Mr Speaker, Sir, in 1954 the People's Action Party, in enunciating its determination to strive for a more just and equal society for all citizens, spelt out this fundamental principle in its Constitution in the following terms, and I quote: - 'To abolish the unjust inequalities of wealth and opportunity inherent in the present system; to establish an economic order which will give to all citizens the right to work and full economic returns for their labour and skill; to ensure a decent living, and social security to all those who through sickness, infirmity or old age can no longer work.' This basic objective was steadfastly adhered to when our Party first came to power to form the Government and the financial policies of the Government were directed towards this end. There were inevitably some minor modifications in procedures from time to time, to meet changing situations, but we did not swerve from our declared principles of democratic socialism - for a more just and equal society. It is understandable since ours is an open economy that we should take into account international situations and take the necessary precautions to cushion our Republic and our people from the adverse effects of conditions that arise from time to time in our region and on the international scene. We have rightly developed an economy which can be described as a capitalist-socialist mix, Such an economy is required for our survival. During the last few years, however, Mr Speaker, Sir, we have observed a disturbing trend towards rank capitalistic practices, with no corresponding countervailing action to maintain our socialistic objectives. These changes in policy have been rationalised as being necessary for our continued economic growth in the face of changing world situations. And the people of Singapore, having confidence in our Government which has led us through difficult times and given us a higher living and continued economic and social development despite the many problems that have beset us from time to time, have accepted the new strategies of the Government as being the inevitable concomitance of development and economic progress for their continued welfare. But, Mr Speaker, Sir, the budget of the Minister for Finance represents a major departure from the fundamental principle of the People's Action Party for a more just and equal society. It is obvious that this budget is a capitalistic budget, for the benefit of the rich and the affluent. It is a budget aimed at making the rich richer and the poor poorer, negating the fundamental principle of socialism. It is evident from a glance at the proposed tax schedules that the so called "tax concessions" are calculated to mainly benefit those in the upper income brackets. The new tax rates clearly indicate that it is only those who draw above $35,000 a year are the real beneficiaries of the reductions in the income tax rates. Those in the lower income brackets get practically nothing except what may be termed a "token concession". It would appear that the token concessions for those in the lower income brackets are merely to justify the substantial concession for those in the higher income brackets. It is difficult to understand the rationale of the Hon. Minister for Finance for this unprecedented budget. Mr Speaker, Sir, the Minister for Finance has informed us that the Consumer Price Index has increased by 3.2% since last year. It will be appreciated that the Consumer Price Index variations are of greater concern to those in the lower income brackets - any increase in the Consumer Price Index will affect them more than those in the higher income brackets. But the tax reduction for those in the lower income group - those who really need concessions - is only around 1% to 2%. It will be evident, therefore, that the so-called "tax reduction" for those with small incomes has been more than eroded by the increase in the Consumer Price Index. This means that the larger section of the society - those at the bottom of the economic scale - will be worse off this year than last year. Mr Speaker, Sir, 1977 was a difficult year and we were asked to work harder and to be more prudent in our spending habits, and to accept certain other constraints, in the interests of national survival. This we all did cheerfully and collectively. The end-result was that, as a consequence of the cooperation and co-ordination of the efforts of the Government, Labour and Management, our economy grew by 7.8%. It is a credit to all concerned. But it would seem from the Hon. Finance Minister's budget that he seeks to reward only management and those in the higher income brackets through tax concessions. What about the poor working class? Do they not also merit some consideration? But no. Their pittance is 1% to 2% which has already been wiped out by the rise in the Consumer Price Index of 3.2%; whereas the more affluent and the rich get tax reductions of up to 18%. Where then is the equality in treatment? Are we not still dedicated to a more just and equal society? Mr Speaker, Sir, I find the budget even more puzzling because in 1976, when the Consumer Price Index dropped by 1.9%, there was apparently no need for tax increases in the 1977 budget. But now that the Consumer Price Index increased last year by 3.2% bringing with it attendant hardship to those in the lower income brackets, the Minister for Finance has chosen to add insult to injury by increasing the tax on telephones, televisions, cars, etc. - small amenities which bring happiness to workers when they are able to afford a little luxury here and there. It would appear then that the intention is to make the working class pay dearly for the small pleasures of life. They will feel acutely the additional tax burden, especially as the illusory tax concessions for them - the 1% to 2% - have already been wiped out by the rise in the Consumer Price Index. It is clear, therefore, that they were better off last year when there were no income tax reductions. Mr Speaker, Sir, during the last few years several voices have been raised in this House urging that the personal relief of $2,000 which was fixed in 1948 at the inception of income tax in Singapore, and has remained stagnant since then, be raised in view of the inflation that has taken place during the last three decades. All our representations, which reflect the sentiments, especially of those in the lower income brackets, have fallen on deaf ears, as far as the Ministry of Finance is concerned. Various excuses have been given to reject any increase in the personal relief. It would seem that this inflexible attitude is because wage earners are captives in the income tax net. The Income Tax Department finds them easy prey, although the revenue collected from those in the lower income brackets is minimal in terms of the $3,400 million collected by the Income Tax Department last year. The fact that a disproportionate amount of manpower is required to collect this minimal tax does not bother the Income Tax Department. It will be noted that on this rare occasion, in justifying the income tax concessions for those in the higher income brackets, the Minister for Finance has had at last conceded that he has taken into account the matter of inflation. I quote: "Fuelling this tendency was the effect of inflation, relatively mild in Singapore, which has pushed some income earners at all levels into higher taxation brackets." Mr Speaker, Sir, now that at last the Minister for Finance has conceded that there is inflation in the context of income tax, has he taken into account how this inflation has hit those in the lower income brackets and eroded the purchasing power of their hard-earned dollar? The 1% to 2% tax reduction for those in the lower income bracket