LUXURY TAX BILL

Order for second reading read.

10.13 a.m.

The Financial Secretary (Mr T. M. Hart): Sir, I have His Excellency the Governor's authority to move, "That the Bill be now read a Second time."

This, Sir, is a complicated Bill. As hon. Members will see from the Comparative Table which appears on page 25, the Law Officers, in drafting, have referred extensively to United Kingdom Finance Acts, thus taking advantage of the long experience of the United Kingdom in the matter of luxury and purchase taxes. The explanatory note at page 23 of the Bill serves as a useful guide to these provisions. Perhaps I may be allowed to outline some of them, Sir.

Part I contains definitions which require careful study.

Part II calls for no comment.

Part III is most important. It deals with the nature and scope and method of imposition of a luxury tax. Clause 8 (1) prescribes that the tax should be charged on the wholesale value of all chargeable goods bought under chargeable purchases. The Governor in Council is vested with the power of deciding what goods shall be subject to tax and at what rates. Any order in this connection, however, must be ratified by the Assembly within seven days. Clause 8 (4) defines a chargeable purchase as "any purchase made from a wholesale merchant or manufacturer selling by wholesale". Purchases made by a registered wholesale merchant or a registered manufacturer of goods as stock for business or as materials are exempt from tax. Clause 8 (5) specifies that the tax will become due on delivery of the goods under the purchase and the seller shall be accountable for tax. Clause 8 (6) states that tax will be charged on the wholesale value of all chargeable goods imported into the colony except goods imported by registered wholesale merchants or manufacturers. Clause 8 (7) states the circumstances and conditions under which goods may be imported tax free by registered wholesale merchants and manufacturers. Clause 8 (9) exempts from tax goods imported for re-export or transhipment under certain conditions.

Clause 9 defines "wholesale value" as the price which, in the opinion of the Comptroller, the goods would fetch on a sale by wholesale in the open market in the Colony to a retail trader carrying on business in the Colony and if it were made in the circumstances specified in the First Schedule to the Bill.

Clause 10 deals with the registration of wholesale merchants and manufacturers whose business includes the selling of any chargeable goods. Clause 10 (2) provides that a manufacturer who is not required to be registered under the Ordinance shall be so registered if he satisfies the Comptroller that he uses chargeable goods in substantial quantities as materials. Clause 10 (3) provides that persons who should be registered must make application to the Comptroller. Clause 10 (4) provides that any wholesale merchant or manufacturer who finds that the proviso to clause 10 (1) no longer applies to him, shall immediately apply for registration. Clause 10 (6) provides for the issue of a certificate of registration, and the Comptroller may in certain circumstances call for security for the payment of tax.

Clause 11 contains provisions whereby the Comptroller shall exempt a person from registration when the tax on his purchases shall be not less than the tax on his sales; in other words, where the tax payable on his purchases and importations in respect of stock or materials would be more than the tax he would be accountable for on his sales.

Clause 12 prescribes when a purchase shall be deemed a purchase by a registered wholesale merchant as stock or by a registered manufacturer as materials, and therefore exempt from tax.

Clause 13 provides for relief against a double charge of tax.

Clause 14 states that, where a registered wholesale merchant or manufacturer appropriates or applies any chargeable goods in his ownership to the purposes of any business carried on by him of selling chargeable goods by retail or of letting out chargeable goods on hire or to any other purpose not being a sale of the goods, the appropriation or application shall be treated as if it were a chargeable purchase.

Clause 15 (1) prescribes that, when any person required to be registered applies a chargeable process, tax shall be chargeable on the wholesale value of the resulting goods and shall become due on the completion of the process. The person who applies the process shall be accountable for the tax. Clause 15 (2) exempts persons who apply a chargeable process from accountability for tax when the goods are his property at the time of the completion of the process, subject, of course, to the provisions of clause 14.

Clause 16 provides that any person who carries out a chargeable process shall be treated as a manufacturer whose business includes the selling of chargeable goods.

Clause 17 states that any retail trader purchasing on a wholesale scale shall be treated as a wholesale merchant.

Clause 18 states that the seller of chargeable goods under a chargeable purchase shall add the amount due in tax to any invoice issued by him.

Clause 19 provides relief for exported goods. Under subclause (1) the Comptroller may exempt from tax goods which would otherwise be chargeable if they were exported from the colony. Under subclause (2) the Financial Secretary may give directions for the payment of an allowance for tax paid or payable in respect of goods exported when the Comptroller is satisfied that the conditions specified in the subclause exist.

It will be seen, Sir, that the Bill gives wide powers to the administration. Any goods can be deemed luxury goods and any rate of tax imposed on them by the Governor in Council, subject, of course, to the approval of the Assembly.

Again the Comptroller of Customs, who is responsible for the care and management of the tax, is given wide powers under a number of clauses. The wide discretion given to the Comptroller has apparently been a cause of anxiety to the Bar Council which has addressed the Attorney-General and other Members of the Assembly on the subject. In particular, the Bar Council takes objection to the Comptroller's powers under clauses 9, 17 and 26. Note has been taken of these objections and they will be given careful consideration in due course, and doubtless when this Bill is sent to Select Committee, the Members of the Committee will consider their objections too.

Government has also given consideration to the question of local industries and has decided, as a measure of encouragement, to exempt from tax all goods entirely manufactured locally and also goods in respect of which a certain percentage of their wholesale value has been expended locally. The necessary amendments to the text of the Bill will be moved in Committee in due course.

