ANNUAL BUDGET STATEMENT

12.53 pm

Order read for Resumption of Debate on Question [3rd March, 1989],

That Parliament approves the financial policy of the Government for the financial year 1st April, 1989 to 31st March, 1990.". - [Minister for Finance].

Question again proposed.

Mr Ng Pock Too (Nee Soon Central): Mr Speaker, Sir, I rise to support the motion on the Budget Statement.

In a flash, it seems, we have emerged from the recession relatively unscathed. In two short years, we reversed the performance across all sectors of the economy. The fiscal measures taken have yielded positive results. The decisions made were proven correct. The economy is now reinstated to its robust growth and full employment. As it turned out, the recession was shortlived, the anguish of unemployment now largely forgotten as we surge forward beyond recovery into a healthy pace of economic expansion.

The recession was a real litmus test to our collective instinct for survival. We surmounted the recession not by the Government acting on its own in making fundamental changes to its fiscal policies. We overcame the recession because we had, what I call, the tripartite symbiosis - the combination of effort by, first, a Government not flinching from taking unpopular but crucial decisions to ensure the long term survival of our nation; second, a people pragmatic in choosing their options wisely when faced with a crisis even though they may have to endure painful sacrifices in the short term as trade-offs for long term gains; and third, the private sector willing to respond to Government measures in undertaking risks by committing capital to expand output thereby creating jobs and generating economic spin-offs.

What we lack in size and resources, we make up for through this unique chemistry of symbiosis involving the Government, the people and the private sector. It was this winning combination that we counted on in regaining our economic strength. We pulled together and we made it safely and quickly through the recession.

As we now enjoy the happy moments of better economic prospects, let us remember the salutary lessons of the recession and, in particular, the powerful combination in strength of the Government and the people in working together to face any common threat to our national well-being. Who knows, we may need to count on it again as old problems are solved and new ones emerge, sometimes unexpectedly!

We should count our blessings that we have done well for 1988. First, it was fortuitous for us being a non-oil producer, that average crude oil prices have been low in 1988. Adjusted for inflation, oil prices have been much lower than at any time since the early 1970's. The lower price of oil has helped to constrain inflation and has given impetus to world economic expansion. For Singapore, which has to import its entire energy needs, a low oil price is a good reprieve and represents one less variable in the growth equation. For many cost-conscious Singaporeans, the most direct impact has been their savings on domestic PUB electricity bills. I am not sure if many realize this.

Second, external demand was very strong. For three years in a row, strong external demand actually provided the main impetus for our economic growth. At the same time, our fiscal measures helped to reduce production costs. This gave our exporters a price advantage in an international market that fortunately stayed buoyant. We were well poised to meet market demand as the OECD economies continue to do well and our international competitiveness remained strong.

Let us remember that even if we had stayed trim on cost, we could never have turned in a strong growth if the world market had softened and there was no demand for our products and services.

A post-recovery Budget, which is what I call this Budget, is sometimes worrisome to the private sector. The fear is whether measures introduced in previous Budgets to reduce the cost of doing business would be retained. I note that the Finance Minister has tried to allay such fears by keeping the tax on utilities and telephones suspended on non-domestic users, by allowing the 50% property tax rebate for industrial and commercial property to continue for another year, and by not increasing SDF levy nor widening its collection net.

It is my honest opinion that even with these concessions, costs will go up in 1989. One key cost component is labour cost. The National Wages Council will be deliberating on its wage guidelines for this year. I do not want to prejudge what NWC will recommend. But let us remember we are in a tight labour market regime and labour as a commodity has to be paid its market price.

The private sector will have to be more astute in managing their costs through relentless automation and mechanization and better organization of work.

The Finance Minister has also announced in the Budget Statlement that there will be susbtantial salary revisions for the key services in the civil service. He mentioned on television last Tuesday that the revisions will not be made across-the-board but will be applied selectively and only to the higher echelons of the civil service.

I am not against paying civil servants their market worth. But to apply this adjustment only to selected groups of civil servants in the higher echelons and in chosen services is tantamount, by implication, to telling the lower echelons - we can do without you. Do not forget that in absolute numbers, those in the lower grades take up the majority in the public service. With a demoralised civil service at the junior levels, there can be chaos and pandemonium which we can ill-afford to have.

Every pyramid has its base. So too in the hierarchical structure in the civil service establishment. Without an equally motivated lower echelon, the civil service cannot function effectively, no matter how well paid your top civil servants are. We should also not denigrate junior officers in the civil service simply because of the less intellectual nature of the jobs they perform. We have to recognize that everyone has his station in life. Given the opportunity and the proper environment, I am sure all officers in the civil service will want to excel in their work and get ahead with their civil service career.

Let us not create the disparity and deny junior grade officers better salary treatment. The Government must regard any junior officer, no matter how junior he is, as part of the civil service team. I therefore hope that the Finance Ministry can consider making the salary revision applicable to all officers across-the-board in the civil service.

The proposed 1% cut in the company tax rate, though a small token reduction, signals the importance which the Government attaches to our company tax rate remaining sufficiently competitive to attract and retain investors. At the same time, as a country with an open economy and our growth dependent mainly on people resources, our tax burden should never be allowed to be so high that it discourages human initiative and enterprise. For these two reasons, both the top marginal tax rate on individual income and the company tax rate were reduced to the same level of 33% a few years ago.

Now that the company tax rate has been reduced to 32%, the same argument of equalization remains. It will be confusing to the taxpayer if his highest effective rate of personal income tax is once again above the corporate tax rate when the Government has in past years been arguing for, in fact has introduced, equal rates for company and individual income taxation at the top bracket.

With due respect to the Finance Minister, there are two other inconsistencies which I need to point out:

First, the wife relief. This has been raised to $1,500. But it defeats the purpose of encouraging wives to work because the relief is only available to those wives are not working. Working wives cannot claim this relief. Instead, if personal reliefs were increased, then working wives will also benefit from this as they will normally elect for separate assessment.

