Provide them the workers they need. Give them continuous incentive to upgrade and reduce the need for low-skilled workers but try not to squeeze them out of business. Social mobility Many MPs have spoken about social mobility, including Mr Sin Boon Ann, Dr Lily Neo, Mr Yeo Guat Kwang and, just a short while ago, Ms Irene Ng. Actually I can mention many names. We are all concerned about the widening income gap, and it is a concern for all of us. First, why is our income inequality high? It is because we are a global city. They are like that. If you look around the world, the global cities that compete with us, especially Hong Kong, New York, they all have high Gini ratios. In fact our Gini ratio is a little lower than most other global cities – Hong Kong, New York and in fact seven or eight American cities. The reason lies in the nature of the economy of a global city.”
“First because it provides some resilience – some industries go down while others are going up, it provides some resilience across the economic cycle. But importantly, it also provides a variety of good jobs for Singaporeans. Not all Singaporeans are best suited to working in the frontline of a hotel or in a restaurant. Some are very good with their hands, very inventive with their hands, some are good in logistics. So we really need a wide range of sectors – manufacturing, including traditional and high-tech manufacturing, logistics, a range of service industries to provide good jobs for Singaporeans. And to provide good careers so that all Singaporeans can realise their aspirations in a thriving economy. It is not a zero-sum game. Speak to any business that hires foreign workers and they will tell you it is not a zero-sum game. They will tell you that they are able to create good jobs for Singaporeans up and down the ladder because they have access to a certain number of foreigners. The foreigners complement the locals and make possible the story that we had in recent years. Increased demand for local workers that has pushed up their wages. There are many examples. And I am just going to cite one, the only one in my speech. Small company, SME – Chun Cheng Fishery – it is a company that processes and exports frozen tuna. They are a company of about 60 to 70 people, about half are locals. They employ foreign workers – first, to fill positions in its freezing facilities, as local workers are not accustomed to working in a cold environment. Freezing conditions. Tuna comes in, they are slicing. Local workers – hard to get them for this particular task because they are not so accustomed to working in such a cold environment.”
“But there is no workable alternative to the FWL increases as a means of controlling the demand for foreign labour – for deciding on which firm or which industry should receive more or less labour at each stage of the economic cycle. There is no workable alternative besides using a clean, straightforward price signal. Mr Low Thia Khiang also questioned the effectiveness of the foreign worker levy. But he offered no alternative in his speech this year. Earlier, I think it was last year, he had suggested an alternative which essentially meant that bureaucrats set quotas for different sectors and company sizes, and gradually reduce the dependency ratio to encourage productivity growth. This is not workable. It would only mean constraining businesses' flexibility to get the necessary manpower to expand when they got opportunities. And no group of bureaucrats will be able to decide on which company or which industry is more deserving and what are the peculiarities of the circumstances they face. So it is far better for us to use the price mechanism to provide clean incentives for employers to reduce dependence on low-skilled foreign manpower, while giving them the flexibility to manage cyclical changes in manpower needs. While we cannot increase the number of foreign workers indefinitely – and we certainly do not want it to exceed, on any sustained basis, the one-third of the total workforce target that we have set – we will still require a significant foreign workforce to keep our economy diversified and competitive. We need a critical mass of workers, talent and expertise, to ensure we have viable economic clusters in Singapore, and a diversified range of economic clusters. Not just one or two clusters but several. We need this diversification.”
