EXEMPTED BUSINESS (Motion)

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EXEMPTED BUSINESS:

(Motion): Resolved,

That the debate on the Budget Statement be proceeded with beyond 7.00 pm and the proceedings thereon be exempted at this day's sitting from the provisions of Standing Order No. 91(3). - [Mr Mah Bow Tan].

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ANNUAL BUDGET STATEMENT: Debate resumed.

Prof. Ivan Png Paak Liang (Nominated Member): Mr Deputy Speaker, Sir, I rise in support of the motion.

I strongly support the Prime Minister's and Cabinet's vision to remake Singapore into a more caring and inclusive society where everyone belongs. Allow me, however, to offer four-and-a-half suggestions in response to the Budget.

My first suggestion concerns CPF top-ups. Singaporeans are concerned about growing old without sufficient support, and particularly about healthcare. The Government has heard these concerns. The Budget includes Medisave top-ups of $50-$350 and CPF top-ups for older citizens of $100. The total cost of these top-ups is $400 million. Like hon. Member, Mr Sin Boon Ann, I am however concerned that these funds are not focused.

May I suggest that we focus these top-ups on the people who need it the most? The Budget proposes to give top-ups to the rich and poor alike. But the well-off people will benefit relatively more from

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the income tax cuts. They would hardly notice a few hundred dollars of CPF top-up. So my proposal is, let us focus the top-ups on the needy. How about re-allocating the top-ups for the top quarter of citizens to the bottom quarter, and then our neediest compatriots can get double the top-up?

Mr Deputy Speaker, my second suggestion concerns estate duty. The Budget proposes a new relief for successive deaths that occur close in time. Allow me to propose a more radical change. Presently, estate duty is payable on the value of any estate with a $9 million exemption for housing and $600,000 exemption for all other assets, including CPF balances. Over 82% of our population own and live in HDB flats, and the market value of the flat ranges roughly between $50,000 and $600,000. A very much smaller proportion of our population own and live in private property. And, even so, how many private homes are worth $9 million?

For many years, we have over-invested in housing. The Economic Review Committee has recognised that and has made a number of changes to the policy in the last few years. But I think the Economic Review Committee has overlooked changing the estate duty system. Let me give you an example. If an industrialist leaves a $9 million factory in his or her estate, the estate duty would be levied on $8.4 million. If the same person were to sell her factory and to buy a house of equal value, there would be zero estate duty. Indeed, when I told a friend about this housing exemption, his immediate response is that when he gets older, he must remember to sell his business and re-invest the money in a big house. That way, his children will get the full amount and with no estate duty.

Clearly, the estate duty structure discourages enterprise that creates jobs.

Let me share with Members the estate duty systems in Australia and Hong Kong.

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Australia has rescinded estate duty. Hong Kong's estate duty provides an exemption of HK$7.5 million, that is, less than one-fifth of our exemption for housing, but only for one, and only if it was occupied by the deceased and his or her spouse and only if it passes to the surviving spouse. So a smaller exemption and three conditions. Ours is five times larger and no conditions.

Let me say it is time to re-balance estate duty, so that it is neutral between various assets. In closing on this point, let me disclose an interest. I have invested in listed shares, unlisted business. I own only a very modest condominium unit.

Mr Deputy Speaker, my third suggestion concerns a lean and effective Government. I applaud Government's initiatives to outsource. These initiatives would strengthen our private sector, while keeping the public sector lean and effective. In outsourcing, I propose that the Government impose a condition on the outsource provider. The condition is that the provider must use GeBIZ for all procurement of goods and services.

Let me explain. One of our public sector's greatest achievements is a clean and transparent procurement system. We have a level playing field among all vendors - SMEs have equal opportunity with GLCs - although hon. Members, Mr Inderjit Singh and Mr Ang Mong Seng, might disagree. Sir, let me qualify that. Let us say that we have a somewhat level playing field among all vendors - SMEs have almost equal opportunities with GLCs and MNCs. Be that as it may, I worry that outsource providers are not going to care so much about our clean and transparent procurement system. Hence, I suggest that all outsource providers under our public-private-people partnership (PPP) be required to use GeBIZ for all procurement. In this regard, I

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disagree with my hon. colleague, Mr Ang Mong Seng's suggestion that opportunities be allocated in closed systems. I think that our open system is one of our bedrocks and we should do our utmost to protect that.