Second, taxation on non-residents. The Minister has clarified that the tax rate applicable to non-residents (including individuals) is 32%. This appears to favour the non-resident more than the resident individuals.

I have gone through the Finance Minister's budget statements for 1986, 1987, 1988 and for this year, 1989. He has given fair warning since 1986 on the need to introduce some form of consumption tax. With due respect to the Finance Minister, his thinking has changed over the years, from a broad-based consumption tax now to a consumption tax to be applied selec- tively on consumption items. The Finance Minister argued in his budget statement in 1987 and I quote:

'I would like to reiterate that a broad-based consumption tax will only be introduced if the revenue shortfall is substantial and a permanent deficit inevitable.' Members may know that we suffered an overall deficit of Government revenue over expenditure in 1987. Because of higher revenue collection and lower development expenditure, we enjoyed a surplus of $3.8 billion in 1988. I presume partly for this reason, the Finance Minister is satisfied that our healthy financial position does not require additional indirect tax revenue to finance expenditure.

I have made a quick calculation of the proportion of tax revenue due to direct and indirect sources. The data show that over the years, indirect tax revenue as a percentage of total tax revenue has in fact been rising while the share of direct tax revenue to total tax revenue has been dropping. In 1985, the proportion of direct tax to tax revenue was 65%, indirect tax 35%. In 1986, direct taxation was 58%, indirect taxation 42%. In 1987, it was 56% direct, 44% indirect. And in 1988, 54% direct tax and 46% indirect tax. This shows that the proportion of tax burden is increasingly borne by the consumer. So in effect, without the formal introduction of a broad-based consumption tax, indirect taxation alone is already contributing to almost 50%, precisely 46%, tax revenue. What need is there to introduce more consumption taxes?

The facts do not bear out the justification to widen the scope for introducing other forms of selective consumption taxes. The Finance Minister may want the additional tool to raise tax revenue in a difficult year but the best answer to increasing revenue is not by raising indirect taxes but by making the business environment more conducive for making good profits and in exercising prudent economic management. Our best insurance for a sound economic future is to spend within our means and to keep healthy reserves. 1.07 pm

Mr Chin Harn Tong (Aljunied GRC): ( In Mandarin): Mr Speaker, Sir, the budget this year is very encouraging. It continues to follow the spirit and principles of the previous budgets. It continues to maintain the growth of our reserves without upsetting the balance of our income and expenditure. At the same time, it will serve to boost up our effort in promoting a healthier development of our society in the best possible way. I support this budget and I shall give my views and suggestions on it.

First, the budget increases the tax reliefs on maintenance of parents and on the wife. This shows the positive attitude of the Government in promoting Asian values. The family is the core of the society and the nation. When a family is consolidated, the society will be stable and the country will be peaceful. When a family is not in harmony, it will destroy social order and the peace of the country. In recent years, the Government has been stressing this point now and then. And now we see that the Government is not only preaching the theory but also putting it into practice by encouraging the actual implementation of this concept. However, by Government's effort alone it is not enough. Consolidation of the family should be on a national basis. It calls for the full participation of all the people, and this concept should be deeply ingrained in the thought of our people. The schools should also help in strengthening the education of the students on this aspect. Community organizations should also actively help to promote this spirit and thought through various activities and turn it into an all-nation campaign in order to thoroughly and fully instil and inculcate this thought in our people.

Second, this budget fully reflects a spirit of human compassion, an example of which is shown in the increase of tax relief for maintaining disabled children. In recent years, there has been the general trend of Singaporeans towards materialism, personal enjoyment. Human relationship is on the decline. Compassionate attitude is declining. This will adversely affect social cohesion. We should not allow this trend of social behavior to continue. The budget seeks to encourage compassionate considerations among our people. The more important thing is whether all relevant departments, social organizations and educational institutions have actively taken more positive meaures to promote better human relationship and compassionate consideration for others in our prosperous society. This should call for our further pondering.

Third, the Government's proposal to reduce the stamp duty on the transfer of houses under $150,000 shows that the Government is trying to raise the quality of life of our middle and lower-income classes. It also shows that the Government is concerned for the welfare of these people. At the moment, all the HDB flats are under $150,000. So, it can be said that this will benefit all HDB dwellers and will be a tangible encouragement to these people to improve their living environment and conditions. This is also a necessary step to facilitate Singapore's more speedy evolvement into a middle class society.

Fourth, the abovementioned measures taken by the Government to show its concern for the middle and lower-income groups of people are gratifying and much much appreciated. But the tax proposed in the Budget on over $40 per month PUB consumption is a cause for concern. According to my understanding, although over 50% of account holders have PUB consumption lower than $40 per month, there are over 40% of consumers who will be affected by this tax. What we are worried about is that this may presage further consumption tax by the Government. I do not oppose consumption tax in toto. If this tax is imposed on luxuries, liquors and tobaccos, not affecting the livelihood of the people, then I will agree to such taxes. But if this kind of taxes is imposed on the consumption of daily necessities and will affect the livelihood of our low income people, causing them greater burden, and will also hinder our people from evolving into a middle class society. I will not agree to such taxes. This therefore calls for our further consideration before any action.

Fifth, according to the budget, since May 1987 the Skills Development Fund has laid emphasis on the training of general workers. This is a good move in this direction. Singapore is gradually developing into a high-tech commercial and industrial society. The training of our general workers in skills will lay a sound foundation for this development. But the training sponsored by the Government is on the basis of recommendation by the employer. This policy would result in certain oversight, because mainly the big companies and big organizations can afford to recommend the workers for such skill development training. Small employers could not respond actively, for the reason that they have very few employees. If they recommend any employees to receive such training, then their business would be affected. In Singapore, there are about 60,000 such small businesses, each of which employs fewer than 10 persons. The employees employed by them numbered some few hundreds of thousands. So I wonder whether the department concerned would take the necessary steps to solve this problem. Perhaps you may consider allowing the workers who are interested to be trained without the need for them to obtain their employer's recommendation, provided the training they receive would be relevant to their work.

