PIONEER INDUSTRIES (RELIEF FROM INCOME TAX) BILL

Order for Second Reading read.

3.50 p.m.

The Minister for Commerce and Industry (Mr J. M. Jumabhoy): Mr Speaker, Sir, I have His Excellency the Governor's consent to proceed with this Bill and I move, "That the Bill be now read a Second time."

Members will recall that I stated in this House about two years ago that Government was investigating the question of making tax concessions, more popularly known as tax holidays, to industries whose expansion or establishment it was desired to encourage.

A number of territories grant tax holidays to new industries. Sometimes this is done under the existing Income Tax Ordinance and sometimes it is done under special pioneer industry legislation. From available information at the present time, Ghana, Nigeria, British Guiana, Trinidad, and some of the smaller West Indian Islands grant tax holidays to industries. Hon. Members are of course, aware that the Federation of Malaya has recently enacted pioneer industry legislation.

The Government has decided that tax concessions to industries should apply not only to enterprises of a pioneer nature but also to enterprises which undertake approved extensions or expansions of their present plant. For the sake of convenience, the Government proposes that this should be done by two separate Bills, that is, by the Bill now before the House and by the Industrial Expansion (Relief from Income Tax) Bill which is next on the Order Paper.

This legislation is a further step forward in Government's policy of creating conditions which will encourage the establishment of industries here. It is imperative that we should turn our attention to secondary industries to provide further employment opportunities as it is only too clear that trade alone will not sustain our growing population. Government is confident that with the policy of selective protection as announced by me a few months ago and the tax concession proposals which are before the House today, the necessary conditions will be created for an increased rate of industrial development resulting in the strengthening of our economy and the creation of more employment opportunities in the industrial field.

The object of the Bill now before the House is to attract capital both local and foreign to invest in new industries in Singapore by means of offering freedom from income tax for a period of five years. Such tax relief or tax holiday may, however, only be enjoyed by an enterprise which has obtained from me a Pioneer Certificate for a specific product. This would mean that the production of the particular product concerned is considered to be of economic benefit to Singapore. The tax concession will also be applicable to benefits and dividends paid out by the enterprise possessing a Pioneer Certificate. The criteria to be applied before an industry could be declared a pioneer industry are, broadly speaking,

(a) that it is in the public interest; and

(b) that it is an industry not being carried out in Singapore on an adequate scale and that there is favourable prospect for further development. Again, before any enterprise may be declared as producing a pioneer product, regard will at all times be had to the public interest and sources within Singapore.

The Bill vests in the Minister for Commerce and Industry the power to declare any industry or product to be a pioneer industry or a pioneer product respectively, and if necessary, he has the power to prescribe conditions in the order declaring either a pioneer industry or a pioneer product. Before such an order is made, however, the Bill provides for full opportunity for those affected to object against the making of such an order. Once an order has been made affording pioneer status to an industry or product, applications may be made to the Minister by firms seeking pioneer enterprise status in respect of such pioneer industry or pioneer product. Every applicant will be required to furnish particulars of the capital expenditure incurred or to be incurred, the maximum production capacity, and so on. On the approval of an application, a Pioneer Certificate will be issued to the enterprise concerned. Provisions also exist in the Bill for the Minister to revoke an enterprise's pioneer status if the conditions under which a Pioneer Certificate had been granted have not been fulfilled.

Finally, Sir, there is in Singapore a body of opinion opposed to the granting of such discretionary powers to a Minister as they consider that misuse can be made of such powers. They would prefer an appointed Board to exercise such powers.

They, however, forget that in a democratic parliamentary system it is the Government, through the various Ministers, that is responsible to the people for the carrying out of Government policy, and therefore it would be totally Inappropriate for important discretionary powers which can have a direct bearing on or can affect Government policy, to be given to a Board which has no responsibility to the people.

As far as this Bill and the next Bill are concerned, the effect is to grant a concession through tax relief, and tax collections are very much a Government matter. Again, these Bills do not give the Minister any power to take away any rights from anybody - only to grant a concession - and therefore no one can be aggrieved in the real sense of the word.

Mr Speaker, Sir, I beg to move.

Question proposed.

3.56 p.m.

Mr William Tan: Mr Speaker, Sir, as the Minister has said, the object of the Bill is to encourage the investment of local or foreign capital in new industries. I think this Bill should have been introduced much earlier. Anyway, I welcome this Bill, but I want to ask the Minister whether he is aware that at the moment the City Council has made a new ruling whereby any people wanting to set up factories or housing projects will have to pay 50 per cent of the cost of laying cables and pipes for the supply of electricity, water and gas. Previously this cost was borne by the City Council if the company concerned could prove that they could erect a certain number of houses or factories. Personally, I would like to have an answer from the Minister whether such an important ruling passed by the City Council will affect the Bill.

3.58 p.m.

Mr Lim Cher Kheng: Mr Speaker, Sir, I am sure that this House genuinely welcomes this Bill but I am also sure that this House has genuine fears about the success of this Bill.

Sir, the problem facing us today is not whether to have tax holidays or that industries should be subsidised. Sir, I think all this is of secondary importance. The only issue lying ahead is whether or not it is high time for the Government of the Federation of Malaya to have a long-term economic policy towards Singapore in the light of our entrepot trade, and the necessity for boosting up industrialisation. If not, no matter how hard the hard-working Minister for Commerce and Industry tries his very best to promote and encourage the industrialisation of our going to be unsuccessful.

Sir, to quote a simple example. Federation - manufactured goods can come into Singapore past the Johore Causeway, or by boat from Penang or Malacca or from any port, free of tax into Singapore.

Mr Speaker: Order. Moment of interruption.