“We were just coming out of a crisis. No one knew for sure how strong the growth would be. It was a series of measured steps over a period of two years. The growth turned out to be much stronger than expected and now local wages are going up. In fact, if we do not raise foreign worker levy further now, there is a real likelihood that the cost of foreign workers will go up less than the cost of local workers. Everyone knows that means an increasing demand for foreign workers. So we have to extend the FWL increases beyond what we introduced last year. And it is better to do it now while the economy is still doing well and maintain that gradual schedule of increases rather than wait till later and introduce steeper increases in one go. The increases starting from where we were last year up till 2013, which is where the schedule of new increases ends, will impact business costs. But it is a measured impact. The total increase in labour costs for the business sector will be less than 2% when the changes are fully phased in. Some sectors will be affected more – the more labour-intensive ones or, as many MPs have mentioned, sectors that depend on the human touch such as hotels, restaurants and the retail sector. They depend on people. But these are the same sectors – construction, hospitality at large – the same sectors where productivity is relatively low compared to the industry leaders globally. There is significant headroom for us to reach productivity levels of the cities that are in the lead in these sectors. 1.15 pm Some Members of Parliament have also questioned the effectiveness of FWL as a mechanism to achieve what we want – to reduce the demand for foreign labour and encourage firms to upgrade. There is no perfect way of doing this.”
“I urge industry associations and chambers to continue to work actively with IRAS to increase awareness and help get maximum take-up rate of the PIC scheme. We will work with them. Key driver for productivity – the tight domestic labour market. To complement business restructuring and productivity investments, we also need to manage the supply of foreign workers (FWs) – as many MPs, including MPs Arthur Fong and Yeo Guat Kwang just this afternoon, have mentioned. We want to make a quantum leap in productivity. Ten years from now, we want to be in a very different place from where we are now. We know we will not get there if we continue to rely extensively on low-skilled foreign labour. We introduced one round of foreign worker levy increases last year, and we extended and accentuated the increases this year. But the foreign worker levy increases are not the fundamental driver for the business upgrading that has to take place. The key driver is a tight labour market. We have virtually full employment. The growth of our labour force going forward is also going to be extremely low. Wage costs will go up. In a full employment economy, it is not just wage costs, but rental costs and many other costs that will go up. So, businesses will have to restructure and make adjustments because we have succeeded and we have a full employment economy. Going forward, the flow of additional local workers entering the workforce is going to be limited. We have to restructure in order to adapt to a high cost environment and to be able to grow without ever increasing labour inputs. That was the context in which we decided to extend and accentuate the FWL increases we announced a year ago. In fact, the increase that we announced a year ago was measured.”
“This tax deferral allows businesses to effectively enjoy their tax savings under the PIC scheme one year in advance, if they so wish. It will apply to expenditures incurred for the year of assessment 2012 to the year of assessment 2015. Some Members have mentioned that businesses are under the impression that the PIC claim process will be complex. This is in fact not the case. PIC benefits can be claimed as part of routine tax filing. In fact, for companies, no additional supporting documents are required specifically for the PIC claims. And for smaller outfits like sole-proprietorships and partnerships, for whom it is not a requirement to submit audited accounts together with the tax returns, they will only need to furnish in a simple form the details of their expenses for PIC. So we will keep this very simple, easy to understand, easy to make your claims. Businesses that wish to opt for the cash grant option under the PIC can do so anytime after their financial year has ended, although I would say that with the new enhancement that I have just announced – the tax deferral scheme, many businesses will choose to take advantage of that and not wait until the cash grant becomes available in the following year. The Government will provide support through our Enterprise Development Centres at key business chambers and associations to advise businesses not only on how they can improve their productivity; but also on how they can tap on the whole range of government schemes available including our grants as well as our PIC scheme. IRAS has in fact been very active in publicising the PIC. It sent out brochures to 225,000 businesses late last year, conducted 50 PIC seminars for 7,600 participants. But it is going to do more.”
