FINANCE (AMENDMENT) BILL

Order for Second Reading read.

The Minister for Finance (Dr Hu Tsu Tau): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Finance (Amendment) Bill 1985 seeks to give legislative authority to the suspension of payroll tax with effect from 1st April 1985, as announced in the fiscal year

1985 Budget statement. Presently, the rate of payroll tax is stipulated in the Finance Act (Chapter 139) of the Revised Edition. It does not provide for suspension of tax collection. Clause 2 of the Bill empowers the Minister for Finance to prescribe the rate of payroll tax by an Order. The suspension of payroll tax would be effected if no rate of tax is subsequently prescribed.

Sir, I beg to move.

Question proposed.

Dr Augustine Tan: Mr Deputy Speaker, Sir, first, I think the hon. Members in this House would appreciate what the former Finance Minister did in suspending this 2% payroll tax, and this Bill is to give effect to that. But on the other hand, I think it is an opportune time for us to examine the rationale underlining a payroll tax and what would be the impact of a payroll tax because the Bill, as it now stands, really opens the door, or open the possibility for a future Finance Minister not only to introduce a payroll tax but it could be at a rate much higher than 2%. There is no limitation on the rate now - it could be 0%, it could be 10%, it could be 20%, so we are really giving a big blank cheque to the Finance Minister. And while the present Finance Minister is quite trustworthy, one cannot be sure that in future the Finance Ministers would be as trustworthy.

It is a matter of some concern to me, Sir, that some of the problems of our economy stem from the fact that labour costs have been too high and that has made our goods and services uncompetitive. If at some stage in the future, we were to reintroduce a payroll tax, this would add on to labour cost and it would clearly be undesirable. I do not think Government is short of revenue or of sources of revenue. In fact, I think the public sector as a whole has grown far too large and it is a time for cutting down and not expanding the role of Government. So I will urge the Government to reconsider this Bill at some stage and maybe take out altogether the provision for possible introduction of payroll tax. 6.30 pm

Mr Jeyaretnam: Mr Deputy Speaker, Sir, I rise to oppose this Bill.

Sir, the payroll tax was first introduced when we were part of Malaysia. It was a Malaysian Finance Act which introduced the payroll tax. When we came out of Malaysia on the 9th August 1965, it was left to us to determine whether any tax or laws should be continued. And speaking in this House as far back as 1983, I pointed out the debate that took place in this House on this very matter, the payroll tax. Then several Members and the Minister said that the payroll tax was a very unwise measure that was introduced by the Malaysian government. And that the then Singapore State Government had opposed the introduction of the payroll tax but, of course, being part of Malaysia, they could not do anything about it. But the Minister went on to declare that the Government would set aside the funds collected from the payroll tax for the welfare of the workers. They were not going to have it. It was not necessary for the Consolidated Fund to have the payroll tax paid into it. Singapore was not in need of the monies. But as I pointed out in 1983, those solemn words made by the Minister for Labour in a 1965 sitting of this House were completely forgotten the moment the sitting was over. Nothing was done about setting up a fund for the workers out of the payrol tax monies that were collected. And year after year, the monies were paid into the Consolidated Fund against this solemn declaration made by the then Minister in this House. And so it continued. When I asked the then Minister for Finance, the late Mr Hon Sui Sen, in this House, he said that he had no intention of giving up the payroll tax. But there were nevertheless protests against the imposition of the payroll tax.

This is another illustration of the sort of double talk that we have from this Government. In one breath, they say they did not want the payroll tax. It was not needed for the revenue. But having said that, they go on collecting it as part of the revenue.

Then in 1985 in the Budget statement, the then Minister for Finance announced to the relief of several Members of this House, and I am sure to the relief of employers and people outside this House, that he had decided to suspend the payroll tax. I have the Hansard here, the sitting of the 8th March 1985 [Vol. 45, No. 7, col. 496]. He said:

'I now move on to the tax changes. In an Addendum to the President's Address at the Opening of Parliament, I stated that one of the objectives of the Ministry of Finance was to simplify the tax structure wherever possible.'

I would pause here and repeat again "to simplify the tax structure wherever possible."

'In line with this objective and to alleviate the burden of costs on companies, I have decided to suspend with effect from 1 April 1985, the collection of Payroll tax.

I do not know what the other Members of the House thought. But I certainly was left with the impression that payroll tax was to be abolished, that it was going to be removed from our statute books. He did not use the word "temporarily". He did not say, "for the next one year or two years." He said, "I have decided to suspend ... the collection of Payroll tax." When I was speaking on the Budget statement, I pointed out to him that he had no powers to suspend the payroll tax under the Finance Act and that a Bill had to be introduced to abolish it altogether. Well, we never saw that Bill until this Bill was presented to the House. And what do we find? We now find that the Government has no intention of doing away with payroll tax. The Minister in March was saying that it was necessary to do away with it to simplify the tax structure. But obviously it now appears that they have got over that objection and they think it is not necessary to do away with the payroll tax to simplify the tax structure.

