CUSTOMS (DUTIES) (AMENDMENT) ORDER, 1958

4.10 p.m.

The Acting Financial Secretary (Mr Oon Khye Kiang): Mr Speaker, Sir, I have the Governor's recommendation to proceed with the motion. I beg to move,

That this Assembly, pursuant to subsection (2) of section 11 of the Customs Ordinance (Chapter 160 of the Revised Edition), resolves that the Customs (Duties) (Amendment) Order, 1958, published as Notification No. S 238 in Gazette Supplement No. 66 of 3rd October, 1958, as contained in Sessional Paper No. S.L. 39 of 1958, be confirmed.

Sir, it has been decided to raise the duty on cigars from $11.00 per lb. full and $10.00 per lb. preferential to $16.00 per lb. full and $15.00 per lb. preferential respectively, an increase of $5 per lb. in each case to maintain the existing differential of $1 per lb. The previous rates were imposed in 1947, when they were exactly twice those on cigarettes. The latter rates have been increased twice since then and it is thought that the rates on cigars should now be increased so as to be nearer the former differential with cigarettes. The increase of $5 per lb. has brought about, on the average, an increase of 10 per cent in the price. Cigars are only smoked by a special group of smokers and this will not therefore cause any hardship. It is estimated to yield an additional revenue of $54,000 in a year.

It has also been decided to impose a further levy on the more expensive cigarettes by charging an additional duty at 35 per cent ad valorem on their value where the value exceeds $15 per 1,000 cigarettes. Value, as defined in the Customs Amendment Bill which was passed this morning, is "the price which an importer would give for the goods on a purchase in the open market if the goods were delivered to him at the place of payment of duty and if freight, insurance, commission and all other costs, charges and expenses (except any customs duties) incidental to the purchase and delivery at such place had been paid". In this category of cigarettes are Players Medium 50's, State Express and Players Perfectos Finos. The rate of duty, in the case of State Express 555 in 10's has been increased from the former rate of $20.90 to $26.60 per 1,000 cigarettes, an increase of 80 cts. over the present Federation rate. The existing price of 45 cts. per 10 cigarettes has been increased to 50 cts. In the case of State Express 555 in tins, the former rate of $20.90 per 1,000 cigarettes has been increased to $27.10, an increase of $1.30 over the Federation rate. The $2.35 retail price has been increased to $2.65 per tin. Again, in the case of the still more expensive cigarettes, such as the Players Perfectos Finos 50's, the rate of duty has been increased from $21.06 per 1,000 cigarettes to $30.32, an increase of $4.32 over the Federation rate. The retail price has been increased from $3.30 to $3.75 per tin. It is estimated that these increases will yield an additional revenue of $2.2 million in a year.

As pipe tobacco is a ready substitute for cigarettes, there would be a loss to revenue should there be a switch to pipe tobacco. To offset any possible loss of revenue, it has been decided to impose an additional levy on the more expensive typpe of pipe tobacco by charging an ad valorem 35 per cent of the value of pipe tobacco which exceeds $7.50 per lb. In this category are the Player's No Name, Three Nuns, Balkan Sobranie. In the case of Player's No Name, the rate of duty has being increased by $2.74 per lb., an increase of 17 cts. per ounce. This is an increase of 84 cts. per lb. over the Federation rate. The rate of duty on the Three Nuns has been increased by $3.22 per lb., an increase of 20 cts. per ounce. This is an increase of $1.32 per lb. over the Federation rate. In the case of Balkan Sobranie, the increase in duty is $3.60 per lb., an increase of 23 cts. per ounce. This is $1.70 per lb. higher than the Federation rate. On the average, the increase in the retail prices has been about 50 cts. for 2-ounce tins. This proposal is estimated to bring an additional $40,000 in a year.

Altogether, Sir, the increased levy in duty will bring an additional revenue of about $2.3 million in a year.

