REVISION OF TAXES ON NON-ESSENTIAL SPENDING (Statement by the Minister for Finance)

[Mr Speaker in the Chair]

2.34 p.m.

Mr Hon Sui Sen: Mr Speaker, Sir, I should like to inform this House that there will be revised rates of customs duties and taxes on liquor, tobacco and cigarettes and petrol; of road tax on private vehicles, and of import duty and additional registration fees on cars. These changes will come into effect from 3.00 p.m. today, i.e. 16th October, 1972.

The revised taxes are on non-essential spending. Taxes on luxuries, in accordance with the tax principles contained in the President's Address and Addendum, must gradually go up. They do not and will not affect essential items, and so will not add to the cost of living of ordinary workers. They have been prompted as much by the need for more revenue as by the need to achieve certain necessary or desirable economic and social objectives. A cut in the use of cars and consumption of petroleum will reduce traffic congestion and pollution. A drop in consumption of liquors, tobacco and cigarettes will promote the nation's health. The lower consumption of these nearly all imported goods will also save foreign exchange.

These measures are expected to yield some $38.25 million in additional revenue. This small sum will be useful, however, to meet part of the expected additional Government expenditure in the near future. Part will go into directly related expenditure on roads and flyovers; part will go into the increased disbursements on salaries and the 13th annual payment. The Government proposes to pay a further annual payment in December this year, although only eight months will have elapsed since the last such payment. In future the 13th annual payment will be made in December, when they will be most welcome, because of seasonal requirements. In addition, the Government anticipates by next June, in accordance with National Wages Council guidelines, to increase wages and salaries of civil servants. There will also be revisions of salaries of civil servants who have stagnated for a very long time on their present salaries.

A comparison of the previous and new rates is shown in the Table (See Appendix, cols. 85-8.) which I have asked the Clerk to distribute to Members. [Copies of the Table handed in to the Clerk and distributed to hon. Members.]

Additional particulars of the taxes are as follows: -

Liquors

The customs duties have not been revised for brandy and whisky since 1955 and for liqueurs since 1947. They were last revised for wines in 1964 and for beer and stout in 1968. With the rise of per capita income, the consumption of all liquors has increased. It is hoped that the increased duties may have the desirable social effect of reducing the consumption of liquors.

Cigarettes and Tobacco

Government's anti-smoking campaign and the revision of customs duties in early 1970 have slightly retarded the growth of smoking among the population. The previous average increase of between 7 per cent and 10 per cent in the annual consumption of cigarettes has been cut down to about 3 per cent during the last two years. These figures show that Government's policy against smoking has had some success. Duties on imported cigarettes and leaf tobacco have been increased further and may reinforce other measures like the ban on cigarette advertisements. Without increase in duty, the rise in spending power of the population might lead to increased consumption, especially by young people taking to the habit for the first time. The increase in customs duty of cigarettes will be beneficial either way: if it cuts down smoking, the health of the population will benefit; if it does not, the Government will obtain some compensating revenue which will help to meet the increased burdens of health care caused by tobacco-induced diseases, especially lung cancer and chest diseases. The Government would not be unhappy to see revenue fall. Young people should not start smoking. It is a dirty, dangerous and expensive habit.

Import Duty and Additional Registration Fee on Private Cars

Various studies of the pattern of long-term development of the Republic have shown that action has to be taken to avoid the Republic being swamped by motor vehicles. Private cars serve a useful purpose in transporting the people. But they have also often become items of conspicuous consumption. Despite the Government's effort in improving existing roads and constructing new ones, the increase in the number of vehicles has aggravated the problems of traffic congestion and air pollution. The number of cars has been increasing at the rate of 8-10 per cent per annum. We are unable to build roads and flyovers at 8-10 per cent to match the rate of increase of cars. We shall have to take further action to discourage greater and often unnecessary ownership of cars, especially amongst the ever more common two- or three-car families. The alternative is chaos and congestion. Traffic will be paralysed, affecting our economy.

In order to reduce the buying of cars, we are adopting a two-pronged policy. First, taxes on the purchase of all types o new cars will increase. Secondly, Road Tax on medium and bigger cars will continue to go up. The import duty has therefore been increased fiom 30 per cent to 45 per cent. The Additional Registration Fee has been made uniform at the rate of 25 per cent for imported Commonwealth, non-Commonwealth cars and locally assembled cars. This harmonisation means that British imported cars will have to pay the same rates as other cars. As popular brands of the smaller British cars like the Austin, Morris, Vauxhall, Escort and Cortina are assembled locally, only British luxury cars like the Jaguar, Rover and Rolls Royce will be affected by this abolition of special preferential rates for imported British cars.

There will be no change in the import duty and additional registration fee for omnibuses and goods vehicles. So public transport which we want to make popular will not be burdened with extra duties.

Road Tax on Private Cars

In December 1966, the basis of road tax on motor vehicles was changed from the horse power to the cylinder capacity of the engine. The road tax is being increased progressively on private cars above 1,000 c.c. Owners of medium size cars will have to pay between $22 and $40 more per annum. For example, the Austin A40 and the Hillman Minx will pay $24 and $30 respectively more per annum. Larger and expensive cars will have road tax increases ranging from $200 to $1,200. The largest increases will be for Rolls Royce, Mercedes 600, Chevrolet Impala, Bentley, and similar cars.

These revised rates should encourage more people to use public transport, whether buses or taxis. It is in the interest of all in Singapore that most people should use such public transport to travel to their places of work, particularly in the central city area. The Government intends to improve public transport by better, cleaner and more regular buses, and with conductors, bus and taxi drivers being more courteous and considerate. For the long-term, there is a feasibility study for a Mass Rapid Transit System.

Petrol

In addition, to encourage economy in the use of cars the duty on petrol has been slightly increased from $1.30 to $1.35 per gallon, although the rates given in the table are indicated in the metric system as $2.80 to $2.97 per decalitre. Again, the increase in the duty will not affect public transport, as all buses and taxis run on diesel.

2.45 p.m.

Mr Hwang Soo Jin (Jalan Kayu): Mr Speaker, Sir, on the question of revised tax on private motor vehicles, I am just wondering whether it would not be more logical, instead of increasing the tax on all categories of vehicles except those under 1,000 c.c., to impose the increase on those people who own more than one car. Surely the intention is to discourage people having too many cars. For cars up to 2,000 c.c., I think it is quite reasonable for the rates to remain the same. A lot of people depend on private cars as their only means of transport. For example, those who stay in Yio Chu Kang, and who have to go all the way to Jurong, at present find it almost impossible to go there by public transport.