But what is worse is this. This amendment now continues the payroll tax. But the sting is this. It now delegates to the Minister the rate at which the payroll tax is to be collected. I have - I am sorry that I keep saying "I have" - I have more than once in this House said that delegated legislation which gives the Ministers of the Government the power to levy tax or any charge or fee without the consent of Parliament was an abdication of the power of Parliament. It has been long established, and for which Parliament had to fight - I am sorry. Of course, I am referring to the English Parliament because this is the tradition we borrowed - Parliament had long to fight for the sole right to impose any tax or charge on the people. They resented the authority given to anybody else. And now the House of Commons has the sole right to impose tax, and attention has been drawn as far back as 1926 to the dangers of giving to the Ministers any power to levy any tax as that must remain within the sole preserve of Parliament.

What are we doing now in 1986? We are again abdicating. Parliament is abdicating its function when Parliament should decide whether any tax should be imposed and at what rate the tax should be imposed. We are abdicating that power to a Minister of the Government. Is that necessary? If that is to be the order of the day in Singapore, then we might as well do without Parliament. We can forget about Parliament. We can save the expense of paying Members of Parliament. We can save the expense of maintaining this House. But if we are going to preserve Parliamentary rule and the supremacy of Parliament, then we must not abdicate our powers.

Mr Chiam See Tong: Mr Deputy Speaker, Sir, I would say that this piece of legislation at this time when Singapore's economy is so bad is one of the worst legislation that is before the House. The Government's policy as has been published is to give priority to revive our economy. How does it do it? It has, of course, to cut down costs, increase productivity and also give confidence to business people and also to business people from abroad to invest here. Confidence is also important. How can you give confidence to business people when we have got such a piece of legislation? As the Member for Whampoa said, it is a blank cheque for the Minister to sign.

What is the limit of the payroll tax? This is the kind of signal we do not want to give to business people. How can you create confidence in business people when they come in and they do not know how much tax the Government is going to impose on them?

We have seen measures to reduce the Central Provident Fund, to cut down costs. But that is done half-heartedly, half measures. They say they are going to do it temporarily, two years. Any businessman will tell you that this kind of signal is not good for confidence. Anyone with money coming to invest in Singapore, they want something on long term, at least five years, if not permanently. At least, they can predict what the future situation will be.

On the one hand, the Government says it wants to revive the economy. On the other hand, the steps taken contradict that. This is the sort of Government we have today. Perhaps the Minister for Trade and Industry who heads the Economic Committee can give his views on this. Does this kind of legislation give confidence to business people? If not, then he should oppose this Bill as I am opposing it.

Dr Hu Tsu Tau: Mr Deputy Speaker, Sir, as to the question by the Member for Whampoa, I can assure you that the present Minister for Finance and future Ministers for Finance would not be so foolish as to impose taxes which obviously the community cannot bear.

Mr Jeyaretnam: That is not the point.

Dr Hu Tsu Tau: That is the point. That is exactly the point.

Mr Jeyaretnam: It is not.

Dr Hu Tsu Tau: I know what you mean. If Parliament decides that the law is inopportune or not practical, it can always legislate to remove it by a majority of the House.

Coming down to the question of the Member for Anson on Dr Tan's commitment to abolish the tax, I think the word he used was "suspend". The Oxford Dictionary will define "suspension" as a temporary measure and not a permanent change.

As to the question of abdication of Parliament, I just mentioned the fact that Parliament always has the power to change the law by a majority. I do not think I need to go into a debate on this issue.

Finally, the questions raised by the Member for Potong Pasir. He said, "What is the limit of the tax?" The present limit is zero, as I have no intention of imposing the payroll tax and neither will I consider doing it if the economy cannot possibly stand it. In fact, it was suspended for precisely this reason. I think one must accept that the Government is not irrational. In fact, the best signal that the Government can give to foreign investors is precisely that we are willing to change our laws, our impositions, to meet circumstances. And everything we have done to date, in fact, illustrates this. [Interruption]. Is zero a killing?

An hon. Member: You have the powers.

Dr Hu Tsu Tau: The powers will not be used unless they are necessary. This is merely a provision which allows us to change the tax system as we can do.

Mr Chiam See Tong: Don't you agree it is a blank cheque?

Dr Hu Tsu Tau: It is not a blank cheque. As I have mentioned earlier, you can always change the law. If the Government wishes to impose a tax it could, to meet the request of the Members for Potong Pasir and Anson, abolish I suppose, the payroll tax, and impose another tax called labour tax. It would have precisely the same effect.

Mr Chiam See Tong: That is not as practicable as you think.

Dr Hu Tsu Tau: The question really is this: the predictability of foreign investors' confidence is the pragmatic flexibility of this Government.

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 Hu Tsu Tau].

Bill considered in Committee.

[Mr Deputy Speaker in the Chair]

Clause 1 -

The Chairman: The citation year will be altered from 1985 to 1986.

Clause 1 ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

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

Mr Jeyaretnam: Mr Deputy Speaker, Sir, may it be recorded that I voted against this Bill at all stages.

Mr Deputy Speaker: So be it.