As the incidence falls on the more expensive brands of cigarettes and pipe tobacco, which are normally consumed by the well-to-do, it is appropriate that this class of the population should bear this increased tax. This proposal is in accordance with the Government's policy that the burden of additional taxation should fall on those who are able to bear it.

Sir, I beg to move.

Mr Chew Swee Kee: Sir, I second it.

Question proposed.

4.17 p.m.

Mr Lee Choon Eng: Mr Speaker, Sir, it is rather surprising that the Government should consider an increase of duty on tobacco at this moment, it would be rather interesting if the Hon. the Financial Secretary could give us figures on the revenue from liquor before and after the increase of duty. I am informed that the revenue from liquor has dropped considerably since then. I wonder if the Hon, the Financial Secretary is aware of a warning given by the leading tobacco and cigarette dealers in Singapore. I quote from the Singapore Standard of 4th October, 1958, and this is the warning given:

"Leading tobacco and cigarette distributors yesterday warned the Singapore Government that the extra duty imposed on cigarettes and tobacco would have an adverse effect on the national revenue.

They were of the opinion that consumption of cigarettes and tobacco would fall if duty was raised.

They also warned Government that with the imposition of extra duty, there would be an increase in smuggling of cigarettes and tobacco into the Colony."

The Hon. the Financial Secretary told us that he expects an increase in revenue of about $40,000 per year due to this increase of duty on tobacco but it appears that the leading tobacco and cigarette dealers in Singapore think otherwise because they feel that with this increase in duty, the consumption of cigarettes will fall. The first warning, as contained in that report, is that if this duty is increased, the consumption of cigarettes will definitely fall, as was the case with liquor after the duty on liquor was increased. Sir, if this presumption is correct, then the result may be that instead of an increase in revenue, Government may have to lose some revenue and this should be an eye-opener to the Government. So why introduce such an increase of duty on tobacco at the moment when Government has experienced a considerable loss of revenue on liquor after the duty on liquor was increased? Is Government prepared to lose revenue on tobacco due to this increase in the same way as they have suffered on liquor? Certainly not! I am afraid that the Hon. the Financial Secretary may come back to this Assembly with a deficit in the new Budget and ask for more taxes to be levied on the public.

The second warning is that smuggling of cigarettes and tobacco will increase. I agree with that because it is obvious that if duty on tobacco is increased, the price of cigarettes will certainly increase and the smugglers will turn their attention more to smuggling tobacco and cigarettes because of the bigger margin of profit that would accrue to them. So this would give the smugglers more encouragement to smuggle tobacco or cigarettes into the country.

According to the Financial Secretary, he says that this increase will not affect the lower income group as he feels that cigars are only smoked by the higher income group. But does he realise that even the lower income group do smoke an inferior type of cigars? It is only the rich who smoke the good brands of cigars but the inferior brands of cigars are smoked by the middle or poorer class of people and, for his information, I have been told that it is far cheaper to smoke cigars than cigarettes. So if this increase is confirmed, it will certainly affect the lower income group and if they cannot afford this increase, I think there is no alternative for them but to stop smoking. If they really stop smoking, then where is the revenue of $40,000 per year that the Financial Secretary expects to get?

I must, Sir, emphasise that I am against the confirmation of this increase, not because I am personally affected. It is in the interest of the lower income group that I am against the confirmation of this increase. I am not a smoker myself. So whether there is or there is no increase, it does not affect me personally. What I am afraid is that those who smoke and who cannot find the money to smoke will have to be non-smokers, like myself, and the result may be a loss of an expected $40,000 per year in increased revenue contrary to what the Financial Secretary says.

I oppose the confirmation of the Customs (Duties) (Amendment) Order, 1958, Sir.

4.22 p.m.

Mr J. M. Mason (Nominated): Mr Speaker, Sir, it is not often that I find myself in agreement with the views of the Member for Queenstown -

Mr Lee Choon Eng: Thank you.

