REVISION OF INDUSTRIAL POLICY (Withdrawal of incentives to foreign investors)

Mr Ang Nam Piau asked the Minister for Finance if it is feasible now for the Government to revise the industrial policy by withdrawing the investment incentives to future foreign investors.

Mr Tang See Chim (for the Minister for Finance): Mr Speaker, Sir, the answer is no. Members may be aware that only last year the Government introduced amendments to the Economic Expansion Incentives (Relief from Income Tax) Act, 1967, which curtailed considerably the incentives offered to industrial investors. The major changes provided in the amendment Bill were as follows:

(1) A reduction in the period of tax relief for export enterprises from 15 years to eight years in the case of exports as well as pioneer enterprises, and from 15 years to five years in the case of non-pioneer enterprises. However, in exceptional circumstances, the 15-year period is still available for very large enterprises with a capital investment of (Singapore) $1 billion or more, or those with a capital investment of $150 million of which more than half is owned by permanent residents of the republic.

(2) The five-year tax relief provided for pioneer industries is now confined only to large enterprises with fixed capital investments of not less than $1 million.

(3) Expansion incentives are restricted only to those enterprises which incur additional capital investment in fixed assets of more than $10 million.

(4) Depreciation allowances which were allowed to be carried forward to the post-pioneer period at accelerated rates which, in effect, extended the pioneer period beyond five years to six years or seven years are now no longer allowed to be carried forward. Thus this restricts the pioneer period to a maximum of five years.

Mr Speaker, Sir, the Minister for Finance has emphasised the need for selectivity also in his budget statement. The Government has been very selective in approving incentives. Since November 1970, when the new amendment Bill was brought into effect, only nine pioneer certificates have been approved.

Dr Augustine H. H. Tan: Mr Speaker, Sir, will the Minister of State consider lowering the qualification of $10 million required for expansion purposes to, let us say, $5 million or less, as this will encourage expansion, especially the smaller local industries? This is the qualification for pioneer status.

Mr Tang See Chim: Mr Speaker, Sir, in considering the amendments to the Economic Expansion Incentives (Relief from Income Tax) Act last year, very careful consideration was given to incentives, and we decided upon $10 million because we thought this was a good round sum. Of course, should circumstances change, we would definitely consider either lowering it or increasing it.

Dr Augustine Tan: If the Minister will recall the relevant sitting when this amendment was discussed, the then Minister for Finance indicated that any figure would do, and so he picked $10 million. At that time I thought that he was open to suggestions for an amendment, but I lost my chance at that stage.

Mr Tang See Chim: Sir, I do not recall the Minister saying that. Perhaps in his lighter mood he could have made that statement. But I can assure the Member for Whampoa that $10 million was fixed after due consideration. But, of course, as I have just said, should circumstances change and if we can with advantage lower the sum, consideration will definitely be given to it.