Justification for this Bill is that Government will have to tap all sources of revenue in the future, and luxury goods appear to be a justifiable source of revenue. As I said earlier, very considerable sums of money are spent each year on goods which cannot, by any stretch of the imagination, be deemed essential or even desirable. If confirmation of this statement is required, one has only to look about one, in the shop windows, in the homes of people in Singapore and at people proceeding about their lawful occasions. That being so, it is only proper that Government should have some small share of the sums spent on luxury goods. A great majority of countries in the world today impose taxes on goods which are outside the "essential" category. In the great majority of cases, the tax is imposed on the wholesale price.

It would not be possible to give any estimate of the possible yield from this tax until it is decided what commodities should be taxed. In selecting goods to be taxed, careful consideration will be given to the nature and needs of the entrepot trade. In so far as it is possible, having regard to the needs of the revenue, goods which enter largely into trade with neighbouring countries will be avoided. Where entrepot trade goods have to be included, efforts will be made to reduce inconvenience to traders to a minimum.

It was to be expected that this Bill would be a controversial measure. It is novel and involves a radical departure from previous taxation principles in Singapore. For these reasons, it was decided to allow a period of time to elapse between the First and Second Readings and subsequently to send the Bill to Select Committee. This will allow full ventilation of views and discussion as to the merits and principles underlying the Bill, both in and out of the Assembly.

In connection with discussion outside the Assembly, it has been suggested that the Bill means the death of free trade in Singapore, and, that being so, that it would be simpler and more straightforward to impose import duties right away. It certainly would be simpler, but it would be contrary to the intentions of Government. Singapore's prosperity has been built on trade and, no matter what industrial expansion takes place in the future, will continue to depend on trade, on free trade and on freedom to trade. Government is fully aware of the need not only to maintain but also to increase trade. As I have said earlier, all Government's development planning starts from the premise that Singapore must be maintained as a centre of world trade. In the circumstances, it is extremely unlikely that this Government, or indeed any government except one bent on the destruction of Singapore, would introduce any law or make regulations under such a law which would undermine the prosperity of the port.

I hope that hon. Members will speak frankly on this measure so that their views can be considered by the Select Committee and by Government in due course. Sir, I beg to move.

Question proposed.

Mr R. Jumabhoy (Telok Ayer): Mr Speaker, Sir, we have before us a Bill to tax luxury goods. Whatever its name, it is a fundamental departure from the free trade policy of Singapore which has continued for over a century. Sir, I hope the Government Members will forgive me if I am harsh with them. They have just come into power and that power of minority has been exercised with three ex-officio Members and four nominated Members.

The Government has already said that there will be new elections in August. If that is so, is it wise on their part to push through such a Bill which is just like committing a crime on Singapore? It is a departure from principles and that is why I say it is a crime.

Sir, I might also say that the present Coalition Government cannot claim that they represent the trading interests.

Mr Marshall: We do not.

Mr R. Jumabhoy: They will say, "Why? We do not care." But I will say this: as Singapore exists on entrepot trade, it is trade that brings in the money, and the workers, the wage-earners and the farmers can only flourish by working together hand in hand. We have no natural resources, none whatsoever. How far and to what extent is the Government going to tax? There is a limit and we have reached this limit - that the Government is forced, by their extravagance, to kill the free trade policy of this country.

Sir, what is luxury? The term "luxury goods" has not been defined. If the Government wants to bring in a few items under this category, as it has already done with motor-cars, by all means describe what are luxury goods and place an imposition on them. But to pass this Bill and give such powers to the Government or any future government, there is a danger that it might mishandle the powers and everything might be included under the category of luxury goods, because money is necessary to run the government. It is said that safeguards will be provided which will ensure that the Government will not do this or that in order to preserve our entrepot trade. What is the guarantee that another government will not do this or that since the Ordinance is in force? We on the Opposition Benches are not willing to give such powers to the Government.

Sir, to produce money you have to spend first on starting a department. You have to have a vast establishment. You have to have bonded warehouses ultimately if not immediately. This is necessary if money is to come in. We must have inspectors and clerks, etc. for these warehouses. Then, Sir, we have to guard against corruption.

Sir, I have been in business here since 1916. I have been President of the Indian Chamber of Commerce for several years. I have been to E.C.A.F.E. conferences and I have heard about the trading conditions of other countries and I have compared ours with theirs. With what little experience that I have, I would urge the Government not to proceed with this Bill. I am glad that the Financial Secretary has said that some time will elapse before this measure will be brought before the Assembly and that a Select Committee will be appointed to consider it. All this is good, but I would ask, "Why is all this necessary?" How much more money is wanted during the next 8 months while this Government remains in power? It can raise the money by income tax or any other tax but not by this Luxury Tax Bill.

Sir, who will suffer as a result of the imposition of this luxury tax on goods? The majority of the population on this small island are the workers and wage-earners. Sir, I have never been personal in my remarks, but I would like to quote the remarks of the Minister for Communications and Works which I read yesterday in the Press. I was not present when he was speaking. Sir, I have great respect for the school-master's knowledge in theory -

The Minister for Health (Mr A. J. Braga): Whose side?

Mr R. Jumabhoy: The Government side. It was very interesting to hear his arguments on socialism and so on, but let me remind him. He said yesterday, subject to correction, that there was no need for gold ornaments or something like that which I read in the Press.