In Singapore, competition is based on what you know and not who you know. Let us please keep it that way.

Mr Deputy Speaker, Sir, my fourth suggestion concerns taxation. The Budget proposes a number of tax incentives to particular industries. These add to a wide range of incentives - tax, grants, loans - that are given to particular companies and particular industries. My suggestion is that our key tax incentive ought to be a simple tax system with low overall rates.

I urge the Government not to create too many exemptions for particular companies, particular industries. The end result would be a system that benefits only accountants and lawyers. I do support initiatives to generate employment, even for accountants and lawyers, but let us not do it through a more complex tax system.

Personally, one of the big benefits that I have enjoyed, since returning to Singapore some 10 years ago is a very easy time around 15th April. Why? A US tax return, as the Members may know, even a simple personal return, takes days to complete, and that is even with software. I am proud that the Singapore return takes only a few hours, and without any specialised software.

Likewise, our corporate tax system is much simpler than those elsewhere. My wife was a tax lawyer in the US. She had this bible called "CCH" - Commerce Clearing House - which is stacks and stacks of US tax codes. In Singapore, we

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do not have that. It is a good thing. Let us keep it that way. Let us not lose sight of this advantage.

Mr Deputy Speaker, Sir, my last suggestion is rather minor and so I call it half a suggestion, that is why I have a total of four and a half. It concerns GeBIZ fees. The Prime Minister and Minister for Finance announced that, to benefit SMEs, GeBIZ would give all suppliers one free account. Members would remember I cheered. Senior Minister Goh asked me why I made such a big fuss. Why did I cheer? The reason is that this decision corrects a mindset.

Most Members who are in business would know that if you are procuring goods and services, you welcome more people coming to sell you things. It is a bit unusual to do the opposite - to levy a fee to exclude people who want to become your suppliers.

So here is my half suggestion. The GeBIZ fee for additional accounts should be on a sliding scale. Surely, the cost of maintaining the second, third and fourth accounts is not the same $320 as the cost of the first account. Now, of course, we are waiving the first $320, but what remains is that it is $320 for the second, third, fourth and fifth accounts. If I understand this correctly, we should be doing this on a cost-recovery basis and not a profit maximisation basis. I think it makes more sense to have a sliding scale fee.

Let me disclose an interest here as well. I have investments in several small businesses, as previously disclosed, and I am a director of several companies. These would benefit from a sliding scale.

Mr Deputy Speaker, Sir, I strongly support the motion. I very much strongly support the Government's vision to build a great nation out of Singapore - a little country, great nation. I do hope that

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these four and a half suggestions would go some way towards helping us build that great nation.

Mr Zainudin Nordin (Bishan-Toa Payoh): Mr Deputy Speaker, like many of the hon. Members in this Chamber, I would like to join in the debate on the Budget Statement delivered by our Prime Minister and Minister for Finance.

Sir, the 2005 Budget arrived against a backdrop of solid economic expansion that took place last year and Singapore's trade dependent economy grew 8.4%, the strongest in the past four years. Furthermore, this year, we were told that we could expect growth of between 3-5%. As I understood, Sir, the 2005 Budget seeks to refine and improve policies of the previous Budget. I support the need to strengthen the country's economic position by enhancing Singapore's competitiveness in the global market place. It is, in fact, an important focus.

The Budget also proposes measures to build an economy that is both dynamic and resilient, while encouraging the entrepreneurial spirit and strengthening the oneness of our society. Similarly, the learning culture we hope to establish is also aimed to help Singaporeans adjust to the perpetual changing economy.

Allow me, Sir, to raise some points that I hope the Government would give due attention and resources in the coming financial year. Sir, I believe that one of the major challenges of the Government is greater social redistribution. The economic recession of 2002 and the SARS epidemic have both demonstrated the importance of closing the growing income gap between the growing middle upper class Singaporeans and those who lost out and the under class, when the tide of globalisation hit us. As we know, older and under-qualified workers who, due to the low level of education and other

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factors, fill the ranks of this blue collar class and their expectations need to be dealt with.

