SKILLS DEVELOPMENT LEVY BILL

Order for Second Reading read. 4.21 p.m.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The NWC recommendations for 1979 include a contribution to be paid by all employers into a Skills Development Fund. This Fund will be used to assist employers to upgrade their technology and operations and also improve the skills and expertise of their employees, which are in keeping with our plan to restructure the economy.

The Skills Development Levy Bill provides for the imposition of the skills development levy and the establishment of the Skills Development Fund. I shall now highlight the main features of the Bill.

The scope of the levy covers all employees, including apprentices and part-time workers, but excluding domestic servants, gardeners and chauffeurs. (Clause 2).

Clause 3 provides for the imposition of the levy with effect from 1st October, 1979, on every employer at the rate of 2% of the gross monthly salary, or $5, whichever is the greater, of every employee earning less than $750 a month. No levy will be due from any employee whose gross salary for that month exceeds $750.

Clause 4 also empowers the Minister to vary the rate and scope of the levy and to suspend the collections, if it is considered expedient in the public interest to do so.

Clause 6 sets out the establishment of the Skills Development Fund which will be under the control and management of the Minister, Provision is also made to reimburse the Comptroller of Income Tax for expenses incurred in the collection and recovery of the levy from the Fund.

Just like any other employer, the Government is also required to contribute to the Skills Development Fund under clause 7.

The objects of the Skills Development Fund, as spelt out in clause 8, are to promote, develop and upgrade the skills and expertise of employees, retrain retrenched persons and provide financial assistance by way of grants or loans for the purpose of its aims. The Fund may be used to assist the establishment or expansion of the facilities for training which are designed to promote the skills and expertise of the employees. It can also be used to assist employers to acquire equipment to upgrade their operations or to defray or subsidise the cost of training or retraining of their employees. The Fund is, however, not intended to be used for basic training.

Clause 9 provides for the setting up of an Advisory Council, consisting of 12 members, including a Chairman. Four members each are drawn from the Government, the employers and the National Trades Union Congress. The term of office of the members and the proceedings of the Advisory Council are set out in the Schedule to the Bill.

The Advisory Council is required, under clause 10, to make recommendations to the Minister on the guidelines for processing applications for financial assistance, the terms and conditions of approval for grants and loans. the proportion of the Fund to be used for grants and loans, and the appeals from applicants for financial assistance.

Clause 11 authorises the Minister to invest monies belonging to the Fund.

Clauses 12 and 13 set out the penalties to be meted out to persons who obtain grants or loans from the Fund by false or misleading statements and documents. On conviction, such persons are liable to a fine not exceeding $5,000 or imprisonment for a term not exceeding one year, or to both. In addition to the penalty, clause 13 also empowers the Court to make an order for repayment of the money wrongfully obtained.

The accounts of the Skills Development Fund are subject to audit annually by the Auditor-General and have to be presented to Parliament as provided under clause 14.

Lastly. clause 15 enables the Minister to make regulations to ensure the proper use of the monies of the Fund, and to prescribe the procedure of the Advisory Council.

Sir, I beg to move.

Question proposed. 4.27 p.m.

Dr Augustine H.H. Tan (Whampoa): Mr Speaker, Sir, I would just like to raise a number of points for clarification. First, if I heard the Minister correctly, the definition of "employees" includes all apprentices.

Mr Hon Sui Sen: Yes.

Dr Augustine Tan: If that is so, then it is tantamount to a tax on the development of skills because apprentices, properly construed, are people undergoing training in a particular skill. So that would seem contradictory to the policy.

Secondly, I would like to know the relationship between this Skills Development Fund and the various schemes of training administered by the Economic Development Board on the one hand, and the various training programmes administered by the Vocational and Industrial Training Board on the other.

The third point I would like to raise is the scope of action under the power of the Minister provided by this Bill. In the first place, under clause 4 the Minister may by order vary the amount of levy, at present 2% or $5 whichever is the greater. I think this particular provision may cause some concern on the part of employers in that, on some future date, the Minister could just arbitrarily increase this particular tax. I think it would be wiser for this matter to be brought up either through the National Wages Council or even directly to this Parliament for endorsement before such a move is made.

Furthermore, under clause 8(2)(d) it is stated that the Fund may be used "for such other purposes as may be prescribed by the Minister." I think there should be a limitation there to note that "such other purposes" should be consistent with the objects of the Fund as spelt out in sub-clause 8(1).