“And as Deputy Prime Minister Teo and several other MPs have emphasised, MP Denise Phua, NMPs Paulin Straughan, Mildred Tan and many others, tripartite collaboration is important in all of these. And our Labour MPs, in particular, spoke in some detail about what they are doing, what the unions are doing to work with specific industries and companies to redesign jobs, raise skills, raise productivity and thereby raise wages. The Productivity and Innovation Credit (PIC) was introduced last year and enhanced this year. I think everyone, including our businesses, recognises that it is a generous scheme. It effectively amounts to a significant cut in corporate taxes for companies that are investing in productivity. But we have received feedback since the Budget. In fact since a week and a half ago, we have received further feedback from our chambers, associations and several individual businesses. Our SMEs do face an impediment in taking full advantage of the scheme. They want to invest now. They want to take advantage of the scheme but they have cash flow problems. The scheme provides them significant rewards later. So we studied various options how we can help these businesses because I agree this is a valid concern. I have therefore decided to allow tax deferral under the PIC scheme. Tax deferrals that will allow businesses to obtain cash in the same year as their investments – by deferring the taxes that they need to pay in the current year to the following year. For up to $100,000 of qualifying PIC expenditures in the current year, businesses may defer the same quantum of tax to the next year. One hundred thousand dollars cater to a very broad base of SMEs, when you talk about the types of investments or the types of training expenditures they intend to incur.”
“Mr Speaker, Sir, I thank all Members for their views and suggestions. I have listened closely to all of them, on a few occasions when I have had to take a biological break, I have made sure I read all the transcripts. I will address in my round up all the key issues that pertain to the Budget. But there are many other issues that the Members have raised which should be taken up by the respective Ministers in their COS. Issues concerning marriage and parenthood, specific policies concerning the environment, the elderly, the disabled, policies concerning the arts and sports, measures to help youth and families at-risk. It has been a rich debate and I am sure my colleagues will take into account not just what will be said during the COS cuts but also what has been said during the Budget Debate itself. The key issues that I want to address during my round up are basically four: first, whether we have adopted the right strategies to boost productivity; second, how we can keep social mobility going and uplift lower-income Singaporeans; third, how we are addressing the issue of rising cost of living and in particular whether we should we cut the GST; and finally, how do we sustain a progressive fiscal system whilst meeting future expenditure needs. Raising productivity Let me address each of the four issues in turn. Deputy Prime Minister Teo has provided an overview of our strategies to boost productivity, including what's already been rolled out, including many examples of how businesses are in fact taking advantage of our schemes. They are upgrading, taking advantage of the various new grants under the National Productivity Fund as well as existing grant schemes that SPRING and other agencies have.”
“Mdm Deputy Speaker, may I seek your consent to move that the debate be now adjourned?”
“Mr Deputy Speaker, Sir, may I seek your consent to move that the debate be now adjourned?”
“Mr Teo has asked whether the duty and GST paid for imported cars could be refunded if they cannot be sold locally and a business decision is then made to export the cars. When traders import cars, they can choose to either release the cars directly into the Singapore market, or keep them in Licensed Warehouses first. The Licensed Warehouse scheme is designed specifically to help traders that import motor vehicles for re-export, or for which they have yet to find buyers for the cars. Duty and GST are suspended for cars stored in Licensed Warehouses. All traders can apply to be Licensed Warehouse operators, or choose to store their vehicles at third-party Licensed Warehouses. Import GST and duty are payable at the point of direct release of the imported car into the domestic market, or at the point at which it is removed from a Licensed Warehouse. GST-registered traders can recover this import GST in their periodic GST returns to IRAS, without having to wait for the cars to be sold. As for customs duty, traders can use the Licensed Warehouse scheme to manage their business risk by deferring duty payment until buyers have been found for their cars. It is up to the trader to decide whether and when to release the cars into the domestic market. As this is a commercial decision and there are already schemes in place to help motor vehicle traders manage their business risks, there is no basis for the Government to provide refunds for duty of cars that they eventually decide not to sell locally. VALUES OF VOLUNTEERISM AND COMMUNITY WORK 2. Mdm Ho Geok Choo asked the Minister for Community Development, Youth and Sports what is being done to (i) educate our youth about the values of volunteerism and community work; and (ii) imbue a sense of altruism amongst our youth.”