How do we deal with the problem of increasing arrears, for instance? Should we consider increasing social handouts? Is that the way to go? It is unfortunate that there is the perception that as Singapore develops, it is beginning to alienate a group that has fallen behind. The recent proposed changes in the individual tax rates may unintentionally fan this perception, where the lower income bracket receives less or no tax rate reduction, while the reduction of the upper income bracket is 1% over the next two years. Nevertheless, many also realise and are thankful of some of the goodies that have been proposed in the Budget for almost every strata of the society, the lower income inclusive, such as the Edusave, Medisave and CPF account top-ups. I do believe, Sir, that we would never get enough of the handouts and there would always be a segment of our society who feels that more could be given to assist them in this difficult time. If, indeed, this negative perception is left unattended, it may bring about undesirable cracks in our society. Unity is something we would not want to compromise in the long term.

Youth potential and challenges. The young, Sir, is our resource. They represent the key of our future. However, having said that, the older generation must not be marginalised. Their experience and knowledge are valuable. The contributions and sacrifices must be mentioned and appreciated. We must concede that, more often than not, the younger generation who sees the prosperity of the present, but fail to appreciate the risk and uncertainty of the past, takes much for granted.

Our relatively small economy is fragile and steps must be taken to protect it. We need to be reminded of this time and

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time again. Prosperity, Sir, is problematic in one respect. It raises quite different expectations and generates comfortable frames of references that could be misleading. This is where the older generation differs. As we know, experience conditions perception. The senior citizens have seen Singapore with few chips at hand, weaker and much more vulnerable. They tend to accept measures that strengthen the common good.

The next issue is the difficulty of graduates to get jobs. Although the job market seems to be improving, we still get regular feedback of young graduates struggling to get jobs. The data of last year's statistics are quite telling. In June 2004, some 9,000 graduates were unemployed, about 20% more than two years ago. That works out to about a quarter of Singapore's current annual birthrate. The National University of Singapore said that the number of graduates who did not find jobs within six months after graduation has risen to over 7%. Unemployed graduates from Nanyang Technological University has also increased to 10.9% of the cohort.

If our young graduates and talented ones are having difficulties finding jobs, I believe the situation is worse for those without proper qualifications and skills. There are several reasons given to this trend. Besides the usual ones like the foreign influx, job outsourcing and the general economic situation, some say our young Singaporeans are choosy and are not in a hurry to work in the short term. Others say their lack of experience is used against them by employers. Whatever the reasons are, we need to try and overcome this situation, as our graduates would face increasing competition from abroad.

Let me now move our attention to another form of threat that potentially

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could be a major problem for our younger generation. There are many worrying trends that come to mind in this changing social landscape that has resulted from globalisation, one of which is the use of drugs and specifically, synthetic drugs, as the new lifestyle comes into practice. This new habit has taken a foothold in our country. It is a clear reflection of changed values, deteriorating values to be more precise. Synthetic drug users now make up 54% of those arrested, while heroin users form 31%. The inclination towards synthetic drugs as opposed to heroin, even though both are equally undesirable, is regarded more fashionable and the majority of the users are in their 20s, in their prime. How tragic. Though the number is still small now, could we afford this - some of our young that is lost to drugs? So, what more could we do in this area?

So far, our nation has done well in experimenting with new technologies and new trends to make sure that we remain ahead of the game, life sciences, biomedical engineering, nanotechnology, IC designs, etc, the list could go on. However, we must not be complacent. The old methods and tricks would cease to work after a while. As China and India come to being and continue to rise, so would the nature of challenges that would face us. They would increase in terms of sophistication and levels of playing field. And, when they do, we must be ready and vigilant, not reactive and slow to respond.

Mr Deputy Speaker, Sir, I am very pleased that sports has been recognised as the fifth charitable purpose. I would like to thank the Prime Minister and the Minister for Finance for this. I believe that this would significantly help promote its importance and help build the sporting community that we envision. In sports, we started the year with a big bang, with 16th January being a glorious date for all football fans. It was the day when we

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took home the Tiger Cup with a resounding win at home and away. Since its inception in 1996, the Tiger Cup has been a symbol of football supremacy in Southeast Asia and this is the second time that we have taken the silverware home.

