CO-OPERATIVE SOCIETIES (AMENDMENT) BILL

Order for Second Reading read.

The Minister of State for Community Development (Dr Seet Ai Mee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, this Bill seeks to amend the Co-operative Societies Act to subject:

(i) co-operatives to a contribution rate of 5% to the Central Co-operative Fund (CCF) for the first $0.5 million of their surpluses; and

(ii) the surpluses of co-operatives in excess of $0.5 million to a contribution rate of 20% to be paid to the Singapore Labour Foundation (SLF) or the CCF at the option of the co-operatives.

Under the existing laws, co-operatives are exempted from paying corporate tax but are required to contribute 5% of their annual surpluses to the CCF. The CCF is used to further the co-operative movement in Singapore and to provide assistance to co-operatives in the areas of education, training, research and audit.

The history of co-operatives in Singapore dates back to the 1920s. In 1924, the British Government enacted the Co-operative Societies Ordinance for the Straits Settlements which included Singapore. In 1970, the Co-operative Societies Ordinance was replaced by the Co-operative Societies Act. By then the number of co-operatives had increased to 90. The principle of co-operation and self-help has remained the underlying philosophy of the co-operative movement in Singapore. In recognition of their role, co-operatives are given tax-exempt status.

The development of co-operatives was given an impetus with the formation of the NTUC Co-operatives in the 1970s: NTUC Income and Comfort in 1970, NTUC Denticare in 1971 and NTUC Welcome (now Fairprice) in 1973. These co-operatives were set up to cater to the needs of their members as well as to the general public. This was to help keep the cost of living down for the man-in-the-street in Singapore. Over the years, these co-operatives have done well and expanded both in scale and size of their operations.

Co-operatives cannot be strictly equated to commercial companies. This is because co-operatives are basically founded on the principle of co-operation and self-help and are subject to the restrictions in operations as specified by the Co-operative Societies Act. For example, dividends paid to members cannot exceed 10% of the shares or subscription capital without the Registrar's approval. At least 5% of their annual surpluses must be kept as liquid assets in the reserve fund. Given the increased scale and scope of operations of many large co-operatives, the Government feels that there is a case for increasing the contributions of co-operatives to the Central Co-operative Fund. This Bill therefore provides for the contributions to be increased from the present 5% of surpluses to 5% of the first $0.5 million of surpluses and 20% of surpluses exceeding the first $0.5 million.

As the larger co-operatives are mainly sponsored by the labour movement and their members are also from the labour movement, the Government has also decided to allow co-operatives to opt to channel their additional contributions over the first 5% to the Singapore Labour Foundation instead of to the Central Co-operative Fund. These contributions will enable the Singapore Labour Foundation to have the resources to embark on projects benefiting workers.

To provide for these changes, sections 2, 71 and 72 of the Co-operative Societies Act will need to be amended, as proposed in this Bill. There is also a provision to require co-operatives to give two years' advance notice for change of option for contributions to either the SLF or the CCF. This will enable the managers of the SLF and CCF to make the necessary administrative arrangement and adjustment.

Sir, I beg to move.

Question proposed.

Mr Goh Chee Wee (Boon Lay): Mr Speaker, Sir, the co-operatives which will be most affected by the Amendment Bill are the NTUC co-operatives such as the NTUC Income, NTUC Comfort and the NTUC Fairprice. These co-operatives were set up to fulfil a useful social objective, for instance, NTUC Fairprice helps to stabilise prices and keep down the cost of living.

So far, the healthy surpluses made by NTUC Fairprice have enabled the co-operative to expand its network of supermarket outlets to various parts of Singapore. From time to time, the co-operative receives requests from the residents of the new housing estates and their Members of Parliament to open new outlets in their estates. But NTUC Fairprice has to compete with other supermarkets and stores in the tender for premises. The co-operative does not receive special preferential treatment from HDB.

I would have preferred that we continue with the present arrangement which requires the co-operative to pay only 5% of their surplus to the Central Co-operative Fund. In this way, the NTUC co-operatives could continue to use their financial resources to further improve and widen their services to the consumers and the community. But I am also aware of the complaints which some of the Fairprice competitors used to make, that is, NTUC Fairprice is not competing on an equal footing because it does not pay corporate income tax. If NTUC Fairprice is not efficiently run and fails in its business, I suppose no one would view the co-operative as a threat. But as the co-operative grows bigger, you can only expect complaints from the competitors. So here we are, the Government is now proposing to make the co-operatives pay more to the Central Co-operative Fund bringing them closer to what commercial firms would pay by way of income tax - the application of the principle of equal misery.

Between paying income tax and making contribution to the Central Co-operative Fund or the Singapore Labour Foundation, I would of course prefer making contribution to the Singapore Labour Foundation for the simple reason that the money collected by the Singapore Labour Foundation could be used to finance projects and programmes which would benefit union members and workers and their families.

I therefore support the provision of the Amendment Bill which allows the co-operatives to contribute to the SLF. I would also like to add that every year, NTUC Fairprice pays patronage rebates to the customers. For instance, in 1988 NTUC Fairprice paid out $7.2 million as patronage rebates. This is equivalent to about 40% of the total surplus. So with the proposed increase in contribution to the Central Co-operative Fund or SLF and the patronage rebates paid out of the surplus of the co-operative, the contribution made by NTUC Fairprice to the Government and the community will be sizable, certainly far exceeding the amount it has to pay, if it is required to pay corporate income tax.

