ECONOMIC EXPANSION INCENTIVES (RELIEF FROM INCOME TAX) (AMENDMENT) BILL

Order for Second Reading read. 4.10 p.m.

The Minister for Trade and Industry (Mr Goh Chok Tong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

In the 1980 Budget Statement, I announced a package of four tax incentives for promoting Research and Development (R & D) activities in Singapore. Three of these incentives involve amendments to the Income Tax Act. These amendments have been incorporated in the Income Tax (Amendment No. 2) Bill, 1980, which the House has just considered and passed. The fourth incentive, namely, the granting of investment allowance of up to 50% of the capital investment in research and development made by a company, requires an amendment to Part VIA of the Economic Expansion Incentives (Relief from Income Tax) Act. The purpose of this short Bill is to give effect to that incentive.

The existing section 46B of the Economic Expansion Incentives (Relief from Income Tax) Act provides that investment allowance may be granted to a company which carries out a project for the manufacture or increased manufacture of any product or for the provision of specialised engineering or technical services. The present Bill will extend the scope of section 46B to allow investment allowance to be granted to companies carrying out projects for research and development. A company may qualify for investment allowance in respect of an R & D project if the project is approved by the Minister. Approval for investment allowance will be given on a case by case basis. The amendments to section 46A of the Act are of a consequential nature.

Sir, I beg to move.

Question proposed.

Dr Augustine Tan: Mr Speaker, Sir, may I just ask a few questions of the Minister? First of all, in respect of the definition of "research and development", my comments which I made earlier on the Income Tax (Amendment No. 2) Bill apply here, namely, that they are exclusively limited to the manufacturing sector.

Secondly, Sir, under clause 3, the proposed amendment as stated would seem to imply that two out of the three conditions laid down there must apply. Sir, I am not a legal man and so I do not know the legal implication of a semi-colon, whether the semi-colon denotes and or or. As I read it, Sir, from the (a), (b) and (c) conditions which are laid down, it would seem to me that either the company has satisfied conditions (a) and (b) or (a) and (c) because if the intention were otherwise, there should have been an "or" after the semi-colon appearing at the end of the condition (a). Then it would be quite clear that one of the three conditions applies. The way it is set out, it would seem to me that the company has to manufacture and has to provide specialised engineering or technical services or else has to manufacture and carry out research and development. I am sure that is not the intention of the Minister or the drafters of the Bill.

Thirdly, Sir, I would like to seek clarification from him as to his definition technical services" because nowhere in this Bill is that provided for. I am not sure whether a similar definition appears in the Income Tax Act. If not, maybe he would want to insert a proper definition.

Finally, Sir, he seems to have left out economic and management services altogether. It would seem to me that these services are very important in the development of Singapore, especially the manufacturing sector which he is trying to encourage.

Mr Goh Chok Tong: Mr Speaker, Sir, the Minister for Finance has already given a reply on the definition of Research and Development to the question raised by the Member for Whampoa. I will therefore not give a reply because I share the sentiments of the Minister for Finance on this particular issue. That reply would therefore cover the observation of the Member for Whampoa on the economic and management services. The thrust of the incentives, as given in the Budget statement, was for the purpose of improving the manufacturing sector, in particular, research and development. As the Minister for Finance has pointed out, there are other incentives for improving human capital for economic and management services. If these are not adequate, improvements could be considered at a later stage.

As to the observation of the Member for Whampoa on clause 3, the intention, as far as my Ministry is concerned, is for a single criterion to apply. In other words, it is not necessary to have a combination of two of these conditions before the incentives would apply. This Bill has been drafted by the Attorney-General's Chambers and, therefore, I take it that the correct interpretation of or is that only one of the three conditions needs to be satisfied. I myself am not a legal man, and therefore I do not wish to quarrel with the legal opinion of the Attorney-General. I do not have the audacity to quarrel with the Minister for Law either, who is here anyway, on this particular point.

On technical services, I do not have the Income Tax Act with me. I therefore cannot give an answer as to whether "technical services" has been defined in the Income Tax Act.

Dr Augustine Tan: Sir, I thank the Minister for his clarification. But has he not considered the possibility of a typographical error?

Mr Goh Chok Tong: Sir, it is not a question of a typographical error. It is a question of whether there is a mental error in the interpretation.

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 Goh Chok Tong].

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