Sixth, the budget proposes that high level civil servants' remunerations will be increased so as to make them comparable with those paid to managerial talent in private enterprises. I do not oppose the increase in their remunerations, but when revising their remunerations, the following factors should be considered. High level civil servants have secure jobs, high prestige and great powers. Their decisions can even affect private enterprises. Whereas employees of private enterprises do not have such advantages. Particularly when there is economic recession or merger of companies they usually would bear the brunt of the impact, and they certainly run the risk of retrenchment. In the meantime, now that our economy is on the upturn, when we are adjusting the remunerations of our high level civil servants upwards, we should not forget our partners, the lower rungs of workers, who had during our economic recession voluntarily frozen their salaries or reduced their wages to help turn round our economy. They similarly have greatly contributed towards promoting our economic development.

Mr Abdullah Tarmugi (Siglap): Mr Speaker, Sir, the budget unveiled by the Minister is a commendable one. It is, however, different from many previous budgets ones in that it contains no shocks, certainly not those speculated by car owners and car dealers alike. Nor has it attracted many adverse response and in some respects could even be considered generous and innovative in our context.

Sir, as Chairman of the GPC for Community Development, I am particularly heartened by the reliefs provided to bolster to the family and alleviate some of the burdens of supporting children, the aged and handicapped dependants. The package of incentives and reliefs will be welcomed by families and in line with our stress on the importance of families as a building block of our society, a point made earlier by Mr Chin of Aljunied GRC.

I am, Sir, especially appreciative of the incentives provided for modifications at the workplace to help disabled workers. It is a bold step and I hope that employers will respond positively to this incentive so that it will make it easier for our disabled to be employed and to get around in their place of work. It also dovetails Government's policy of making the disabled as self-sufficient as they can be and thus give them the dignity and respect due to any human being. It may be long overdue, Sir, but it is a step in the right direction, and I sincerely commend to the Government and to employers to look into the question of increased and easy mobility not only for our disabled but also for our elderly citizens in a wider and a more comprehensive perspective.

Let me, Sir, come back to income tax reliefs. The increased relief for disabled handicapped dependants from $750 to $2,500, a three-fold increase, seemed very generous at first glance. But I wonder, Sir, just how many households would benefit from this, given the proviso that such dependants do not earn more than $1,500 a year, which is only $125 a month I would have thought that if we were to achieve the twin objectives of helping families with handicapped dependants and encourage the disabled to be more self-supporting, the ceiling for annual income could have been much higher. Should we peg the income ceiling too low, it would, be more beneficial for some families to keep their handicapped dependants unemployed than breaking this ceiling and hence become ineligible for relief, which is $1,000 higher than the disabled income's ceiling.

The other, Sir, is the relief for wives. I am sure the Minister has heard of comments many times before that the raising of this relief from $1,000 to $1,500 is indeed too low. Sir, I do understand that we want to encourage more women into the labour force but there are also those who, either out of choice or out of necessity, remain at home to take care of their families, and their role is no less important in keeping the family stable and well taken care of.

As for the relief for aged parents, I am personally glad that it has risen by 150%. This will go a long way to encouraging children to take care of their aged parents. But, Sir, what about those with parents who do not live with them but who nevertheless continue to support them.? I know that this matter has been raised again and again before but I believe that this is one way of encouraging children to live with their aged parents. However, I personally have cases brought before me, and I believe also brought before many MPs, of parents out of necessity having to live away from their children but are supported by the latter. It is not that they do not want to live together but circumstances determine that they live apart. It would therefore appear unfair to their filial children to be penalized by the living-together ruling before they can be allowed relief from their income taxes for supporting their aged parents. I do not think, Sir, that allowing reliefs for such children will result in many ensuring that their aged parents live away from them. But in all, Sir, I think it is fair to say that the budget now before us is a fair one, and I support the motion.

Mr Peh Chin Hua (Jalan Besar GRC): Mr Speaker, Sir, I rise to support the motion on the budget statement for the financial year 1989 by the Minister for Finance.

This budget has given a great increase in the tax relief for parents, children and the handicapped dependants. This proves that the Government is putting into practice its promotion of traditional cultural values. It also shows the support of the report by the Adivsory Council on Family and Community Life.

As a member of this Advisory Council, I fully appreciate the Government's efforts in promoting the family as a basic unit of society as well as taking care of the aged and the handicapped. The efforts in promoting moral values in the nation is most commendable.

In the budget, the incentive to encourage those who can afford to have more children should have the effect of turning the population trend. The reduction in property tax and stamp duty is to further enhance the Home Ownership Scheme. It will enable our people to have better housing not only in the HDB flats but also in private residential properties. This has the effect of reducing the financial burden of the home owners and it will also encourage the revival of the construction industry.

The company tax will be reduced from 33% to 32% by 1990. Although this is just a token reduction of 1%, the action shows the Government's concern and it will be appreciated by the private sector. The budget statement states that there will be a 5% consumption tax on domestic use of water, gas and electricity if it exceeds $40 per month. This measure shows the consideration of the Government for the poor whose monthly PUB bills are normally below $40. For the middle class and above, it serves as a reminder to them to support the Government's "Save Energy" campaign.

