PART III - REVENUE AND TAX CHANGES

Mr Speaker, Sir, I shall now move on to describe Government's revenue position and the tax changes proposed for FY92.

The amendments to the Constitution relating to the protection of reserves safeguard both the reserves accumulated by previous Governments as well as the income generated from investing them. The Government can use this derived income for debt servicing and other investment related costs, but not to finance other expenditure, unless the Elected President concurs. This will protect the real worth of the reserves.

In order not to draw on past reserves, the Government must finance all its operating and development expenditure from its operating revenue. In addition, the Government can spend surpluses which it has itself accumulated earlier in its current term of office, without referring to the Elected President.

Operating revenue is projected to increase by only 4.1% to $15.2 billion in FY92. This is in line with the slower growth expected this year. With operating and development expenditure budgeted at $14.2 billion, there will be a modest surplus of around $1 billion. The FY92 Budget is hence not expected to draw on the reserves accumulated by Government from its previous terms of office.

Our economy is entering the mature phase of its development. We are unlikely to grow as rapidly as in the past. Slower growth and an ageing population will lead to higher expenditure and slower revenue increase. This is a reality that Government will have to take into account in formulating its fiscal plans.

Notwithstanding this, we will continue to maintain an environment conducive for businesses to thrive. Government is committed to taxing factors of production as lightly as possible and will adjust corporate taxes downwards whenever the revenue position permits.

In the last Budget, I indicated that a White Paper together with the legislation for a comprehensive goods and services tax will be introduced in Parliament when it is ready. I would like to inform the House that the White Paper is expected to be tabled in Parliament in the second half of this year.

Finally, before I turn to the proposed tax changes for FY92, I would like to announce pending changes to the CPF contribution rates.

Government is committed to achieving the target of 40% CPF contribution rate with equal contributions by employers and employees. This target should be achievable before 1996 at the latest.

Government has decided that with effect from 1st July 1992, the employers' CPF contribution rate would be raised from 17% to 18%. The employees' CPF contribution rate will be reduced from 22 1/2% to 22%. As in previous years, I urge employees to recognise that the employers' CPF contributions are part of wage cost and to take this into account during the next round of wage negotiations.