PROPERTY TAX FOR COMMERCIAL AND INDUSTRIAL PROPERTIES (Preferential rate for owner-occupation)

Mr Chia Shi Teck asked the Minister for Finance whether he will introduce an owner-occupation preferential rate for property tax for commercial and industrial properties.

Dr Richard Hu Tsu Tau: Mr Speaker, Sir, there is no economic justification to have a concessionary property tax rate for owner-occupied industrial and commercial properties. To do so would be to discriminate against businesses that operate from rented premises. It would distort the businessmen's choice towards buying as against renting properties.

In the case of residential properties, the concessionary tax rate for owner-occupation is given to encourage home ownership.

Mr Chia Shi Teck: Sir, does the Minister also want to encourage property ownership with its HDB shop sales scheme?

Dr Richard Hu Tsu Tau: I have said that the concessionary rate for home- ownership is introduced because widespread home-ownership is clearly desirable for social purposes, and a concessionary rate for other than private home-ownership will have very little economic justification.

Mr Robert Chua Teck Chew: Sir, will the Minister consider a lower property tax rate for industrial properties in view of the high rental or high land cost here in Singapore which is eroding the competitiveness for manufacturers?

Dr Richard Hu Tsu Tau: During the recession in 1985/86, we did reduce the property tax rate from 23% to 12%. Subsequently, with the recovery of the economy, it has been raised back, not to 23%, but to 16%. So a reduced rate of property tax has in fact been implicitly introduced. I do not think that at this stage we want to make further concessions unless there is substantial justification.

Mr Chia Shi Teck: Does the Minister know that the annual value has increased manifold since 1986?

Dr Richard Hu Tsu Tau: Yes, I do, because annual values are revised periodically and they of course cover a wide range of properties. Those which have been rising quite substantially are those which have not been revised for a long time. So some of the quantum jumps may look big, but they are being merely brought up to current market levels.

Mr Robert Chua Teck Chew: The Minister mentioned about the recession, but he is fully aware that the recent economic survey showed that the manufacturing sector did badly this year and it is hardly recovering. It is expecting a 1% growth this year.

So will the Minister consider giving manufacturers a relief at this time with a lower property tax rate for industrial properties?

Dr Richard Hu Tsu Tau: I am prepared to consider anything. However, I think the third-quarter results are beginning to look somewhat better. The prognosis is that it should be better in the final quarter and, hopefully, even better next year. Of course, if the situation should deteriorate substantially, anything is possible.

Mr Chiam See Tong: Sir, whilst the Government is encouraging individuals to own properties for social good, does not the Government also want to encourage Singaporeans to own their own commercial properties?

Dr Richard Hu Tsu Tau: Of course, we do, but not necessarily with incentives. Each person should consider how he should deploy his capital. He may decide that it is more profitable for him to own shares. Why should we dictate or try to influence him in his decision-making?