The Government is also considering increasing substantially the pay of key civil servants. I am happy to note that this will also be extended to our Ministers. I am in the private sector and therefore I fully understand the difficulty of employing good and talented people. Among the managing directors whom I know, their salaries are much much higher than our Ministers. The contributions of our Ministers who serve the nation are equal, if not beyond those of the key civil servants. The efforts they put in are reflected in their graying and receding hairline. Some people may think that Ministers entering politics should be regarded as a kind of devotion. Therefore, the salaries in the Government and those outside should not be compared. However, this is unreasonable. There is a Chinese saying which says: Yu yeow mar er how, yu yeow mar er chow tze chow, which means that you want the horse to run fast and yet you are unwilling to feed it with more food. This shows the unfairness of some people who want the best from another and yet are unwilling to give him the equivalent. Singaporeans must understand that to have an efficient, good and clean Government, the salaries of the Ministers must be equivalent to the amount of work they put in.

In conclusion, Mr Speaker, Sir, I would like to support the motion standing in the name of the Minister.

Mr Chew Heng Ching (Eunos GRC): Mr Speaker, Sir, many people say this year's budget is a good and painless one. There were little surprises and indeed the only surprise was what did not happen, the absence of any fiscal measures to curb the rapid growth of our car population. I say this year's budget is a prudent one, caring but cautious. It is a "pro-family" budget as well as one aimed at maintaining our international competitiveness and fostering economic growth.

Sir, I would like to discuss briefly three subjects mentioned in the budget, and they are the long-term CPF rate adjustment, civil servants' salary and fiscal incentives for the family.

Sir, our economy has performed extremely well last year. Many Singaporeans were able to secure jobs, earn good incomes and enjoy a higher standard of living. Can this happy growth scenario last forever? Unfortunately it cannot. We live in an interdependent world. Our economic health depends too much on the external economy. Moreover, for social and political reasons, we cannot rely too much on foreign labour for growth. The Government has therefore forecasted a more moderate growth of 6-7% for this year. This is a realistic forecast given the constraint to growth posed by our limited manpower resources and the tight labour market situation.

Sir, the world economic outlook is one of cautious optimism, if I may put it. Upward pressures on inflation and interest rates in the developed economies have begun. Economists are already forecasting a slowdown in growth next year. The latest first quarter 1989 survey of business expectations carried out in Singapore suggests a slowdown in economic growth this year.

Sir, with this slower growth economic outlook, I would like to sound a word of caution. I suggest the Government deliberate carefully any efforts to try to quickly restore cost as a result of sacrifices made by Singaporeans during the recession years. We must continue to watch our international competitiveness.

The Government has announced a long-term CPF contribution rate of 40% and that the employer's CPF contribution rate will be raised by 4% with a corresponding reduction in employee's CPF contribution rate of 2% in July this year, subject to our economic performance in the first quarter of this year. Sir, I appreciate the concern shown by the Government to try to restore CPF rates, but I believe it may not be proper to try to base the decision on whether or not to increase the employer's CPF contribution rate by 4% merely on this year's first quarter economic performance. Given the openness of our economy, it could slow down in subsequent quarters as quickly as it has picked up in recent quarters. With a slower economic growth outlook for the rest of this year, the proposed 4% increase in employer's CPF contribution rate appears on the high side.

Sir, another significant development, and this has been brought up by various speakers before me, is the pressure on wages in the next few months given the very tight labour market situation. There are just too many jobs chasing after too few job seekers. The proposed increase in civil servants' salaries may have an impact on wages in the private sector. This upward movement of wages, if we are not careful, could price us out of the international markets. We must try to avoid a repeat of what happened in the recession in 1985.

Sir, given this scenario of a slowdown in economic growth and wages spiralling upwards, I urge the Government to consider increasing the employer's CPF contribution rate by only 2% instead of 4% this year. If moderate economic growth could be sustained in the following three years, the rate could be increased by another 2% each year in 1990, 1991 and 1992 in order to bring it to the long term level of 20%. At the same time, reduce the employee's CPF contribution rate by 1% per year in the next four years. These changes will be more gradual and, barring a serious economic recession, I believe our economy should be able to absorb these cost increases without seriously affecting our competitive position internationally.

Sir, I would like to move on to the next subject which is the much talked about civil servants' salary revision. I support the need for the public sector to have its fair share of brains and talents, particularly in the key services like the Administrative Service. Presumably, the proposed increase in salary is to try to match the salaries of key civil servants with those in the private sector and to also try to motivate and retain talents within the service. Sir, whilst I agree we must adjust the salary of civil servants we must be careful not to try to match it dollar for dollar with the private sector. The civil servant enjoys job security and his salary is seemingly less dependent on his individual job performance. The private sector executive's income fluctuates between good and bad times. He could even be fired if the organization fails or he makes a wrong decision. This seldom happens in the civil service.

As regards the need to motivate and retain young talents within the civil service, particularly the Administrative Service, I personally doubt if the proposed revision in salary will be totally effective in trying to prevent a brain drain to the private sector. Many young and promising civil servants view upward mobility in the civil service as being limited. The top civil servants, the Deputy Secretaries and the Permanent Secretaries, are all very young, in their 30s and 40s. Moreover, with the Government's aim to try to reduce the size of the public sector, promotional prospects for these young civil servants may be limited. To resolve this problem of brain drain and to perhaps widen the talent pool from which to select and groom young and potential civil servants, I would like to suggest that the Government consider recruiting mid-career executives from the private sector for key services, including the Administrative Service. I believe the Government has not done this before. It has a policy of promotion from within. Perhaps it is time the Government reviewed this policy and widened its net to try to tap private sector talents.

Finally, Sir, I move on to the last point, and that is, fiscal incentives for the family. I fully support the various tax incentives introduced to try to foster closer family unity and ties, encourage Singaporeans to have more children and to look after their aged and dependent parents. These are steps in the right direction. However, these fiscal incentives by themselves are not enough. As a further measure to encourage Singaporeans to have more children and to look after their dependent parents, may I suggest the Government review the levy on foreign maids. Keep the levy at the present level of $160 per month. Try not to increase it by another $40 in July this year for those families which engage foreign maids to help look after their aged dependants, aged parents and their children.