I hope this will put to rest any allegations that the co-operative has undue advantages because of its tax-exempt status, and my comments apply not only to NTUC Fairprice but also the other NTUC co-operatives.

Sir, I support the Bill.

Mr Lew Syn Pau (Tanglin): Mr Speaker, Sir, I rise to support the Co-operative Societies (Amendment) Bill.

Before I continue, I would like to declare my interest as the General Manager of NTUC Comfort, which is a co-operative society, and also as an Executive Committee Member of the Singapore National Co-operative Federation (SNCF).

The main amendment is to section 71 which seeks to vary the amount of contributions made by co-operative societies to the Central Co-operative Fund (CCF). With the passing of this amendment, co-operative societies will contribute 5% of the first $0.5 million of their operational surplus to the CCF. For surplus in excess of $0.5 million, the co-operative societies will now have to contribute 20% of their operational surplus, but they can opt to pay this either to the CCF or the Singapore Labour Foundation.

First of all, let me say that there are very few co-operative societies which have operational surpluses above $500,000 and hence would not be affected by this amendment. Those affected are the larger NTUC co-operatives such as NTUC Comfort, NTUC Fairprice and NTUC Income. This 20% contribution will bring the operations of larger co-operative societies more in line with that of companies under the Companies Act. Hopefully, this will lay to rest complaints of unfair competition from some quarters in the commercial world.

However, I would like to take this opportunity to say that even under the present regulations which require only contribution of 5% of surplus to the CCF, many NTUC co-operatives are already contributing significant amounts of their surplus to support and sponsor NTUC as well as Singapore Labour Foundation projects and activities for the benefit of all workers, sometimes in excess of the 31% corporate tax paid by companies. The NTUC co-operatives, therefore, welcome this move as it serves to institutionalise what is already common practice among us.

For the non-NTUC co-operatives with surpluses above $500,000, it may mean a greater financial contribution in the future. The Singapore Labour Foundation, however, may wish to consider extending benefits to members of such co-operative societies in order to attract them to opt to contribute 20% of their surplus to the Singapore Labour Foundation rather than the CCF. I support the contributions to the SLF as its objectives are much broader in scope, catering to all workers in Singapore, and not just members of co-operative societies or members of trade unions only. From the major projects undertaken in the past, the Singapore Labour Foundation has also shown that it is better placed to utilise these contributions from such surpluses.

I would also like to take this opportunity to talk about the Central Co-operative Fund. The uses for the CCF are spelt out in section 71(4) of the Co-operative Societies Act as follows:

'The Central Co-operative Fund shall be used to further co-operative education, training, research, audit and for the general development of the co-operative movement in Singapore.'

Presently, it collects about $1.6 million in contributions from all co-operative societies every year, and disburses only about $500,000 to fund the Singapore National Co-operative Federation. In my view, considering the contributions collected, not enough is being done by the CCF to promote co-operative education, training and research, apart from that done by the SNCF. Since SNCF is the apex body representing the co-operative movement in Singapore, I would like to request the Minister to consider giving the SNCF greater say over the administration of the CCF for funding SNCF programmes and activities. Secondly, apart from funding the SNCF, I feel that the CCF should also play a more active role in achieving the objectives of the Fund.

Dr Seet Ai Mee: Mr Speaker, Sir, I thank the Members for Boon Lay and Tanglin for their support of the Bill.

As Mr Goh Chee Wee has aptly put, the NTUC Fairprice supermarkets help and assist greatly in keeping the cost of living down for all Singaporeans. I am rather glad that he supports the Bill in that the monies from the NTUC Co-operatives be sent to the SLF instead of the CCF.

In answer to Mr Lew Syn Pau's question, he is quite right in saying that the major contributions will be coming from the NTUC co-operatives. However, of the 63 co-operatives, eight currently qualify for the 20% contribution. These include the four NTUC co-operatives and also the Singapore Mercantile Co-operative, AUPE Multi-Purpose Co-operative, Telecoms Co-operative, Singapore Police Multi-Purpose Co-operative, Singapore Government Servants Co-operative and PSA Employees Cooperative.

In answer to Mr Lew's request that for the non-NTUC bodies contributing to the SLF Fund the SLF consider extending benefits to these, let me explain that the privilege of membership in the SLF is not dictated by the Ministry of Community Development. I therefore would suggest that those interested co-operatives who want to contribute to the SLF instead of the CCF contact and negotiate with the SLF directly to see what privileges they can get if they exercise this option.

Mr Lew has also brought up the point about utilisation of the Central Co-operative Fund. The CCF is only a fund, Sir. It is like a bank. The money is kept there and it funds the apex body, the SNCF, which is the arm utilising this fund. The utilisation of this fund has been dictated by the Act. We have both repeated how this fund should be used, so I do not need to repeat it a third time. The SNCF is the body which utilises this fund and will organise the education and training courses. These courses include computer programming, use of word processing and other software, report and minute writing, managing a thrift and loan co-operative, public speaking and presentation skills, etc. The list is long. The subjects taught and courses undertaken are good. The participation level, however, can be improved.

Sir, I would like to assure the Member for Tanglin that my Ministry will work together with the SNCF to improve on the education and training programmes and improve on what we will be giving through the CCF to the co-operatives.

Sir, I think I have answered the questions of both Members.

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 Seet Ai Mee].

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