The Minister for Communications and Works (Mr Thomas) rose -

Mr Speaker: Is the hon. Member giving way?

Mr R. Jumabhoy resumed his seat.

Mr Francis Thomas: What I said yesterday was that it was desirable to mobilise all hoardings of unfruitful capital used up in gold ornaments or in dollar notes tucked away in cupboards and not put to productive use.

Mr R. Jumabhoy: Thank you; I would say that the Europeans can never understand the Asian way of life.

Mr Francis Thomas: Exactly!

Mr R. Jumabhoy: It is a necessity for a poor man to save some money and because he has insufficient money to open a bank account, he invests his savings in gold ornaments. The Minister also spoke about remittances to India and China, but he forgot to say that billions of dollars have been drained away to the United Kingdom for 135 years.

Sir, as I have asked, "What are luxury goods?"

Mr Braga: Ask yourself!

Mr R. Jumabhoy: Everyone in Singapore uses scent, soaps, cosmetics, radios and refrigerators. They are necessities to the wage-earner, the clerk, the merchant or the rich man. By introducing this Bill, the Labour Front Coalition Government, which claims to be representative of the workers, will be imposing hardship on them. It would be a fine idea if the Government, after bringing in this Bill before the Assembly, were not to proceed with it. Orders must have been placed or goods have been hoarded by profiteers, and if the Bill is not proceeded with, the benefit will go to the public because these profiteers will have to sell their goods at a cheaper price. In any case, during the next eight months while the Government remains in power, it will not do any good and it is not necessary for it to introduce this Bill. But if the necessity arises, then let a fully elected government by the people and for the people take the necessary measures to introduce a similar kind of Bill if it finds it necessary. Sir, in conclusion, I would request the Government not to proceed with this Bill which is not in the interests of the colony or the masses or anyone else.

10.36 a.m.

Mr Marshall: If it please you, Sir, I support this measure unreservedly. The Member for Telok Ayer says - and he speaks rightly - that there is no person on this side of the House who represents trade. That is true, Sir, but I would also add that though we do not represent trade, we are and have always shown ourselves to be very conscious of the fact that Singapore survives by virtue of the activity of capital through trade and commerce in this territory and that our record does indicate that we have been conscious of this, and we are anxious that no harm shall be done to this aspect of our economic life.

I believe, Sir, that the Member for Telok Ayer's fears are grounded on the fact that Government has not shown its hand as to what it believes or it considers to be luxuries; but I would draw his attention to this, Sir: this Bill is in the nature of the overall law which will control the tax on luxuries, but in fact the luxuries will be defined when the tax is applied; and seven days after it is applied, this House will have to confirm the decision. That is necessary, Sir, so that this step should, first of all, be progressive, and, secondly, we cannot now disclose what is in mind before the Bill is passed and thereby gives the importer an opportunity to pile up goods which may or may not be taxed afterwards.

I would remind the House that the question of taxation on individual objects, subject to this tax proposed by Government, is still in the hands of the House; and supposing we bring in a tax on radios in two or three months' time, then within seven days this House will have to decide whether or not radios are a luxury, and if they are, whether they are appropriate objects in the existing circumstances for the application of this tax. The House, in giving these overall powers, is in fact not giving power for application of this tax to individual articles. It is retaining that power and can exercise it when the Government comes before the House seeking confirmation of its desire to tax any particular type of object.

Sir, I am happy to learn that this Bill will go before a Select Committee. It is a good measure and it should, as soon as possible, be on our statute book. But it is a difficult measure, a measure full of acute technical subtleties, and representations - some of which seem very valid - have been made by the Bar Committee with reference to various aspects. I think that a Select Committee is certainly appropriate to consider each and every individual phrase in the Bill, and I welcome the suggestion made by the Financial Secretary that this Bill will, in fact, if it passes its Second Reading, be submitted to a Select Committee.

I have only one other remark to make on this measure, Sir. I welcome the statement of the Financial Secretary that local industry will receive direct encouragement by the exemption, in part, of those taxable luxury goods which are produced locally. I would like to go further. Our industrial-set up is in an extremely poor condition and I would like a large measure of assistance where possible to be given to it, and in this instance it is possible. I would like to see all luxury products, which are subject to this tax, exempted from taxation if produced locally. I also welcome the indication given by the Financial Secretary that products which are even partially produced in this colony, that is, in respect of which part of the cost is incurred in this colony, will be considered for partial exemption.

Sir, this is a good measure, a necessary measure, a well-thought out measure, and I say with respect to the Member for Telok Ayer that I really do not see how it can affect our entrepot trade. The basis of our entrepot trade is the produce from the East and the essentials from the West in which we deal. Luxury goods as such form but a very small proportion of our trade and we have been promised special arrangements for the entrepot trade in these luxury goods so that it would not in any way be impeded.

10.42 a.m.

Mr John Ede (Tanglin): Mr Speaker, Sir, my objections to this Bill are three-fold. Firstly, any tax measure which endangers the free port status and the entrepot trade of Singapore is a bad measure and I am not convinced by the assurances of the hon. Gentlemen opposite that this will not have this effect. Secondly, the tax on certain luxuries, while intending to tax the rich, may, by a chain reaction, result in raising the cost of living for the poor man as well. Thirdly, such a tax reduces the buying and selling of goods and the contraction in trade in an island which lives or dies by trade can be suicidal.