Sir, we should continue to support sports development and provide the relevant resources for it to grow and the sports industry to gain a respectable footing in the Singapore economy. This is not impossible. As we nurture and support more champions like Remy Ong, the Lions, Li Jia Wei, Mardan Mohamed, Jing Ju Hong and more, these professionals would be role models and success stories for our young.

Let me now touch on the arts and creative industry. We must also grow the creative industry because we still have a long way to travel. Establishing the arts school is a positive step but a lot more could be done in this area, in terms of recognition and resources.

I would like to see MICA receive more support so as to do a better job in creating our cultural capital. Like education, this is a long-term investment that requires commitment and patience. The results will show in time but, in the meantime, we must persevere and continue to provide more resources.

Another important factor I wish to highlight is the need to introduce the arts to our children at a younger age - ideally, during their pre-school years. This is imperative if we are serious about developing talents. Familiarising them much later has been proven to be not as effective, a claim few can refute. I am glad to know that NAFA is now starting a unique pre-school programme that has strong focus on arts and music. This is a positive development that I would encourage.

Sir, as these two areas of industries grow, there will be a need to increase the

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pool of qualified arts and sports teachers and professionals. Maybe it is timely for our polytechnics and local universities to introduce more courses in sports and arts.

Sir, in conclusion, it is my earnest hope that this year's Budget will create opportunities for all. All social groups should be able to ride this current wave. In terms of societal unity, the current Budget does concentrate in creating a stronger sense of community among Singaporeans. Clearly, our hearts are where they should be.

Sir, I support the motion.

Dr Ong Seh Hong (Aljunied): ( In Mandarin ): Mr Deputy Speaker, Sir, the Prime Minister and Minister for Finance tabled the 2005 Budget which takes into account the needs of the whole nation as well as the individuals from every strata of society. On the one hand, it promotes economic growth and, on the other hand, it takes care of the disadvantaged in our society. At the same time, the Prime Minister also explained the need to establish a lean and effective Government.

While supporting this Budget, I would like to put forward a number of my views for further improvement to it. For the provision of the expenditure, the Budget lays out that every Ministry's expenditure will be pegged to a certain percentage of the nominal GDP. Therefore, when the economy is expanding, although there is a cut of 5% for every Ministry except MINDEF, every Ministry will, in actual fact, have a greater allocation than last year.

I feel that in this way, we will not be able to effectively control the expenditure of the Ministries; neither will it encourage the Ministries to raise their productivity. Although I am not an economist, I feel that from the economic point of view, when the economy is doing well, and

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public expenditure increases, it will lead to inflation. When the economy is slowing down, public expenditure will decrease. This will magnify the effect of the economic cycle. In my view, when the economy is doing well, the Government should put aside the surpluses, and when the economy is in recession, such surpluses should be used to stimulate our economy, to achieve the counter cyclical effect. It can then mitigate the effect of economic recession. I therefore suggest that, in future, the Government should not base its expenditure on the percentage of the nominal GDP alone, but also take into account the margin of GDP increase or decrease.

The main theme of the Budget this year is creating opportunities and building an inclusive society. The Budget talks about creating opportunities. It seems that these are limited to the commercial enterprises and financial institutions, so that they can make more money. Like other MPs who have spoken, I have heard certain feedback from the people. These people are worried about the cost of living, their work, and about the cost of healthcare. Many retailers in HDB estates have not benefited from the growth in the economy. Many of them are struggling. Therefore, the Government should make sure that the opportunities we create are also made available to them.

The Government announced a slew of measures to stimulate our financial services, wealth management and logistics hubs, and so on. However, can we make sure the prosperity of these sectors also benefit our workers, especially our elderly workers who are worrying about losing their present jobs? When the economy is restructured, workers who are retrenched should be given retraining so that they can find jobs in the new economy, have enough income to support their families and provide

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better education for their children. What I worry is that when we try to promote financial services, wealth management and so on, would the people who are retrenched benefit from this? Perhaps they are not able to take up such jobs, and we have to resort to getting talents from other countries. I am not opposed to foreign talents. However, I hope that when we create such new services and industries, we should make sure that enough jobs are created for our local workers who have been retrenched.