Mr Hwang Soo Jin: Sir, the rationale behind the setting up of the Fund has been fairly well explained. I do not think there is very much that we can quarrel with in the objectives. However, for the Fund to succeed, it is important to ensure that the administration will not be rendered ineffective by too much bureaucratic red tape. The procedures for application should be made simple, and I hope that there will not be complicated forms to be filled. Over the years, the public has come to associate any Government-sponsored financial assistance scheme with elaborate questionnaires and cumbersome procedures to be complied with, which have been apparently designed to discourage rather than encourage applications.

Sir, although clause 4 does provide for exemption, there is no indication whatsoever under what circumstances exemptions may be granted. I suspect that this particular clause is intentionally left vague to discourage application for exemption. It is important that, on implementing the Bill, a set of guidelines on exemption is published as soon as possible so that justifiable cases are accorded the attention they deserve.

In setting up the Fund, we should take care to ensure that we do not unwittingly kill the initiative of the employers, either individually or collectively, to finance their own training schemes, some of which can be quite costly and may become uneconomic to continue as a result of the additional levy imposed. If this is allowed to happen, the Fund can become a counter-productive exercise and the levy will simply come to pass as just another additional item of tax to be tolerated.

Mr Hon Sui Sen: Sir, quite a number of questions have been asked. May I reply, first, to those questions that have been raised by the Member for Whampoa. He spoke of apprentices being included in the definition. I did say so in my speech. The reason for this is that apprentices are very often workers. They learn on the job but I think at least towards the later pan of their apprenticeship they perform work which is almost as much as the ordinary paid workmen. To that extent, it may be appropriate to include them in the Skills Development Levy. If I am advised by the Advisory Council that thi3 may fall within the class of persons whom it would be appropriate to exempt, then this matter can be considered. But at the moment we merely say, "domestic servants, gardeners and chauffeurs." These are not people who are used for the purposes of a profession or occupation.

On the Skills Development Fund, the Member asked the question, what is its relationship to EDB programmes and to the VITB training schemes? I have said in my speech that the Fund will not be used for basic training, and by that I assume we shall not be considering the financing of VITB training. As for the EDB programmes, a lot of these are related to what the employers are doing. It may be that some of them will qualify. Again, this is a matter which we will put to the Advisory Council and seek their advice. Some of the EDB programmes are already of the kind that we consider to be appropriate for training skills. For example, Government/industrial training schools run by Philips or Rollei may be of the kind that would be suitable also for other employers of labour, in which case we will consider financing from the Skills Development Fund.

As to the Member's third question, he asked, what is the scope of action by the Minister for varying the levy? I think it was stated in some of the statements we made in Parliament that if there were circumstances that made it necessary for us to cancel the imposition of the 4% CPF tax or the Skills Development Levy because of external circumstances, for example, a major slump, then this would be done. The power is therefore in the Act for varying the levy. This can be downwards as well as upwards, as the Member has pointed out. If the Advisory Council should advise that the amounts being obtained by the levy are insufficient, then maybe this matter can be considered without having to come back to Parliament.

As to the Member's last question, what are the other purposes which may be considered by the Minister under another clause? I think this is an overall catch-clause. I am not sure what the legal position is but I have been told in other cases that, when we set out a whole series of purposes, there is a doctrine in law which says that it must be for similar purposes. I am not quite sure what the situation is but I will be guided by the members who are in that profession. However, the intention is that it will be used for purposes which are related to those which have already been set out in the preceding sub-clauses. I think I have dealt with all the questions of the Member for Whampoa.

As to the Member for Jalan Kayu, he says that the procedures should be made simpler. We would, of course, like these to be as simple as possible but, in the disbursement of public monies, there must be a certain procedure laid down so that there will be no question of our being careless or being led by fraudulent means, for which we have provided, into disbursing monies for purposes which are not intended under the Act.

He also asked, under what circumstances will exemptions be granted under clause 4 which empowers the Minister to grant exemption from the levy in certain cases. The answer to this is that perhaps, as in the case of apprentices which has been raised by the Member for Whampoa, it may be that at least in the first few years the levy should not be imposed. There is therefore a necessity for a clause of this kind.

He also suggested that the Skills Development Levy should not kill the initiative of employers to provide training schemes. I do not think that is the intention at all. If there are training schemes set up by employers, I have no doubt that they will see that under the provisions of the Act there is a chance that the payment for such schemes will be made under the Skills Development Levy.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Hon Sui Sen].

Bill considered in Committee; reported without amendment; read a Third time and passed.