I notice that of all the definitions or interpretations which are made under clause 3 of this Bill, there is no definition of the most important term of all, the term "luxury". This makes us extremely suspicious of Government's intentions. Only yesterday I pointed out that small cars in certain circumstances are necessities. As the pressure of population increases, people have to live further from their offices and from schools while the public transport system lags inevitably further and further behind this development. Therefore it is essential that the Financial Secretary should give us a list of the articles which he has in mind to tax and a list beyond which he will in no circumstances go. Who knows otherwise whether textiles and clothing will not be counted as luxuries in time to come? In his speech on the Second Reading of the Appropriation Bill the Financial Secretary stated as follows:

"Even if the imposition of luxury taxes were to limit consumption of luxury goods, I should be perfectly happy since it would mean that the population saved more and had more to invest in the Government loans...".

This is a dangerously over-simplified argument and I am inclined to think that the savings would go, according to taste, into company shares, gold and jewellery or into lottery tickets. It is as dangerous as the other argument that if you tax luxuries, you are necessarily only taxing the rich, an error into which the Minister for Commerce and Industry fell yesterday. Very often you will find that from such taxation it is the poor man who in the end is to suffer. Let me give an example. The Financial Secretary has given, as I have said, no indication what the Government regards as luxuries, but a little intelligent guessing suggests that refrigerators and air-conditioning sets might be on a short list of possibilities. Now, raising the price on these articles will restrict sales and, as a result of this, the consumption of electricity will drop; and it will drop during the 20 hours outside the peak period from 6 to 10 p.m., or, precisely, during those 20 hours when it is essential to sell as much electricity as possible. Let it not be forgotten that it is the purchasers of refrigerators and air-conditioning sets who spend more on electricity, and are therefore helping to keep down the price per unit of consumption. To make a complete generalisation - abolish all luxury electrical appliances and the price the poor man pays for his electric light will go up. Encourage the sale of these appliances by enabling more people to buy them and to use electricity, and it will be possible to lower the unit rate for lighting and lower the cost of living for the working man. May I quote a sentence from the 1955 Report of the Electricity Department of the City Council:

"As usual, emphasis must he placed upon the fact that only by increased revenue from the sale of electrical energy can this Department safely extinguish the various loans to which we have been committed through the necessary construction of Pasir Panjang Power Station."

Sir, I give this example as a warning to Government to study very carefully what chain reaction can be set up by an ill-considered tax. It is part and parcel of what I already said yesterday regarding the dangers of the inflationary spiral. The luxury tax, while on the face of it means taxing the rich without affecting the poor, can upset the economy of the country to its foundations. It can raise the cost and lower the standard of living, which would be fatal. Just when the wage-earner has obtained better living conditions to which he is entitled and brings within his reach the extra comforts of life, it appears that the present Government will put a tax on them to take them out of his reach. It reminds me of the story of Sisyphus, the Greek legendary king who was condemned in Hades to roll a stone up to the top of the mountain, and when he laboured to the peak, the stone rolled down again and he had to start all over again.

Sir, this Bill seems to me to be the thin end of a wedge. Once it is approved in principle on the basis of certain types of luxury goods, there is no knowing what will come within the definition of "luxuries" in the future.

10.48 a.m.

The Minister for Commerce and Industry (Mr J. M. Jumabhoy): Mr Speaker, Sir, I am rather surprised that a Party which claims to have the word "Socialist" as part of its name would be opposed to a measure which any socialist-thinking person would welcome, a measure that is intended to extract painlessly - I can say it because it is slow extraction - a little bit of money - not very much because the burden does not fall on one individual - to pay for the social services to be provided for the poor.

The main argument, Sir, that has been advocated against this Bill has been one of departure from our free trade policy. Sir, I have emphasised in this House in the past this obsession with the free trade policy of Singapore can be carried too far. Sir, there is no doubt that we survive on trade, and it is the duty of every government that is in power in this country to see that nothing is done that will hamper or discourage our entrepot trade. But, Sir, there is a limit to which this principle should be carried, and I say that with some people this free trade principle has become an obsession. Economic conditions have changed and are changing every day. We are not in the position as we were before. The world has changed. Asia has changed. Economic policies have changed. Politics have come into the picture now. In order to survive, therefore, we must see that we shape our policy in accordance with the times. It is all very well to say that we are killing the free trade principle. We are not doing that. In fact, we want to preserve as much as possible our entrepot trade and to expand it as much as possible; but it is dangerous to generalise on it. We must know in which sphere our entrepot trade lies and what we can do outside this sphere without harming our entrepot trade. We should be free to do this.

Sir, the Member for Telok Ayer said that the Government does not claim to represent trading interests. Sir, that is in keeping with the principle of democracy that representation in the House of the people should be on a democratic basis and that there should be no reserved seats for the representatives of any particular interests. In fact, the hon. Member has many times remarked that this Government is not fully elected and that there are four nominated Members in this House and so on and so forth. Therefore, Sir, I do not see how he can be moan the fact that trade is not represented. But I can say this, Sir: that although I have not had the vast amount of experience that the hon. Member has in trading spheres - I am younger and obviously, therefore, I have not had that much experience as he has - I can claim that I do have some experience of trade and entrepot trade and I will not do anything that is going to harm our trade. I think Members on the Opposition side should rest assured on that point.