Mr Deputy Speaker, Sir, another point I wish to raise is that when we promote new industries, should we make them part of our enterprises? In the past few decades, in the 70s and 80s, when we developed our industries, we mainly attracted MNCs to Singapore to set up their manufacturing bases. In this way, they created many jobs for Singaporeans and we have benefited from the presence of these MNCs in Singapore. However, we do not seem to see the emergence of our local MNCs. Therefore, I hope that when providing all sorts of incentives for these new industries, we should make sure that our local enterprises also benefit through technology transfers, so that our local people can learn and master such technology. In this way, we can truly say that our economy is restructured.

Thirdly, I want to talk about retailers in the HDB estates. Sir, many shops in the HDB estates are facing high business cost and high rental. Many MPs have spoken on this. I am glad to see that the HDB is putting forward this 3R scheme to help them to restructure, relocate and to retire. Before such a scheme is carried out, I hope the Government will allow them to continue enjoying certain rental rebates. Otherwise, before the 3Rs are implemented, they would have the 4th R - "Rest in Peace", and close down their shops.

When replying to a Question for Oral Answer, Minister Lim Hng Kiang did not

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agree that the rentals for existing tenants should be revised downwards when the market rate is lower, unless the tenants could promise to accept an upward revision when the market rate goes up. Theoretically, he is right. But what people want to see is a warm-hearted Government and hope that the Government will provide an umbrella for them on a rainy day. When the economy is slowing down, what the businessmen want is some compassion from the Government so that they can survive. Therefore, I hope that we can help them to protect their rice bowl and not let them lose their jobs, so that they would not have to join the queue at the CDC for help. Therefore, I would like the Government to reconsider their request for an extension of rental rebates. We should also lower the rentals for those who are paying higher than market rate rental.

Sir, I do not have the details of the 3R scheme. I hope that such restructuring should also mean rejuvenation, so that new life could be injected into the neighbourhood shopping precincts. People say that the decline of such shopping precincts is due to the change in people's buying habits. However, HDB as the developer and landlord of HDB shops had failed to restructure them in time and failed in the promotion of HDB shops. We can see that the owners of private shopping centres, having collected rents and conservancy charges, carry out promotion and publicity exercises regularly for the shopping centres, so that these shops could do well. Whenever new shopping centres spring up, old shopping centres would carry out upgrading works to match them. The landlords also benefit as they can enjoy higher rental return if the centres do well. However, HDB has never done anything to help the heartlander retail shops by way of promotion or publicity. The old shopping precincts are not ideal in their design because it does not facilitate a

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convenient flow of pedestrian traffic and crowd control. Some of the centres are not properly ventilated and there is no proper shelter against rain or sunshine. I wonder whether these shopping centres can be rebuilt or merged into one big shopping mall to become a modern shopping centre with broad passage ways, high ceilings, ample lighting and ample parking spaces. I feel that although people have changed their shopping habits, many people still need such shopping precincts in HDB estates for their shopping convenience. However, the upgrading of the physical facilities is not enough. The HDB should mobilise and organise all shopkeepers, so that these centres can be properly managed and promotion activities organised regularly.

Next, I want to touch on the issue of loss carry-back tax provision. On the surface, such provision can help the SMEs who have difficulty in cash flow. However, the actual benefit is not significant for them because many SMEs do not pay corporate taxes. Even if they do pay taxes, their taxes are quite negligible. Even if they can apply for such an allowance, the amount is not big enough. At present, our corporate tax rate is 20%. So the maximum amount of allowance allowed is $20,000. Therefore, what they can get back is very little in amount.

According to the Budget, such a rebate can be given to them only in 2006. I wonder how many shops have to close down before we lend them a helping hand. If we want to help them, why do we not allow them to enjoy such a tax exemption with effect from this financial year?

Another point is whether the refund by IRAS can be carried out speedily when such a loss carry-back provision is claimed. I hope the tax authority will not

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drag its feet as far as tax refund is concerned.

