PAYROLL TAX COLLECTIONS FOR UNEMPLOYMENT INSURANCE SCHEME

[Mr Speaker in the Chair]

Inche Abdul Aziz Karim asked the Minister for Finance what is the total amount of payroll tax that has been collected since the tax was introduced up to the latest convenient date; and whether the moneys collected in the form of payroll tax will be used to introduce a social insurance scheme to fulfil the Government's promise to the working people of Singapore.

The Minister for Finance (Dr Goh Keng Swee): Mr Speaker, Sir, actually the Government has never made any promise to introduce a social insurance scheme. What was mentioned was an unemployment insurance scheme which is a small part of social insurance. The amount of payroll tax since it was introduced was as follows: 1965 - $ 7.3 million 1966 - 9.6 million 1967 - 10.0 million 1968 - 11.0 million 1969 - 13.1 million

The Government has studied the question of unemployment insurance and has sought advice from the International Labour Organisation. The I.L.O. sent an expert, Mr E. D. Tsoucatos, and he was in Singapore from September 1967 to February 1968. Briefly, the findings of this expert are as follows:

(i) an Unemployment Benefit Scheme alone cannot make any substantial contribution towards the solution of problems created by unemployment in the country. An Unemployment Insurance Scheme in Singapore can only supplement other measures to reduce unemployment, to provide more employment opportunities and to intensify vocational training;

(ii) any unemployment insurance scheme should be financed by the contributions both from workers and employers;

(iii) the scheme should be designed in such a way that it would be self-supporting, covering financial administrative expenses from the workers' and employers' contributions.

The Government has decided to abandon for the time being the introduction of an unemployment insurance scheme based on payroll tax contributions. There are several reasons for this.

First, as I said before, the introduction of an unemployment insurance scheme would require contributions not only from the employer, which he is now doing under the payroll tax, but also from the employee. In view of the additional contributions which both employer and employee are making in the enhanced rate to the Central Provident Fund, this is not the right moment to impose further exactions on employees.

The Government's view is that in the circumstances facing the Republic in the last few years, it would be better to solve problems of unemployment and other social problems related to it through an accelerated programme of economic expansion rather than by arranging transfers of incomes from those who are well off to those who are unfortunate to lose their jobs.

It is the intention of the Government to use payroll tax contributions to offset additional liabilities which employers incur when they employ discharged national servicemen who are called up for their annual training exercises. This will remove any handicaps which national servicemen may encounter in their efforts to find employment.