One remark that the Member for Telok Ayer made, I think, calls for some consideration, and that is that a future government might mishandle this power which we are seeking now. That is a possibility which we have to think over very carefully. But I may answer that point by saying that a future government, even though it has not got this particular power, can always ask for and get this power in a future House of the people. So there is nothing to prevent any government bringing in any measure which it likes provided it has a majority, and therefore whether or not we give this power to posterity is immaterial.

The Member for Tanglin raised the point of what are luxury goods and why we have not defined "luxury goods". Sir, it is a matter of opinion as to what are luxury goods. It is a matter of the standard of living of the people. It is a matter of the environment and the upbringing and the residence of the people. To us, what appears to be a luxury may be a necessity to people who have a better standard of living, for instance, to people in the United States. Yet to us what appears to be a necessity may be a luxury to people living in Africa who probably may not have seen it at all.

Sir, the Member for Tanglin has also stated that there may be a chain reaction which may affect electrical consumption if a luxury tax is imposed on certain electrical appliances. That is a far-fetched argument. There is always a chain reaction ending up somewhere or other if you do anything in this world. Something is going to be affected by it. So I am sure that whether this or any future Socialist government brings in a measure for raising income tax on the higher limits of income, say, from 40 per cent to 50 per cent or even 60 per cent, that particular hon. Member is going to say that the result of the chain reaction will be to kill incentive, and therefore the activity of capital will be dampened, and the man with money will sit tight and not invest his money, and therefore the labourer will not be able to get a job and so on and so forth. That argument can be carried to any limit. Then, Sir, the Member for Tanglin said that electrical consumption may be reduced as a result of this luxury tax. And yet what do we hear today? We hear that the City Council is going to spend another $65 million on extensions or on the building of a new power-station.

Sir, I think the crux of the matter is: what items are going to be included in the Luxury Tax Bill. That is where hon. Members can debate bitterly if they feel that any item which the Government puts in the Schedule to this Bill later on is not appropriate to be included there. But to denounce the general principle of this measure because they do not know what item is going to be included at this stage is wrong. I commend this Bill, Sir, to hon. Members on both sides of the House.

10.55 a.m.

Mr Lim Koon Teck (Paya Lebar): Mr Speaker, Sir, in spite of the assurances by the Financial Secretary, the Member for Cairnhill and the Minister for Commerce and Industry, I am not convinced that this Bill will not affect the status of Singapore as a free port. We all agree that we live by trade, and now that our entrepot trade is diminishing in volume due to the producing countries exporting direct to Europe and America, and the Minister for Commerce and Industry has spoken about his fears for the expansion of our industry in Singapore, we must think twice before we do anything that may hurt our trade. The Minister for Commerce and Industry seems to get hot and bothered and has turned this debate into a political issue, but we on our side want to put before the House the views of the traders, particularly the small traders who do most of the entrepot trade.

This Bill has left the items intended to be taxed. If it is confined to goods which are real luxuries such as refrigerators and air-conditioning sets, the tax it will bring in will not be worth the expense of setting up a department to collect it and the expense and trouble it will cost the wholesaler. If it is intended to apply to many more items, then it cannot be a luxury tax and the fears of the public that the list of taxable goods will be the same as that of the Federation will be justified, and the poor man will suffer as much as those who can best bear the burden and upon whom it is intended that this tax should fall. This tax will hit the small traders most. Their business lies in sending out various kinds of goods to the small islands around us in exchange for produce. They cannot afford a large staff to keep the records and fill the forms required by this Bill. It is a most complicated piece of machinery and even the Financial Secretary has admitted it, and members of the Bar are greatly concerned about some of the anomalies already noticed. We are very glad indeed, therefore, that this Bill will be sent to Select Committee. Even many large firms have expressed their opinion to me that the working out of this tax will impose almost impossible conditions on them.

If this luxury tax is to be imposed at all, it should be at the retail level and not at the wholesale level, which is the medium of our entrepot trade. A measure like this, imperilling Singapore as a free port, can only be justified in extremis, that is, if there is no other way in which finance can be found by the Government for the running of Singapore, and I am not at all satisfied that we are in that position yet, unless we choose to kill the goose that lays the eggs. I have advisedly left out the word "golden".

Apart from the criticisms already expressed in this House yesterday, and I do not wish to repeat them, we have many items of expenditure which can be pruned and I shall attack these items in the Committee stage; but I do solemnly repeat that this Bill, if passed, will do more harm than good to Singapore.

11 a.m.

Mr William Tan (Tiong Bahru): Mr Speaker, Sir, the speech on the Luxury Tax Bill delivered by the Hon. the Financial Secretary gave us a curious feeling in the pit of our stomach! He was at great pains to emphasise that the people have the money to spend on things other than the bare necessities of life and they undoubtedly had, so he claimed it was therefore, only right that the Government should have a fair share of it. This argument is not only unconvincing but dangerous. In simple Queen's English, it means that "what is your's is mine".

