PERSONAL TAX CHANGES

Personal Tax Rebate

In 1997, the Government gave a 10% across-the-board rebate on individual income tax as a reward for individual effort and to share the budget surplus. Last year, despite the worsening economic conditions, the Government gave a 5% rebate on individual income tax to provide a measure of relief to taxpayers. Although some signs of stability have emerged, there still remain critical uncertainties in the external environment. Nevertheless, I have decided to restore the personal tax rebate to 10% for the Year of Assessment 1999, similar to 1997, in order to help taxpayers tide over this temporary difficult period. The estimated revenue loss to Government is $275 million.

Following the GST-related changes made to personal income tax, currently about 65% of individuals no longer pay income tax and therefore would not benefit from the income tax rebate. To extend help to these individuals, the Government will grant the same rebates on HDB rentals and town council Service and Conservancy (S&C) charges as in 1997 to citizens staying in rented and owner-occupied HDB flats. The rebates will be as follows:

a) One-Room Flats

Two months' net rent and three months' net S&C charges. The rental rebates will be made on 1st June and 1st September, and the S&C rebates will be made on 1st June, 1st September and 1st December this year.

b) Two-Room Flats

One month's net rent and three months' net S&C charges. The rental rebate will be made on 1st June, and the S&C rebates will be made on 1st June, 1st September and 1st December this year.

c) Three-Room Flats

Three months' net S&C charges. The S&C rebates will be made on 1st June, 1st September and 1st December this year.

d) Four-Room Flats

One month's net S&C charges. The S&C rebate will be made on 1st June this year.

e) Five-Room Flats

One month's net S&C charges, to be made on 1st June this year.

The estimated cost of these rental and S&C rebates is $39 million. The rebates will be given after deducting the GST offset rebates, the S&C grants associated with the utilities rebates and a special S&C monthly rebate, which I will now elaborate.

Special Rebate on Town Council Service and Conservancy Charges

To provide further help to tide over the present difficulties, Government will give a special rebate to Singaporeans living in HDB flats through town councils. The town councils will offer a one-off additional monthly rebate for citizen households living in 1 to 5-room flats for a period of one year, starting from 1st April 1999. The special rebates, which are about 10% of current gross S&C charges, are as follows: $2 per month for 1-room flats, $3 per month for 2-room flats, $4 per month for 3-room flats, $5 per month for 4-room flats and $6 per month for 5-room flats. These rebates will cost Government an additional $40 million.

Extension of GST-Related Offsets and Rebates for Two Years

In view of the difficult economic conditions, Government had announced in November last year that the transitional measures in the GST offset package, consisting of rental and S&C rebates for 1 to 3-room HDB households, would be extended by two more years. The rental and S&C rebates are as follows:

a) Rental Rebates

For 1-room flats: a rental rebate of $12 per month.

For 2-room flats: a rental rebate of $8 per month.

b) Rebates for S&C Charges

For 1-room flats: $8 per month.

For 2-room flats: $7 per month.

For 3-room flats: $4 per month.

The estimated cost of these rebates is $22 million per year.

Low income households which are not living in HDB flats can continue to receive help from the Citizens Consultative Committees (CCCs) Assistance Scheme, which was set up in 1994 when GST was implemented.

Offset Package for Utilities Rates Revision

The Government had in June 1997 announced the revision of water tariffs and the water conservation tax to uniform flat rates for all users. There have so far been two increases in July 1997 and July 1998. The next increase is scheduled for 1st July 1999. Despite the economic downturn, we must press on with our water conservation efforts and raise water tariffs and conservation tax as planned.

The water tariffs, including conservation tax, will increase by 15.3 cents to 24.4 cents per cubic metre for domestic consumers. The non-domestic water rate will increase by 5.8 cents per cubic metre to reach the target rate of $1.52 per cubic metre. As part of the water conservation effort, the waterborne fee will also be raised as scheduled, by 5 cents per cubic metre for domestic consumers and 9 cents per cubic metre for non-domestic consumers with effect from 1st July 1999.

The Government will continue to help lower income households cope with the increases in water charges. In 1997 and 1998, a package of annual utilities rebates and monthly S&C grants were given to citizens living in 1 to 4-room HDB flats to offset the increases in electricity and water rates. To help the lower income groups cope with the economic crisis, the Government has already announced in November 1998 that the package of utilities rebates and monthly S&C grants given in 1997 and 1998 will be continued for another two years. The cost to Government is estimated at $73 million per year.

As water charges are scheduled to increase further in July 1999, the Government has decided to double the utilities rebates from $100 to $200 for 1 to 3-room HDB flats and from $50 to $100 for 4-room HDB flats in 1999. This will cost Government an additional $41 million, and is more than sufficient to offset the increase in water costs for lower income households.

The utilities rebates will be credited against the utilities bills of eligible households for the month of September which are payable in October. The balance of the rebate not consumed within the month will be carried over until it is fully used up. Grants for S&C charges to HDB lessees and tenants, ranging from $36 to $66 a year, will continue to be given. The grants will start from July 1999 and will be $3 per month for 1-room flats, $4 per month for 2-room flats, $5.50 per month for 3-room flats and $4 per month for 4-room flats. Those lower income groups which do not live in HDB flats and hence are unable to benefit from the utilities rebates and S&C grants can obtain help from the CCC Assistance Scheme.

Tax Deduction of Certain Educational Expenses for Individuals

For Singapore to transform successfully into a knowledge-based economy, the need for continual training and skills upgrading cannot be over emphasised. Besides facilitating and providing funding for numerous training schemes, the Government would also like to encourage individuals to take the initiative to improve their skills and knowledge. Currently, a tax deduction of up to $2,000 is allowed for actual expenses incurred by individuals in pursuit of further academic and professional qualifications, or vocational qualifications related to their business, trade or employment. I have decided to raise the tax deduction cap to $2,500, to give further emphasis to the importance of lifelong learning and skills upgrading. The higher deduction cap of $2,500 will take effect from Year of Assessment 1999. The revenue loss is estimated to be $4 million.