OTHER TAX CHANGES

Reduction in Property Tax

Last year, I announced a reduction of the property tax rate for industrial, commercial and let out residential properties from 16% to 15%, with the aim of ultimately reducing it to 12% over 4-5 years. As a measure to further enhance the competitiveness of doing business in Singapore, I have decided to reduce the property tax rate by 2%, from 15% to 13%. The reduction will take effect from 1 July 95 and will involve a revenue loss of $214 million per annum for Government. The Government strongly encourages landlords to share this reduction in property tax with their tenants. The 4% concessionary tax rate for owner-occupied residential properties will remain unchanged.

Withdrawal of Property Tax Exemption for Land Under Development

At present, land under development are exempted from property tax for a period of up to 5 years. This tax exemption was introduced in 1987 to help entrepreneurs tide over the economic downturn in the 1986 to 1987 period. Given the current strength of the economy in general, and the property market in particular, this tax exemption is no longer necessary. I have thus decided to withdraw the property tax exemption for land under development with immediate effect.

The withdrawal of this tax exemption will only affect new projects. On-going projects that have been granted property tax exemption will continue to enjoy the concession until the projects are completed. Property tax exemption for land under development will henceforth only be granted to certain approved building projects endorsed by the Economic Development Board. These building projects must fit in with Government's aim to build up capabilities in particular industry clusters as well as lead to substantial economic spinoffs and benefits for Singapore.

Contract Note Stamp Duty on Trading of Stocks in Singapore

Stock trading has become increasingly globalized as a result of technological advances and increased interest by investors in foreign stock investments. For example, Asian stocks are increasingly being listed or traded in the major stock markets outside their home exchanges due to the strong international investor interest in such stocks.

To enhance our competitiveness and to continue to attract international investors to trade in Singapore and regional stocks on our Exchange, the Stock Exchange of Singapore (SES) has recently reduced its minimum stockbroking commission rate from 0.5% to 0.3% for transactions of Singapore stocks exceeding $1.5 million. This is a commendable initiative on the SES's part to encourage more trading activity. In support of the SES's efforts to keep stock transactions costs in Singapore competitive, I have decided to halve the contract note stamp duty on stock transactions from 0.1% to 0.05% of the contract value. This change will take immediate effect. Revenue foregone from the halving of stamp duty on contract notes is estimated at $135 million for FY95.

Waiver of Stamp Duty on Loan Agreements for SES Listed Stocks

To raise the sophistication of the stock market and to cater to the needs of institutional investors, the SES plans to facilitate lending and borrowing of SES listed stocks. Stock borrowing is widely carried out in major financial markets. With the increased sophistication of stock market participants in Singapore, there is scope for the growth of stock lending and borrowing in SES stocks. To support the development of such activities and encourage the growth of stock options trading, I have decided to exempt loan agreements for lending and borrowing of Singapore stocks, for ASCs, ACUs and residents outside Singapore, from stamp duty with immediate effect.

Water Conservation Tax

The water conservation tax was last increased in 1992. This successfully brought down the increase in demand for water from 5.4% in 1992 to 4.9% in 1993. However, despite the continued efforts by the Public Utilities Board to encourage water conservation amongst households and industries, the increase in demand for water has since climbed back to 6.5% for 1994.

Water is a scarce resource for Singapore as we import a large part of the water we consume. To restrain the growth in water consumption, Government has decided to increase the Water Conservation Tax on domestic customers who consume more than 20 cubic metres of water per month from 10% to 15%. The tax for non-domestic and shipping customers will also be increased from 15% to 20%. This tax change will take effect from 1st April 1995.

Duties on Cigarettes and Tobacco

Imported cigarettes are currently subject to both import and excise duties, while locally manufactured cigarettes are subject to an excise duty on the leaf tobacco and an excise duty on the finished product. To equalize the tax treatment between locally manufactured and imported cigarettes, import duty on cigarettes will be eliminated and excise duty on cigarettes raised to $115 per kg with immediate effect. In addition, local cigarette manufacturers will be exempted from excise duty on tobacco leaves used in the production of local cigarettes. Details of the duty changes for the various types of cigarettes and tobacco are in Appendix A (Cols. 117 - 120). Appendix A - CHANGES IN CIGARETTE AND TOBACCO DUTIES (Cols. 117 - 120)