In conclusion, Sir, I think the Budget before us is a good one. I support the motion moved by the Minister for Finance.

Mr Goh Choon Kang (Braddell Heights): ( In Mandarin): Mr Speaker, Sir, I welcome the Budget for the coming financial year. Many people describe this budget as a family budget because it is of benefit to the families. Tax relief for a disabled child is increased from $750 to $2,500, for the maintenance of an aged parent the relief is increased from $1,000 to $2,500, for the wife from $1,000 to $1,500 for the first, second and third child from $750 each to $1,500. If I may express these figures in percentage terms, the rates of increase of the above tax reliefs will be 230%, 150%, 50% and 100%. Therefore, the rate of increases is very considerable. In addition, there is the rebate on the fourth child. The idea is to encourage parents who have the financial ability to produce the fourth child. All these measures will be able to reduce the economic burden of the families generally. Therefore, they should be welcome. But how big an effect will it be on encouraging marriage and producing more children? I think we have to wait and see. When the couple consider whether to produce more children or how many, I think they will generally consider three factors.

The first factor will of course be the economic position of the family; the second, the problem of care for the children; and the third relates to the question of concept of more children. In encouraging procreation of more children the tax relief can only contribute a little towards this. The main factors that greatly affect our demography and the rate of procreation are generally the urbanization, westernization and modernization of the society and the general rising of educational level of women as will as the full employment condition in addition to other factors prevailing in the society.

There is the change of concept in regard to family and procreation. It is not easy to turn the tide of this long-term trend. From the long term point of view, we should start from education and the gradual revival of the traditional family concept to avoid being replaced completely by the trend of extreme individualism. The traditional family concept contains the system of cultural values and thought about personal cultivation, disciplining of one's family and the governance of the country, defining each individual's position and role in relation to the whole society and vis-a-vis the other individuals.

On the other hand, I would remind the Chinese who are the great majority of the population that it is very important and necessary for them to increase their procreation rate. According to the latest statistics in 1988 the increase in our population was about 1.5%. According to different ethnic distributions, we can find out there were very great differences in their birth rates. The increase in Malays was 1.86%, Indians, 1.52% other races, 2.4%. Whereas in respect of Chinese, the population increase was only 1.4%. But the Chinese are about 76% of the total population. Therefore, the rate of increase of the Chinese population has a decisive effect on the total rate of population increase as a whole. If it is desired to achieve an ideal level of rate of increase in total population by maintaining the balance in population increase of the various races, then the Chinese population increase rate must be raised, that is to say, the Chinese must increase their procreation rate.

The Statistics Department recently has issued statistics on the birth rates of various races. It is shown that even last year - the Chinese generally regard last year, the dragon year, as a propitious year - the Chinese birth rate was trailing behind the other races. According to per thousand birth rates, the birth rate for Malays was 23%, Indians, 21.7% and Chinese, only 18.9%. Even in the dragon year, the result was like that. It certainly would be a cause for concern. Last year, the propitious dragon year, the increase in births of Chinese could be only a momentary phenomenon and the same manifestation may not occur again. Not long ago, according to the Acting Minister for Health, our birth rate this year may decrease by as much as 20%. But if the Chinese birth rate and propulation were to continue to decrease, then it will have very adverse effect on our total population and society.

The greatest problem is the rapid aging of our population. At the moment, people over 60 years old number some 8% of our total population. At this rate, when we reach the year 2030, 40 years later, the aged population will be 26%. If the Chinese do not procreate more or decrease in population, then the aging of population will certainly speed up. This will greatly affect our economic ability in future. At the moment, those who are economically active, compared to those who are inactive like the retired, the ratio is about 8:1. After some 40-50 years, the ratio may be 2:1. Therefore, I hope the Chinese community will pay serious attention to this problem of population and procreation and seek out some measures to remedy this situation. We should not look to the propitious animal years of the Chinese zodiac system in which to procreate and we also cannot depend on the Government's tax concessions alone to procreate. Otherwise, the problem of our population will be the more serious.

On the other hand, the Government also cannot depend only on taxation policies to encourage procreation, because the effect will be very limited. I hope the Government will resort to other more active measures as well to help, such as propaganda and education and the setting up of more creches and to improve services in the creches to gain the confidence of parents to create more viable conditions for the families to be more confident in procreating more in order to turn round the trend of decreasing birth rate.

Encik Ibrahim Othman (Bedok GRC): ( In Malay): Mr Speaker, Sir, the Budget this year has two important objectives. Firstly to give impetus to the country's economic growth and, secondly, to encourage family life and procreation. The people have received the Budget well and welcomed the additional incentives introduced to encourage procreation, the care of aged parents and handicapped dependants.

I support the Government's policy to encourage the people to have families and, for those who can afford it, to have more children. The tax rebates for the third and fourth children are a response to the Government's population policy which was introduced by the First Deputy Prime Minister about two years ago. Parents eligible for these incentives would certainly be able to use the extra money that they will gain therefrom to provide a little more comfort for their families.

Mr Speaker, I would like to pose a few questions to the Minister for Finance on the tax rebates allowed. First, the relief for parents, which has been increased to $2,500. The question is: could a person be eligible for this relief even if he does not live with the parent? The present rule requires such persons to live with their parents. But we know that there are many who support their parents through monthly contributions even though they do not live with them, for various reasons such as that their parents live with some other members of the family and so on.

The second question concerns the rebate for third and fourth children which is limited to 12 years. My question is: why is it limited to 12 years and not until the child completes full-time, formal education, that is, until the completion of his secondary and tertiary education?