The citizens of Singapore fully appreciate the fact that Government needs all the revenue it could get, but they do feel that the intricate matter of luxury tax must be debated, talked about and challenged lest they would suffer the consequences of the Hon. the Financial Secretary's indiscretion. In the words of the Hon. the Financial Secretary, the Luxury tax demanded and expected is to be partly determined by a mere look at the shop windows rather than by a careful study of the "earning and paying abilities of the people". The income of the majority of the people of Singapore ranges between $2,500 and $4,000 per annum, and I would draw the urgent attention of Government that these wage-earners are at all times so poor that they cannot afford to spend money on one thing without depriving themselves of something else. It is not hard for Government to understand also that the purchase of even a tiny gold locket does add zest to a wage-earner's life and that the possession of a wrist watch constitutes a social distinction, being the first step upward in the economic progress of the country. Our business houses are doing an enormous entrepot trade in Singapore with a wide variety of merchandise and the result of a luxury tax will be to destroy our entrepot trade, thus killing the goose that lays the golden eggs, if Government insists on collecting this tax at wholesale level based on wholesale prices. Let us be more realistic and look at some of the major snags. Local wholesale prices will undoubtedly rise and the immediate effect is to drive away our customers from the neighbouring countries to Hongkong or elsewhere where they could obtain their requirements at very much cheaper prices. Business in Singapore will eventually be reduced to a "retailer-to-consumer" basis only and the entrepot trade will virtually be at a standstill. In a country which thrives solely on its entrepot trade and where a negligible portion of the imported goods are actually consumed by its people, the proposed luxury tax will serve no useful purpose except to bring chaos to the country. Singapore import houses will, as a result of the introduction of the luxury tax, arrange for shipments of their agency lines of goods direct to the buyers outside Singapore, and thus a considerable portion of the trade will bypass Singapore. In due course, Government will have very much less revenues from taxes on profits and personal income. Heavier taxes will eventually fall on the shoulders of the average man-in-the-street, which must ultimately cause widespread demands for higher wages. I would draw the attention of the hon. Member of this House that another round of wage increases, unaccompanied by corresponding increases in entrepot trade or the local industries, is pound to seriously upset our economy, Thus crippling our prospects for merdeka. This Luxury Tax Bill is a hara kiri or suicide Bill.

11.05 a.m.

Mr Lim Cher Kheng (Changi): Mr Speaker, Sir, as a believer in socialism, I rise to support the principles of this Bill, but at the same time I wish to remind hon. Members on both sides of the house that there are at least two points which we must bear in mind. We have been hearing all this time about the argument on the entrepot trade and the free port status of this island. I wonder whether the Members of this House will admit that it is a fact that experience has shown that Singapore's entrepot trade and its status as a free port is quickly passing. We expect to produce our own products and export them to other countries, including, of course, our brother country, the Federation of Malaya. But whether this state of affairs will continue is a question that hon. Members will have to answer for themselves. For my part, I believe it will not continue. Sir, I find it rather hard to understand why, especially when we are faced with difficulties of expansion and the encouragement of our local industries, the Federation of Malaya should impose so many tariffs upon our products. Further, we now have Indonesia, Thailand and Burma, which for many years have been our chief customers, closing their doors upon us one by one. Therefore, we should not rely too much and always on our entrepot trade or the free port status of Singapore, especially since all political Parties in this House now believe in socialism. It is high time for us to tell the people the truth, that we must now work hard, spend less and try to save more. Therefore this Bill is, I think, most timely. The people of Singapore should realise the critical situation that lies ahead and work hard and save more.

The second point that I wish to know is what items will be classified as luxury goods. The question of small cars was argued yesterday and today. Sir, last night I happened to attend a high society marriage dinner party. A friend of mine was telling me that his wife had been grumbling, that she loved the new model of the Singer sports car very much, and that she insisted on her husband booking one immediately. Sir, I understand the Singer sports car is in the category of a small saloon car. I know this family very well. The husband has a big Custom-build Ford car which sends him to and from office and his wife has a small Fiat car which she uses for shopping and marketing. And now this beautiful and lucky lady insists that they must have another car, a beautiful Singer sports car, for night driving!

So, Sir, I rise to support the principles of this Bill and welcome the statement of the Financial Secretary that it will be sent to a Select Committee. I wish to point out that not only must a Select Committee be appointed to consider this Luxury Tax Bill but it must go to work on it very quickly. It should not let the deliberations drag on so that the operation of this measure will be delayed. The present caretaker Government, even though it will remain in office for the next few months only, should pass this measure quickly. Since all political Parties believe in socialism, let us be honest and admit that a tax on luxury goods is very essential.

Mr J. M. Jumabhoy rose -

Mr Speaker: Is the Minister rising on a point made by the hon. Member in his speech?

Mr J. M. Jumabhoy: Yes, Sir. The Member for Changi just now touched on the tariffs imposed by the Federation on Singapore products. I did indicate to this House yesterday that I was greatly disturbed by this development, but I said the solution was a political one.

11.11 a.m.

Mr Lim Choon Mong (Serangoon): Mr Speaker, Sir, the term "luxury tax" is a very beautiful one indeed. In fact, when they talk about the tax on luxury goods, the people of Singapore will think that they are not going to be affected by it. However, because there is no naming of goods in the Schedule to the Bill, nobody knows exactly what type of goods will come under the definitions of this Bill. The Hon. the Minister for Commerce and Industry said that it is a matter of opinion, and, of course, that matter of opinion will lie with the Comptroller of Customs, or probably it will be decided after some of the Ministers get together and say, "We will define this and that and the other."

An hon. Member: Clause 3.

