Reducing Government Charges to Curb Rising Costs

Mr Teo Siong Seng asked the Deputy Prime Minister and Minister for Finance whether the Government will consider reviewing and reducing all taxes and charges levied by Government departments and agencies so as to curb rising business costs and increased costs of living for the average Singaporean.

The Minister of State for Finance (Mrs Josephine Teo) (for the Deputy Prime Minister and Minister for Finance): Mr Speaker, Sir, we share the hon Member, Mr Teo's concerns over rising business costs, and what it could imply for the cost of living. As far as fiscal charges are concerned, we intend to keep the overall burden of taxes and fees low for both households and businesses. Taxes and fees are already low and we intend to keep them low.

Government fees and charges, including service and conservancy charges (S&CC), University fees and hospital and polyclinic fees, make up about 6.4% of the Consumer Price Index (CPI) basket. Over the past one year, CPI has increased by 5.2%. As the Minister for Trade and Industry has stated in response to Members' earlier questions, a large part of this increase in 'headline' CPI is a result of imputed rather than actual housing rentals, and the sharp spike we have seen in Certificates of Entitlement for private cars (COEs). COEs contributed 1.2 percentage points to the increase.

To put things in perspective, other Government fees and charges accounted for 0.1 percentage point of the March 2012 CPI inflation. So, for the 5.2% 'headline' CPI, 1.2 percentage points attributable to COEs and just 0.1 percentage point attributable to other Government fees and charges.

The Government has taken a few initiatives to help households with their costs of living. The Ministry of Transport has announced that LTA is reviewing its plans on the slowdown of the vehicle growth rate and whether the claw back of the past over-supply of COEs should be implemented in a more flexible way. These measures may ease COE price increases.

We are also helping to cushion the impact of rising costs on lower and middle income households. These include the GST Voucher Scheme introduced in Budget 2012, which will make its first payout in July. For retiree households who are not well-off, the GST Vouchers should in most cases fully offset the total GST payments they make each year.

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The reduction of marginal income tax rates for the first $120,000 of chargeable income from Year of Assessment 2012 will also ease the tax burden of middle income earners.

Further, as was also mentioned by Minister for Trade and Industry, our efforts to cool the property market will also help prevent current asset price inflation from translating into future CPI inflation. If property prices keep going up, they will tend to put pressure on prices of goods and services elsewhere.

For businesses, the main driver of cost increases due to Government fees and charges has been the recent increases in the Foreign Worker Levy (FWL). As explained previously in this House, increases in Foreign Worker Levy are necessary to manage our dependence on foreign workers, promote our needed economic restructuring, so as to achieve productivity-driven economic growth. In the short term, this may translate into domestic cost pressures, while the effects of productivity improvements will be realised over the medium to longer term. This is one of the reasons why we are increasing the Foreign Worker Levy gradually, and in steps.

To support businesses, we have provided various measures to help them upgrade productivity sooner rather than later, and to help them reduce costs. In Budget 2012, we enhanced the Productivity and Innovation Credit (PIC) Scheme, provided more help to support SME upgrading and productivity, and gave businesses strong support via the Special Employment Credit for hiring of older Singaporean workers. The SME Cash Grant will also help companies offset higher business costs.

In conclusion, we will continue to monitor the situation carefully. All Government agencies will also do their best to keep costs and, hence, fees as low as possible, and continue to seek new ways to provide the best value to the public.

Er Dr Lee Bee Wah (Nee Soon): Sir, I am very heartened to hear that it is the Government's intention to purposely keep the charges low. However, will there be a review in how it is being executed? I would like to give an example – in BCA. In construction, very often amendments need to be done due to site constraints. And if you repeat the same changes, for example, if it is 50 storeys, instead of $200 per amendment you will have to multiply it by 50. Instead of collecting $200 amendment fee, very often they will collect $10,000. I believe it is the implementation stage. So, I hope that this can be reviewed.

Mrs Josephine Teo: Mr Speaker, I will refer the Member's feedback to the BCA. I am sure they will look seriously into her suggestion.