Thirdly, regarding the rebate for a fourth child born after 1st January 1988. My question is: why only for those born after 1st January 1988? Many people feel that the special tax rebate of $20,000 for five years and relief of $1,500 should be given to all dependant fourth children. The reason is that the fourth child, whether he comes from a higher income family or a lower income family, would one day make the same contributions to the country even if they were born before the date.

Mr Speaker, Government policies should be fair to the majority of the population. The Government should not have policies which tend to show discrimination to any particular sections of the community, especially to those of the lower-income group. As an example, a rebate of 15% of the wife's income is given for the birth of a fourth child in lieu of maternity leave. This, I think, is not advantageous to mothers who do not earn high incomes. The ones who benefit most are mothers who earn high incomes who would surely be already in the position to have more children. Mothers, whether they belong to the high-income or low-income category, all contribute to the country, which really needs their services in terms of employment. So in order to be fair to all, I feel the Government should allow maternity leave for third and subsequent children.

Mr Speaker, where family life and working mothers are concerned, a number of questions need to be answered. Firstly, what can we do to encourage our people to have families and to have more children if they can afford it. Secondly, how can we encourage more women to remain working even after starting a family. And thirdly, what facilities can we offer men who have working wives. I feel the relevant Government policies should fulfil the desire of the people to have families as well as answer the questions I have posed earlier.

The participation rate of women in employment is only 48%. If we want more women to remain working, we must provide more facilities for them. These include more creches, kindergartens and schools, maternity leave and, if possible, special leave for fathers, etc. Much has been said about this by my colleagues in this House. I do not wish to repeat what has been said.

But let me focus our attention on one matter which we need to consider, and that is, how we can establish a comprehensive parent education programme to ensure better family life. In other words, how we can assist parents to enhance their family life. Mr Speaker, the family is an important institution in any community. Peace and stability in the community depend on the stability of every family within the community. Having made achievements economically, achievements in material terms, we should focus attention on non-material areas. The happiness and security of the family are things that deserve our total concern. Clearly, we must give attention to the issue of parental education programmes to enable parents to build a happy family life. Parents have a major task in the education of their children. This is a lifetime task. The happy family life that we seek must be built on the foundations of love and care amongst its members. They must also be prepared to sacrifice for their family to ensure the happiness of the family.

Mr Speaker, I would like to call upon the Government, beside giving incentives to parents to have more children according to their means, to give attention to the quality of community life through family education programmes. A happy family life is the foundation for a peaceful, prosperous community and nation.

Mr Speaker, I support this year's Budget.

Mr Leong Horn Kee (Thomson): Mr Speaker, Sir, 1988 has indeed been a good year for us. Singapore chalked up a strong 11% growth. The Finance Minister was in a generous mood. He gave tax incentives to the industrialists, the family man and woman, the handicapped and the property owners. We have done well, and practically everyone gets some reward from the Minister. The only group that was generally penalized by the Minister was the smokers. I would call this year's budget a "rewarding budget", particularly for the family man.

There is good reason for us to be proud. Singapore is probably one of the few countries in the world which managed a "double surpluses" status, that is, with a balance of payment trade surplus and a government budget surplus. On the balance of payments, Singapore attained an overall trade surplus of $3.3 billion, with surpluses being achieved in both the Current Account and the Capital Account. On the Government budget, we recorded an overall $4.3 billion total revenue surplus in 1988. What is more remarkable is that this surplus is attained after paying for a very hefty $5.2 billion worth of Development Expenditure. Looking at these achievements, Sir, there is much reason for us to be sanguine.

In terms of economic performance, I would say that Singapore has scored a double distinction or double honours. In comparison, we are all very well aware of the perilous situation in the US. They are faced with the contrary situation of a problem of a double deficits. They are confronting the problem of a balance of trade deficit as well as a government budget deficit.

Sir, while there is much cause for us to be smug, I would like to sound a note of concern on two aspects:

(1) The decreasing number of capital projects we have in Singapore; and,

(2) In our flush of high achievements, there is an increasing lack of tolerance and scorn for failures, creating an over-achievement oriented and pressurised environment.

I note from the Budget Statement that the Government's total development expenditure as a percentage of the GDP has dropped from about 12.6% in FY87 to 10.8% in 1988, and down to 8.2% for FY89. Many of the major public sector projects such as the MRT, roads, expressways and public housing have been completed. Unless the public and the private sectors can dream up other useful large scale projects, then Singapore may have to be faced with the prospect of only moderate expansion in future. Our people may have to be aware and accept, and be contented, that the previous spectacular growth of past years would not be easy to come by from now on.

Because we are caught up in this phenomenal growth in the last 2 1/2 decades, our success can be taken too much for granted. Very strong competitive pressures are being built up in all aspects of our life, for example in the schools, in the workplace and even among siblings at home. Perhaps we should try to find ways not to emphasize too heavily on achievements but to find ways of how we can make our people more tolerant to failure. Last week, we read in the newspapers about the very bright boys and girls who scored 10 straight A's in the "0" level examinations. We are extremely proud of these young boys and girls. But in the process of publicising these outstanding achievements, we should not forget that there are thousands who simply scored B's, C's and D's. But indeed we are also proud of them because they had tried their best in their work.

Sir, I am not advocating a move towards a more relaxed atmosphere, and that significant achievements be scorned. What I feel is that we should have an environment where, while achievements and excellence are properly recognized, there also should be some higher level of tolerance for failures. We know well that in the Western countries, like the US, businessmen who have operated failed ventures do not carry any stigma with them. After their failures, they just simply pick up the pieces and start all over again. In Singapore, there are already some symptoms or manifestations of an over-pressurized environment here. Two trends are of some concern. The first is that more and more people, both young and old, are turning to religion and seeking solace in the spiritual domain. The second is that some young professionals are getting increasingly tempted to emigrate to other countries where they perceive, whether rightly or wrongly, that they can lead a less demanding life or perhaps even a more rewarding life in those countries. These trends are issues worth deserving our detailed analysis and close monitoring from now on.