is a mockery in the face of the rise in the cost of living and inflation during the last 30 years. One wonders at times whether the Minister for Finance is at all concerned with the views expressed in this House, or whether he is solely guided by the advice of his bureaucracy? I say this because on the one hand, although there have been frequent requests in this House for increasing the personal relief, the Minister for Finance has chosen to ignore the views of elected representatives. On the other hand, out of the blue, he has chosen to lower the rate of income tax for the benefit of those in the higher income brackets, although there was no representation in this House for such a change. One wonders what prompted the Minister to do this. Perhaps he has his own advisors. I am astounded at the rationale given for the concessions for those in the higher income bracket. I quote: "Aggravating the problem of equity or fairness in sharing the tax burden is the ability of many self-employed professionals to incorporate themselves into companies in order to sell their personal services, and thereby quite legally avoid paying tax at more than 40%, the company rate. Professionals and executives working for the public sector on salaries are unable to take advantage of this loophole in the law. Nor do they enjoy the perks of tax free 'expenses'." Mr Speaker, Sir, I am appalled at this argument. This is tantamount to saying that because some of those in the professions are organising themselves into corporations and have thus been able to avoid paying a higher rate of income tax, the Government has to grant them income tax concessions although they are perfectly within their rights to band themselves into companies. In any case, it is not at all certain that they are forming themselves into companies to avoid a higher rate of income tax. They may well be organising themselves into companies because the boom is over and money is more tight, thus making it more prudent and profitable for them to work in groups. Mr Speaker, Sir, the tendency for many self-employed professionals to "incorporate themselves into companies in order to sell their personal services" is as old as the hills. A large number of the older professionals incorporated themselves into companies many, many years ago, after working independently for a few years. This is a natural process among professionals. The ambitious young professional prefers to operate alone for a few years in the open market to prove his worth. After a few years, having demonstrated the value of his services, he seeks a greater measure of stability by getting together with a few colleagues and incorporating themselves into a company, so that collectively not only do they have greater security, but are able to offer more expertise by pooling their talents and resources. A closer examination of the newer companies will probably show that it is the younger generation who are now incorporating themselves into companies. This is a logical development. But the Hon. Minister for Finance appears to have misconstrued the situation and having been unduly alarmed by his misconception, has been stampeded into making concessions for fears which are absolutely unfounded. I am also astounded by the argument that tax reductions at the upper levels of income are necessary because "professionals and executives working for the public sector on salaries are unable to take advantage of this loophole in the law" and that they do not enjoy the "perks of tax free expenses". Sir, in regard to salaries it should be remembered that Government salary scales and allowances especially for professionals have increased considerably in recent years with rapid promotions so as to bring them almost at par with their colleagues in the private sector. Therefore, there is no need for those in the public sector to seek any "loophole" because at present under the existing tax schedule, they are subject to the same levels of taxation as their colleagues in the private sector. In regard to the so-called "perks of tax free expenses", what exactly are they? Is the Minister referring to entertainment allowance or the use of the company car? Or the company house? Surely all these perks have to be declared by those in the private sector to the Comptroller of Income Tax, and my understanding is that they are also taken into account in assessing the income tax payable. An entertainment allowance has to be justified as being necessary for the promotion of business. In any case comparable facilities are also available to senior officials in the public sector. My understanding of the situation is that if they have to entertain on official business, funds could be made available, provided the Minister for Finance is satisfied that such entertainment is necessary. Senior civil servants go abroad on official business at Government expense in the same way as their counterparts in the private sector proceed on company business. It is obvious, therefore, that the so-called perks are also available to the professionals in the public sector and if perchance the rules for these perks are a bit too rigid they could perhaps be liberalised by administrative action. Thus parity in treatment could be achieved without having to reduce the taxation rates in the upper income brackets and widening the gap between the haves and the have-nots. Mr Speaker, Sir, a few years ago at an UNCTAD meeting our Ministerial representative, in protesting against certain GATT regulations, pointed out that the end-result of certain regulations was that the rich countries were becoming richer and the poor countries poorer. He underscored the need for a revision in the existing regulations so as to close the gap between the rich nations and the poor nations. That was indeed necessary. But while on the one hand, we are seeking a more equitable distribution of wealth on a global scale, on the other hand, in our own Republic, new taxation scales are being introduced to make rich Singaporeans richer and poor Singaporeans poorer. There appears to be a contradiction in our approach. Finally, Sir, I would like to turn to another weak excuse given by the Minister for Finance to justify the increase in tax to meet the shortfalls created by reductions in income tax rates. I refer to the 150,000 people who, he says, should be paying tax on their income but do not do so because they are self-employed and keep no accounts. Mr Speaker, Sir, the Income Tax Department has been in existence for nearly 30 years and if at the end of 30 years they still say that they are unable to assess the income of 150,000 people, that is to say, another 50% of the existing number of 300,000 taxpayers, then something is radically wrong with the department. Or the Income Tax Department is content only to collect tax from law-abiding citizens while letting those who are clever enough to get away scot-free. This is a most inequitable situation. It is high time that those responsible bestirred themselves and made an effort to ensure that all Singaporeans are treated equally before the Income Tax law. Mr Speaker, Sir, there is an old Chinese saying that "a journey of a thousand miles begins with the first stop". Has the first step been taken by the Income Tax Department in this direction? They have had 30 years to work on this problem and I feel sure that the 300,000 captives of the Income Tax Department would be glad to learn whether they are paying a higher rate of income tax because there are 150,000 income tax evaders whom the Income Tax Department have so far been unable to reach and give parity of treatment in the matter of income tax. Mr Speaker, Sir, it may well be that this budget could be the proverbial straw to break the camel's back. 3.43 p.m.