TAX ON PUBLIC UTILITIES BOARD CHARGES

Mr Ling How Doong asked the Minister for Finance, with 3% Goods and Services Tax, why is there a necessity of 2% tax on Public Utilities Board charges.

Dr Richard Hu Tsu Tau: The Goods and Services Tax (GST) and the PUB tax were imposed for different reasons. A 5% utilities tax on PUB charges in excess of $40 per month was introduced on 1st April 1989 as a means to discourage the excessive consumption of gas, electricity and water. This conservation measure remains valid and should be retained. On the other hand, the GST is a general consumption tax levied on the final value of any goods and services consumed in Singapore and will therefore have to be imposed on top of the 5% utilities tax.

To avoid increasing the total tax levied on PUB charges, the utilities tax was therefore reduced from 5% to 2% on 1st April this year, simultaneously with the imposition of 3% GST. It is an offset.

Mr Ling How Doong (Bukit Gombak): I thought GST was meant to convert the present tax system into a broad based and more equitable one. I fail to see the reason why this particular tax cannot be abolished for the simple reason that if you use more you pay more GST. If you use less, you pay less GST. The same principle should apply here.

Dr Richard Hu Tsu Tau: I said that the 5% tax was originally used as a conservation tax and conservation is still an important consideration. I think we should retain it to discourage people from spending more rather than paying more because you spend more. We should spend less and pay less.

Mr Chia Shi Teck (Nominated Member): Sir, since the introduction of the 5% tax, has consumption been reduced? Has the 5% tax been effective?

Dr Richard Hu Tsu Tau: I do not know the exact figures. I would doubt that consumption has declined in absolute terms. What we are hoping for is that it will reduce the rate of growth because consumption of PUB utilities normally grows either in line or faster than GDP.