Mr Lim Choon Mong: All right, we have clause 3, but even with this clause, it is possible the Government may change its mind every now and then. Today it says it is having a deficit of $34 million. Next year it will put in the Estimates a deficit of $50 million and then, in order to raise that money, it says it must add on to the Schedule of luxury goods other items. That is why, Sir, when we talk about luxury goods, it is important to know where we will stop. Yesterday I said that if you confine it to such items as air-conditioning sets and radios, that seems to be quite acceptable to the people of Singapore at large. As a matter of fact, when we talk about radios, there are big ones and small ones. There are radios that are purchased by people who have plenty of money to spare and to throw away too; but there are also small radios that are usually purchased by the ordinary wage-earners. When I came to jewellery yesterday, Sir, and there again I say -

Mr J. M. Jumabhoy rose -

Mr Speaker: Point of order?

Mr J. M. Jumabhoy: Point of information, Sir.

Mr Speaker: Will the hon. Member give way?

Mr Lim Choon Mong resumed his seat.

Mr J. M. Jumabhoy: The Member for Serangoon has been placing so much emphasis on the expression "ordinary wage-earner". What is an ordinary wage-earner, Sir? Can he define him in terms of dollars?

Mr Lim Choon Mong: Yes, Sir. By "ordinary wage-earner", I must exclude, first and foremost, all Ministers because, although they draw salaries, they draw very high salaries, and, of course, I exclude managerial staff; but I include the ordinary clerical staffs working in most firms, the City Council and the government offices, whose salary range will be somewhere between $150 and $400 per month. People drawing these salaries will be, in my opinion, ordinary wage-earners. I also include, of course, workmen who earn about $4 to $5 a day.

Sir, I was talking just now about jewellery, and mention of it brings to mind diamonds and very expensive brooches and so on - that I think everybody will agree - but when you come down to other items of jewellery which must necessarily be included if the word "jewellery" is added to the Schedule, then you will have such things as small gold rings and bangles. Sir, the Minister for Communications and Works said that people should not keep their money in gold but should put their money to better use - put it into circulation, invest in government loans. I put it to you, Sir, that we must not always look at a problem from our own point of view, but we must be able to look at it from the point of view of the man in the street. Of course, to us it would be silly to lock up $50 in the form of a gold bangle or a gold ring; but to these people, if they put this money in the Post Office Savings Bank and if they want to make use of it at one time or other, they will find that they have to take a bit of time and some form-filling before they can get the money back, and they do not like this. It is a difficulty that any illiterate will try to avoid. You can say that they should, of course, keep it in a bank, but we know that bankers do not work free for people with less than $500 in the bank. The banks impose a surcharge of, I think, $5 per half-year and so these people find that their money, instead of increasing, is dwindling on account of having to pay a tax on cheques and again they have to contend with other difficulties. Therefore, Sir, the small man saves his money and invests it in gold - it is his savings bank - and if he ever wants money, he just goes to the pawnshop and pawns it. So if the item "jewellery" should come within the Schedule, it will affect the poor workers indeed.

Sir, let us look at the problem from another angle. Today it is the intention of every political Party to raise the standard of living of the average man in Singapore. It is now accepted, Sir, that ordinary things such as small radios, small refrigerators and some transport facilities should become essential to everybody, and if we can give the workers all these things, we will be raising their standard of living. This Bill, in effect, Sir, would be to try and exclude these people from getting what we want them to get in order to improve their standard of living. In this connection, Sir, I would say that there are many clerks and workers who strive very bravely to improve their condition. They strive to get a house. They strive to get a car. They strive to get a radio. They strive to get a refrigerator. I say "strive", Sir, because these people cannot really afford to pay outright for these items. So what do they do? They go along to a company and ask for a loan and they pay back in installments - I say "installments" - so that even such goods cannot be purchased on the basis of what they can pay. They have to save and stint in order to buy them, and probably out of money loaned to them at interest. If we are to put more difficulties in the way of people in this category, Sir, then we are putting difficulties in the way of those who strive to raise their own standard of living, which I hope is our aim.

Sir, let us now come to the principle of the Bill. My friends and colleagues have said that Singapore is a free port and up to today we have enjoyed that status. In fact, we have been patting ourselves on the back all this time, saying that the Federation is putting a tax on cloth, a tax on cosmetics, a tax on this and that, and we are still free from it. If this Bill is passed by the present Government, then I think the people will know that the loss of such facilities and the loss of the ability to pat themselves on the back again is the work of the present Government.

The Government say that we must try and extract money painlessly for our social services. That was said by the Hon. the Minister for Commerce and Industry. With all that I have described before, I say that the largest amount of money will be coming from the people who are working, and I maintain that stand, Sir. A rich man will buy one radio. A poor man will buy one radio. There may be 19,000 people who pay income tax and could be regarded as well-to-do, but the remainder of the 1,200,000 of our population, Sir, who do not pay income tax - and many of them come under the category of people who are not well-to-do - strive to buy radios. Look up the radio licences and if you can tell me that most of those people who buy radios are the rich people, then I am ready to agree with the Government that the tax on luxuries will be on the rich and not the poor. In effect, Sir, this goes back to the Chinese axiom that if you want wool, it must come from the body of the sheep. If you want any social services, you must pay for them. If the people, according to the aims of the Labour Front, are to get higher social services, then the payment for them must not come from the rich people. It must come from the working people. This is the essence of the Bill, Sir.

Mr Marshall: Only poor people buy luxuries?