Perhaps the challenge in the future for the Government is not so much to build more imposing edifices such as the Raffles City and the like, or to chalk up more spectacular growth. The challenge should be for the Government to devote more time and resources to non-physical projects. Attention has to be devoted to the finer things in life, more gracious living, art and culture, sports and care for the less privileged and the aged. The final objective is to devote more effort to develop a more tolerant society and a more vibrant environment for all of us to live in.

Sir, now I would like to turn to just one final subject, ie, tax deduction for CPF contribution. I do sympathize with the Finance Minister on his desire to prevent the use of CPF contribution as a form of tax shelter. Hence, he has decided that CPF contribution is only tax deductible up to 40% of the annual ordinary wages. I would like to ask the Minister whether he would consider allowing certain categories of professions to be exempted from this rule. There are certain industries which depend on bonuses and commissions to remain trim and competitive. They are usually trades like the stockbrokers, dealers and salesmen. They are offered minimum base annual salaries but enjoyed substantial bonuses and commissions during good performing years. Their businesses are quite cyclical. Therefore, during difficult years, they have to stay trim and competitive by only offering very low base salaries. Hence, I would like to ask the Minister whether he could review the need to impose this 40% rule for such category of workers where high bonuses and commissions is a norm for them.

Sir, may I conclude by expressing my support for the Government's financial policy for the year 1989/90.

Dr Koh Lam Son (Telok Blangah): Thank you, Mr Speaker, for allowing me to join in the debate at this stage.

Sir, I am sure Singaporeans are gratified that the economic recession is truly over and the economy is strong again. I am heartened to note that this year's budget is geared not only towards meeting our economic but social objectives as well. This is necessary as Singapore becomes more developed. Tax relief to help with the burden of taxpayers with children and aged parents is long overdue. But it is better late than never.

Sir, the group of people who will benefit will be the taxpayers, ie, the middle class which comprise fortunately the majority of Singaporeans. But what about the lower-income group? They pay little tax, if any, and would therefore not benefit from the tax incentives. The budget has therefore not addressed the problems of the lower-income. Moreover, the two new consumption taxes on PUB bills and telephone charges will be felt by them. Incidentally, should not consumption tax start with luxury items?

Sir, I know it is the long-term goal of the Government to enable the lower-income group to catch up with the rest of society. And I recognize that this should not be achieved through handouts which will lead to our downfall. However, I feel that the Government can farm and implement appropriate programmes to achieve this goal and I would like to take this opportunity to suggest a few.

First, I strongly support the call made by the Member for Kebun Baru during the debate on the Agenda for Action last year to set up an advisory council to study in detail the problems of the lower-income group. I am sure such a committee will be able to come up with good recommendations that the Government can imple- ment to help the lower-income group to upgrade themselves.

Second, I would like to suggest that the Government implement a free tuition scheme for the children of the lower-income group. This can be organized with the assistance of the grassroots organizations or other social welfare organizations. Tuition is a way of life for the majority of Singaporean children and is taken for granted. But this may not be so for the children of the lower-income group. By farming this scheme, the children of our lower-income group will be given equal opportunity with other children and hopefully will do just as well.

Sir, many of the workers in the lower-income group may be reluctant to go for skills upgrading after working hours because they could be holding a second job in order to supplement their income. I would like to suggest that the Government look into possible ways of providing time off and sponsoring workers from the lower-income group for training and upgrading their skills. Just as monetary and leave incentives are given for working mothers to encourage procreation, I feel that support given to the lower-income group in this manner will help them tremendously.

My last suggestion pertains to the older workers in the lower-income group. I would like to ask the Government to consider offering this group of people the option to continue working beyond the retirement age to enable them to have an income for a longer period.

Next, I would like to speak on the tax rebates to encourage procreation. But before I continue, I would like to declare my pecuniary interest as an obstetrician. Bringing up a child is costly and any assistance is welcome. The budget emphasizes the importance of the family and will help working mothers who have the financial burden of hiring maids, foster mothers or putting the child in child care centres. The enhanced tax relief for working mothers and the tax rebate of $20,000 for the fourth child are most welcome. Certainly, those couples who are contemplating on the fourth child will be relieved. But what about the fifth child? In my opinion, since the underlying principle of the tax rebate is to encourage parents who can afford more to have more, the tax rebate should be extended to the fifth or even subsequent child.

I would like to raise three questions for the Minister. First, how would he compute the tax rebate for a working mother who is expecting twins in the third pregnancy? Will she be entitled to a rebate of $40,000 spread over 10 years?

Second, would the Minister give an assurance that those who adopt the new policy in good faith will not lose out in the future when policy changes have to be made? This is important because some people are apprehensive whether there will be a reversal of policy once the population goals are met.

Third, will the Government also consider removing another discrepancy between the third and fourth child incentives in also allowing the fourth child to have priority for primary school entrance? Sir, tax incentive is one of a number of measures to encourage mothers to have three or four children. And despite this, a mother may choose to have fewer children because deciding to have a child is a very private matter and fiscal incentives alone cannot play the decisive role. It certainly will not have the same influence on our Singaporean mothers as the mythical dragon.

Sir, the tax rebate in lieu of maternity leave for the third and fourth child has to be examined further. Presumably, this would allow mothers to go on unpaid maternity leave without suffering a financial setback. If this is the case, the rebate is insufficient and should be extended to cover up to eight weeks' of salary as this is the normal maternity leave period. Even with this adjustment, I am concerned that many private companies may still not grant unpaid maternity leave because of shortage of manpower, high work load or the difficulty of finding temporary replacements. Some mothers may also be reluctant to take the unpaid leave in order to have more savings. The result is that mothers having the third or fourth child will have very little rest before and after the labour period. And I wish to remind the Minister here that maternity leave is granted to mothers in the first place for health reasons. Eight weeks is the minimum period for recovery and recuperation from labour, especially if the delivery is by Caesarean operation.