“We are doing more in this Budget. We are significantly expanding support for children from lower-income families, from pre-school through to tertiary. We are also helping lower-income workers to get more from work, and to own their homes. Social mobility will become more challenging as our society matures. But we will find every effective way to help those who start off lower to discover their strengths, and provide them many routes to achieve their aspirations. We will also keep the progressivity of our fiscal system, which gives us the resources to help those most in need to uplift themselves. But whichever way the Government intervenes, we will only succeed if we preserve and strengthen the things that Singaporeans value most – family; everyone aspiring for a better life and feeling that they can get there by working hard; and a sense of community. These are the values that will keep our society dynamic, and will allow us to achieve our next transformation as a nation. *Cols. 2797-2802; 2815-2816. Mr Speaker, Sir, I beg to move. [8] Based on 2007/08 Household Expenditure Survey data. The increase in cost of living in 2011 is based on projection of 3% to 4% increase in household expenses based on the CPI; this excludes the imputed rental value of Owner-Occupied accommodation, which does not imply any cash outlay. It also excludes the cost of purchasing new cars, which only a small proportion of Singaporeans would encounter this year. [9] Transfers to Endowment and Trust Funds total $5.5 billion. This includes $3.4 billion to support our longer-term social objectives in healthcare, continuing education, and help-schemes for the needy. It also includes $2.1 billion in investments for productivity and innovation, and measures to help the corporate sector.”
“8 billion – these are the net investment returns that come from investment income earned from our reserves, and secondly, the amounts we are setting aside for Endowment and Trust Funds that serve both our economic and social objectives[9]. The injections into Endowment and Trust funds will alleviate pressure on future Government Budgets to fund our long-term needs. Mr Speaker, Sir, this Budget seeks to strengthen both our economy and society for the future. We are taking major steps to enable Singapore to be a first-rate developed society a decade from now. We can deal with the immediate problems. The rising cost of living is a concern. We are providing lower- and middle-income Singaporeans with benefits in this Budget that for many households, they will more than offset their increase in household expenses – even before taking into account any wage increases. Our core agenda however is focused on the longer term. We want to grow Singaporeans’ incomes significantly, by transforming productivity. It cannot be achieved overnight, but we are investing substantial resources towards doing so – by helping our businesses invest and restructure, and by developing skills and mastery in every job. Through continuous improvements as well as breakthroughs, we must succeed in raising productivity in every sector, so that we achieve a 30% improvement in real median incomes of Singaporeans over the next decade. We must also ensure an inclusive society, where everyone, including the lower-income group, can contribute to and share in Singapore’s progress. We must sustain growth if we are to achieve this, but growth on its own will not be sufficient. That is why the Government has been intervening actively to support those lower down the income ladder.”
“Including other measures that we have introduced this year such as the removal of Radio and TV licence fees, and the enhanced CFAC Scheme for lower-income children in childcare, the family will receive about $3,500 this year. This is equivalent to about 15% of their household income. The benefits that they receive will also be more than four times the expected increase in their household expenses this year – again without taking into account any wage increases. So the $3,500 that they receive will be more than four times the expected increase in their household expenses this year. This is also before counting the benefits that they will receive this year, which had been committed in previous Budgets. On top of the $3,500 from this year’s Budget, if we add just four components of what had been pre-committed, the regular Workfare payments they will receive, their existing CFAC fee subsidies for the child in childcare, and the pre-committed U-Save and S&CC rebates – the family will *Cols. 2705-2706; 2707-2708; 2797-2802. receive total benefits from Government amounting to a substantial $8,500 this year with $3,500 coming out of this year’s Budget [Annex B-2* ]. FY 2011 Estimated Budget Position Mr Speaker, Sir, let me now summarise the Fiscal Year 2011 budget position [Annex C *]. After factoring in the various tax measures and significant special transfers in this year’s Budget, we expect a basic deficit of $2.2 billion for Fiscal Year 2011, or about 0.7% of GDP. This is slightly smaller than the Fiscal Year 2010 basic deficit of 0.8% of GDP. The Overall Budget Balance for Fiscal Year 2011 is projected to be a slight surplus of $0.1 billion. This is after taking into account, firstly, Net Investment Returns Contribution (NIRC) of $7.”