Mr Mason: - but I must congratulate him this afternoon at least for avoiding the word "torture". I think he got some of his figures wrong on the revenue referred to by the Financial Secretary, and if those are wrong, I do not blame him in the least, because I was completely dazed by the mass of figures - the price of Three Nuns and the various other brands of cigarettes that we were told would now go up or down - but I am in agreement with the Member for Queenstown in being against confirming this motion, because of the enormous expenditure that I envisage the Customs will be asking for. I cannot believe that there are Customs officers who can possibly be expected to cope with what will undoubtedly be a great encouragement to smugglers even with their present equipment. They will undoubtedly come and ask for bigger and better launches. I understand that, at the moment, they have the greatest difficulty in catching the smugglers with their outboard engines. They will then come back to this House and ask for more money for bigger and better launches and I can foresee that whatever the figure that is hoped to be gained in revenue by these increases - a lot of us are a bit vague on what that figure will actually turn out to be - will be more than offset by the very reasonable demands from the Customs Department for better equipment to enable them to enforce the laws that this House has seen fit to pass.

4.25 p.m.

Mr Lee Kuan Yew: Mr Speaker, Sir, on a rather important issue such as this, when we are already envisaging faster and bigger speed boats being asked for in this Assembly, we must not let it pass without our expressing an opinion on it.

I must say that I do not quite follow the argument of the Member for Queenstown. I am quite sure that he is all in favour of the workers. I am quite sure that he would like them to save money. I am quite sure that he would not like them to have cancer and his argument is: "If they all gave up smoking, I am quite sure that he would support them and wish them all long life. If they did stop, we would not bemoan the fact that the expected $2 million increase in revenue does not materialise." But when Mr Mason says that he thinks we ought not to amend the law, the reason being that it is unlikely that the increase would be profitable, because any expected increase might be offset by the increase in the cost of collection, I say, but surely in that case, what we need is a really good expert who will see that these taxes are collected efficiently and cheaply and if smugglers do put on faster speed boats, well what the smugglers can buy, so can the Government. I am quite sure that it should not be beyond the ingenuity of our Customs Department to get the right kind of speed boats with the right kind of depth clearance and horsepower so as to make sure that no more smugglers get by than what usually get by in any case. But I would like to say this. I do not believe that smugglers will smuggle more because the duty has gone up. They will keep on smuggling in any case because, even at the present rates, it is profitable. If the Financial Secretary eventually does collect $2.2 million extra, good luck to him. If he does not, he has to think of other ways, because I say, "If he wants to put up the duty on tobacco, why should we object?"

Mr Oon Khye Kiang rose -

Mr Speaker: In reply?

Mr Oon Khye Kiang: Yes, Sir,In answer to the first point raised by the Member for Queenstown about the fall in revenue as a result of the increase of duty in 1957, I wish to point out that he is not correctly informed. According to the figures given by the Department, in 1956 $9.5 million was received in respect of imported liquor and in 1957 $10.6 million was received, showing an increase of $1.1 million, in spite of the increase of duty. Sir, it is the experience in this country as well as in other parts of the world, that, human nature being what it is, the increase of duty does not usually bring about a decrease in revenue, if I may mention the case of tobacco, when the rates of duty were increased in late 1956, the total amount of revenue received in 1956 was $35 million, and in 1957, the amount received was $39 million, showing an increase of $4 million.

With regard to the second point raised by the Member for Queenstown about the likely increase in smuggling, the Department is well aware of this danger and, in fact, there is already an organisation in the Department to cope with this work. I am confident that the Department will do its best to reduce the extent of smuggling to the minimum.

I do not think that there are other point that need answering.

Question put, and agreed to.

Resolved,

That this Assembly, pursuant to subsection (2) of section 11 of the Customs Ordinance (Chapter 160 of the Revised Edition), resolves that the Customs (Duties) (Amendment) Order, 1958, published as Notification No. S 238 in Gazette Supplement No. 68 of 3rd October, 1958, as contained in Sessional Paper No. S.L. 39 of 1958, be confirmed.