Mr Lim Choon Mong: They strive to buy, Sir, as I have told the House, with money loaned to them and on an installment basis. Tell me, Sir, if I am wrong, that these people who buy goods on loan and pay installments are rich people, and if that is so, then I am sure the Oxford Dictionary is wrong.

An hon. Member: The Liberal-Socialists are wrong!

Mr Lim Choon Mong: They are absolutely right. Then we have another remark that many people are obsessed by the term "free trade". In fact, the Minister said that we have changed, and we have changed because of politics, and because of these changes, we must have more taxation. The position of Singapore today is, he said, different from that in 1951. I agree with him, Sir.

Mr J. M. Jumabhoy: Thank you!

Mr Lim Choon Mong: Sir, we have changed, but we have changed from a position where we were strong and where we had the Federation asking us, "Singapore, would you join us? Could we be equal partners?", to a position today where we ask the Federation, "Could we be allowed to come in?" We have now come to the position whereby when we knock at the door, it is not opened to us.

Mr Marshall: You slammed it!

Mr Lim Choon Mong: We are now, Sir, licking the hands of the Federation.

[Interruption.].

Mr Speaker: Order.

Mr Lim Choon Mong: I come to this point, Sir, because if anybody ever dares to say that we have changed and that we must have all that, I will pin the fault down to the present Government. We were strong in 1954. We were strong early in April 1955. Our position has deteriorated only after April 1955 and has not improved to this day.

Mr J. M. Jumabhoy: Alas!

Mr Lim Choon Mong: There is another point which I regret I must point out. In considering this Bill, the Minister for Commerce and Industry said that any government can bring in any measure. If we do not bring in the Luxury Tax Bill, then another government can bring it in. It can bring it in anytime whatsoever. But I would like to point out, Sir, that we are living in a democratic country and when we live in a democratic country, we must not say that just because we are the Government, we hold the reins of government, we go wherever we like, we direct the traffic as we please, whether it is going against anybody at all. In a democratic set-up, Sir, the views of all sections of the population, even the minority, must be considered. We must try to take in all views and see that every Bill that is passed in this House will not affect any section of the population adversely. We say that this Luxury Tax Bill is going to affect many sections of the population. Of course, the biggest section that will be affected will be the ones doing business, and I must declare, Sir, that I am not a businessman and. I am not speaking from a businessman's point of view but from the average wage-earner's point of view.

Then, of course, we have a very incomplete understanding of how electricity is being produced and how it is consumed. I happen to know a little bit about electricity. I have visited a power-station, so I am in a position to be able to say with some certainty how it works. In the Pasir Panjang power-station it would be economical if the load were to be kept at a constant level, so that the burning of fuel and the gyrations of its various machines would carry on at about the same rate. The amount of energy consumed is not a criterion, Sir, but if we have a good average -

Mr Hart rose -

Mr Speaker: Point of order, Mr Financial Secretary?

Mr Hart: Is this relevant to the measure, Mr Speaker, Sir?

Mr Speaker: I was just wondering how the hon. Member is going to lead up to luxuries. He is talking about electricity!

Mr Lim Choon Mong: Mr Speaker, Sir, I was just trying to be helpful to the Member for Stamford (Mr J. M. Jumabhoy) on the problem of electrical consumption.

Mr J. M. Jumabhoy rose -

Mr Speaker: Point of Order?

Mr J. M. Jumabhoy: Point of order, Sir. Will I have the right to explain to this House my theory on electrical consumption, especially since I served on the Committee that was charged with the task of building the Pasir Panjang power-station?

Mr Speaker: I have ruled on the point of order already.

Mr Lim Choon Mong: Sir, on this question of electricity, I was just pointing out to the Minister for Commerce and Industry how electricity is being charged and how the chain reaction as stated by my colleague affects the whole problem and I was just about to say that it is the average and not the total amount of electrical energy consumed that matters.

Finally, Sir, I will come to the point on how it will affect trade. Singapore is a trading centre and whenever people are being made to do more work, we find that invariably they avoid it. There are business houses that do import and export business on an agency basis, and such being the case, Sir, it will mean that if we have a luxury tax and the goods cannot be bonded in the Harbour Board or there is no government godown to bond them, or there is any difficulty about anything, they will try to avoid making things difficult for themselves. So it will mean direct shipment of goods to the consumer countries, or transhipment, and this will make Singapore a less important city.

11.35 a.m.

Mr Hart rose -

Mr Speaker: Mr Financial Secretary, in reply?

Mr Hart: Yes, Sir. After this rather lengthy debate, Sir, two points of criticism of the Government measure emerged from the speeches made by the Opposition. The first point is that the introduction of this Bill will definitely harm the entrepot trade. The other point is that the tax will not be a tax on luxury goods but on a wide range of goods which will affect the cost of living generally in Singapore and affect the working man in particular. Both these criticisms, Sir, are entirely baseless. I cannot say more than I have already said about Government's desire not to harm the entrepot trade, about Government's realisation that the prosperity of Singapore depends upon the entrepot trade, and about Government's conviction that nothing should be done to harm that trade.

With regard to the other point, I can only give an assurance that the articles chosen to be subject to this tax will be chosen with great care. They will be chosen so that they will have the minimum effect upon the entrepot trade of Singapore and the cost of living in Singapore.

Finally, Sir, I should say that, whatever articles are chosen by Government for the imposition of this tax, the Assembly will, within seven days of the order being published, have the opportunity to criticise or express any views it wishes on the articles which have been chosen. Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time.