The next point is that all these retailers are also very concerned about the foreign workers' levy. One retailer told me that the Government, on the one hand, allows him an exemption of a GeBiz electronic account, saving him $320 a year but, on the other hand, imposes a higher foreign worker levy. For every worker, the levy will be increased from $50 to $80 and then to $100. So, he would have to pay $480 a year more now, and then $600 more later on. Now that the economy is just beginning to pick up, they have to suffer the impact of higher business cost! The business people are hoping that the levy increase could be delayed or the margin of increase be smaller.

After talking about the SMEs, now I would like to talk about retirement. Yesterday, Low Seow Chay spoke about Singaporeans who bought properties beyond their means. He gave a very detailed analysis on that. I just like to add some supplementary details. I feel that the Government can help the people who had bought their houses or properties, especially HDB flats, when the property prices were very high. The worst hit are those who sold their HDB flats when the prices were very high and bought another flat from the resale market at even higher prices. They are in the worst position. Many of these people are having difficulties servicing their mortgage loan, and even if they were to sell their flats now, they would not be able to pay off the outstanding loan. Although many of them could be said to have brought about their own misfortunes, we should find some ways to help them.

Furthermore, as we help them, we must prevent such a situation from happening again. Dr Low suggested that

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we must educate the public. However, when HDB counsels the prospective buyers on financial management at the point of sales procedure, it would be too late. I think it is most important that HDB sets a minimum income level for purchase of each type of flat. Presently, the HDB only sets an income ceiling for flat purchase. Perhaps we should limit the buyer to the type of flat they can afford based on the total family income. Below certain level of income, they cannot buy a bigger flat. This will prevent Singaporeans from buying beyond their means and at the same time ensure that they have enough money left in their CPF account for their old age.

We should also consider the age of the purchaser. If the prospective buyer is nearing retirement age, HDB should not allow them to purchase the bigger flats unless they have enough cash to pay for the full purchase price, or at least the major part of it.

Another way to help our people to build up bigger retirement funds is for the CPF Board to help to earn a higher return for the account holders. At the moment, we let our CPF account holders invest their money at their own discretion. However, many Singaporeans lack the professional knowledge in investing their money. Also, because the amount they invest is small, they attract a higher risk and higher investment cost. I feel that the CPF Board, as the guardian of three million CPF account holders, should help the account holders to earn more returns on their deposits. With huge amounts in the retirement funds, the CPF Board would have more power in negotiating better deals for the CPF members. As at the end of last year, there were some $111 billion of the members' funds deposited with the CPF. If we can get 1% more in return, we will actually create an additional $1.1 billion. This is a significiant amount.

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Another area I would like to bring up is the Supplementary Retirement Scheme. This is a very good scheme because it encourages those with surplus cash to put more money into their retirement nest. But I feel that, at the moment, linking the ceiling that you can put into SRS with CPF contribution cap is not logical. The ceiling for contributions to the CPF has been reduced to $5,000. Prime Minister Lee mentioned that the CPF is the basic retirement fund for every Singaporean. We should encourage the people to put in more into their own retirement fund. I feel that if you reduce the CPF contributions and reduce the SRS contribution, the total amount is actually reduced. So, we should increase the SRS ceiling when we reduce CPF contribution, so that those people who like to save more in the SRS fund can contribute more and save more for their old age.

I hope that the Government can relax this rule. After all, the SRS fund is different from the CPF. It is not tax free. It is deferred tax. I feel that this is a disadvantage, especially to the young people. This is not very attractive as the tax rate in Singapore has been falling for the past few decades. It is very difficult for us to ensure that in the future, our tax rates will not go up with an ageing population. If we need to have more taxes to take care of the older population, there might be a possibility that the tax rates may go up in future. For a person in his 30s, a professional, or a high-income earner, if he were to put his money into the SRS and 30 years later, he takes it out and the tax he has to pay later is higher, then it is not to his advantage.

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Thus, I suggest that the Government should either make it tax free or at least we should give tax exemption to a certain ceiling, or to guarantee that if the tax rate is higher when the money is withdrawn, then the lower tax rate when the saving is deposited prevails. This would encourage the people to put more money into their retirement funds.

On the whole, this is a very good Budget. It takes care of everyone. It is very comprehensive. I am very happy. I therefore support this Budget.