Sir, it appears that we have forgotten the role played by the husband in deciding the third and fourth child. We should also look into ways where we can encourage the husband to view this positively. More important than tax incentives may be the incentives of having more time to care for the children. I would encourage the Minister to consider providing more generous paternity leave and perhaps a 5-day working week. I have come across families where the mother is unable to have another child because the father refused it. In many instances, Singaporean men still have the final say in such matters.

Finally, Sir, I am cheered by the increase in the personal relief for aged parents and handicapped dependants. However, I would like to point out that as it is more difficult and costly to look after a handicap dependant than an aged parent, I would have thought that the personal relief for the handicap dependant should be relatively more.

Dr John Chen Seow Phun (Hong Kah GRC): Mr Speaker, Sir, I rise to speak in support of the financial policy of the Government for the financial year 1st April 1989 to 31st March 1990.

It is a good budget, Sir, because we are able to take advantage of the buoyancy of the economy, and make considerable progress towards our long-term goals, both economic and social. The role of the public sector has been laid down by the Minister in the budget in no uncertain terms. The revenue and tax measures for both private companies and individuals are constructive and prudent, and essentially prepare us for the future. The need for greater procreation is emphasized and the importance of the family unit is upheld. The corporate sector has been assured that the Government will closely monitor the cost of doing business and help it stay competitive internationally.

The budget shows us very clearly where we are in our economic development, where we should be heading to, and what steps and direction we should take to get there. It is heartening to see that we are moving towards a more robust economic system which is more efficient, resilient and better able to react and respond quickly to external factors and retain our competitive edge.

Sir, I would like to take this opportunity to comment on a few measures proposed by the Minister in his budget. First, let me touch on the issue of tax deduction for contributions to CPF and other approved funds which the Member for Thomson has also touched on. At present, an individual enjoys tax deduction for obligatory contributions to the CPF or other approved funds. These contributions are made monthly and comprise two parts: first, 36% (12% from the employer and 24% from the employee) of his or her monthly ordinary wages not exceeding $6,000; and the second part, 36% of his or her additional wages not subjecting to any limit. It is therefore possible for a high-wage earner to take advantage of this statutory requirement, for tax purposes, if his or her additional wages can be made artificially large compared to the monthly ordinary wages which are then kept at $6,000 or below. To prevent the use of CPF contributions as tax shelters, the Minister has proposed that, in the case of additional wages, deduction will be limited to the statutory CPF contribution from additional wages not exceeding 40% of the annual ordinary wages.

Sir, with the existing CPF rule, a person who uses CPF contributions as tax shelters would have a large amount of additional wages close to his gross annual income. By gross annual income, I mean the sum of annual ordinary wages and additional wages.

With the introduction of the new rule, assuming his gross annual income remains the same, he will have to restructure his wages to make his additional wages to be 40% of his annual ordinary wages so as to maximize his tax deductible CPF contributions. This means that his additional wages have now reduced to about 28.6% of his gross annual income. And all his additional wages qualify for tax deductible CPF contributions. There is no doubt that the new rule is effective in preventing tax shelters. However, it does not distinguish between those who are deliberately exploiting the tax loophole and those who are not. The new rule affects significantly anyone whose income pattern is such that they have large additional wages compared to their annual ordinary wages. Therefore the normal wage earners, such as the salesmen, are likely to be unfairly penalized. They are likely to pay more tax compared to another person having relatively higher monthly ordinary wages but the same gross annual income. This is unfair and may have a dampening effect on our flexi-wage policy.

Sir, the problem arising from the new rule lies in the fact that annual ordinary wages are used by the Minister in the budget to determine the maximum additional wages which enjoy tax deductible CPF contribution. I propose that the gross annual income be used and therefore, instead of 40% of the annual ordinary wages being the ceiling of the additional wages which enjoy tax deductible CPF contributions, we should perhaps use somewhere between 25-30% of the gross annual income. The reason why I say 25-30% is that if we use 28.6% (the figure that I mentioned earlier) my proposal is no less effective than the Minister's in so far as preventing tax shelters without unduly penalizing the normal wage earner. Furthermore, if an individual's bonuses amount to 4.8 months or less, CPF contribution on all his bonuses will be tax free, which is the same as what the Minister has proposed. However, if an individual has more than 4.8 months of bonuses, then the ceiling of the additional wages which enjoyed tax free CPF contribution will not be restricted to 4.8 months but higher. At any rate, it is always pegged to 28.6% of the gross annual income. Sir, my proposal has the advantages of being fairer to everyone, as simple as the Minister's and not capping the portion of CPF contributions from the additional wages.

Sir, before I change the subject I would like to ask the Minister one more question which I think is of concern to some people, that is, under his proposal, whether there will be obligatory contribution to the CPF from those additional wages in excess of 40% of the employee's annual ordinary wages which will be assessed to tax.

May I turn briefly to the subject of property tax on non-HDB owner-occupied residential properties. Depending on the year the annual value was assessed, the present system gives different concessionary taxes to different properties. It is good that the Minister has proposed that a standardized tax rate of 4% of annual value be adopted. I would like to seek the Minister's clarification as to whether the annual value of all the properties will be updated and standardized? How the 4% has been decided and how much more revenue will be generated as a result of this change?

In conclusion, Sir, notwithstanding what I have said, there is no doubt that it is a good budget and I support the motion.

Mr Speaker: Order. I suspend the sitting and will take the Chair again at 2.55 pm.

Sitting accordingly suspended at 2.23 pm until 2.55 pm. Sitting resumed at 2.55 pm