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

Order for Second Reading read. 3.36 pm

The Minister for Finance and Minister for Trade and Industry (Dr Tony Tan Keng Yam): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

It is proposed under the Bill to amend the Economic Expansion Incentives (Relief from Income Tax) Act to effect the following economic policies which were announced in the 1983 Budget Statement.

(i) Extension of various incentives provided under the Act to non-manufactured products and services; and

(ii) Extension of the investment allowance incentive to non-manufacturing companies for their water conservation projects.

Sir, the Economic Expansion Incentives Act applies at present to only the manufacturing industry. We have in recent years been actively promoting activities like engineering and consultancy services, industrial design, biotechnology projects and computer services. These have been identified as areas of future economic growth.

The Bill creates two new Parts - Part IIA and Part IIIA - to extend pioneer status tax relief and expansion incentives to cover the knowledge-intensive activities which we would like to encourage. The following activities will qualify for incentives under these new Parts:

(i) any engineering or technical services including laboratory, consultancy and research and development activities;

(ii) computer-based information and other computer related services;

(iii) the development or production of any industrial design; and

(iv) such other services as the Minister may prescribe.

Investment allowance for water conservation projects is currently restricted only to manufacturing companies. The amendment to section 46B of the principal Act extends the incentive for investment allowances to a company which proposes to carry out a project for the purpose of reducing its consumption of potable water. This amendment will encourage non-manufacturing companies, such as hotels and shopping complexes, to invest in plant and equipment that will reduce their potable water consumption.

Sir, the opportunity is also being taken to make certain technical amendments to the principal Act. Section 20 of the principal Act is being amended to change the base year for calculating expansion incentives. Currently, a company which qualifies for expansion incentives enjoys tax exemption on the additional profits it makes after the expansion. The reference used is the company's profit for the accounting year during which the expanded capacity comes on stream or the preceding accounting year. The amendment allows the average profit for the three years preceding the expansion to be used as the reference.

Section 46A of the principal Act is also being amended to broaden the definition of "fixed capital expenditure" for the purpose of investment allowances to include expenditure incurred on the acquisition of any know-how or patent rights.

Sir, I beg to move.

Question proposed.

Mr Tang See Chim (Chua Chu Kang): Mr Speaker, Sir, I just want to seek an expla- nation from the Minister on this Bill. He says that the Bill is to amend the Economic Expansion Incentives (Relief from Income Tax) Act and to implement two new tax incentive schemes and also to make certain technical amendments.

I just want to know why is it necessary that we should proceed with the Second Reading of this Bill when at the commencement of business the Minister had just introduced a second amendment Bill to the Economic Expansion Incentives (Relief from Income Tax) Act. Why could not the second amendment Bill be incorporated into this first amendment Bill, or why could not this first amendment Bill wait until the provisions of the second amendment Bill are ready and we debate the whole thing together? Can I please have an explanation?

Dr Tony Tan Keng Yam: Mr Speaker, Sir, I am afraid the answer is a very simple one. We were unable to get all the amendments ready in time to enable all the amendments to be incorporated in this present Bill and, rather than wait until we were able to finalize all the amendments, we decided to proceed with the amendments which have been finalized and agreed with the Attorney-General's Chambers. I regret that it was not possible to have a neater arrangement.

Mr Tang See Chim: Mr Speaker, Sir, I thought I also heard the Minister say just now that this was to implement the schemes announced at the Budget meeting. The Budget meeting was sometime in March and now it is October, i.e. seven months ago. Surely, all these amendments could have been incorporated into one amendment Bill so that we could discuss them together rather than coming to Parliament in bits and pieces. Personally, if for no other reason, the Minister should really ask his technical staff to get on with the work or wait until we have got everything together and then come here for a debate rather than coming o Parliament in bits and pieces and ask us to approve this Bill now and then the second amendment Bill at the next sitting which could be any time seven days after the second Bill is published. I just do not see why Parliament should be asked to sit at different sittings debating amendments to the same Act.

Dr Tony Tan Keng Yam: Sir, the answer is very simple. Times change and we must change with it. Taxation Bills are difficult Bills and while my officials have done their best in order to try and incorporate all the changes that are necessary, I am afraid that I cannot assure the Member that it will ever be possible for me to put forward a perfect Bill which will incorporate all the amendments that we wish to introduce. Indeed I think it will be inadvisable to do so because it will mean that we have reached a stage of stagnation and that my Ministry at least would have no new ideas.

Mr Tang See Chim: Sir, you must pardon me if I pursue this line of argument. This amendment Bill was first published on 24th August and we are now having another amendment Bill which would again be debated. I am sure the Minister has got simple explanations. The explanation is convenience of his technical staff. But how about the convenience of Members of Parliament? I also appreciate that the Minister cannot incorporate all the amendments at one go but the time difference between two amendment Bills is really far too short. He is asking us to swallow this, saying "it is not possible." The time difference is too short. Today is the 19th October and the first amendment Bill was introduced on 24th August. Let us have some sense of urgency or proportion.

Dr Tony Tan Keng Yam: Sir, for the benefit of the Member, I would say that the second amendment Bill which I introduced today deals with a subject which is quite different from the present subject. It would have been possible for me to hold up the second amendment Bill until next year so that I would not have given the Member cause for concern or to be upset today. But I felt it was unwise to do so and that, as and when the amendments are ready, they should be presented to Parliament. And I see no reason for holding up any amendment just to make sure that it gives the appearance that we have thought out everything. But I would assure the Member that we will, of course, try and incorporate and be as expeditious as possible in presenting the necessary amendments to Parliament. And certainly, Sir, it is not my intention to waste Parliament's time or the time of Members unnecessarily.

Mr Tang See Chim: Mr Speaker, Sir, on the Minister's assurance that he would do so, I withdraw my objection. I pursued the argument just now because he said he could not assure Parliament that he would not do the same thing the next time.

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. - [Dr Tony Tan Keng Yam].

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