Mr Speaker, Sir, I beg to move, "That Parliament approves the financial policy of the Government for the financial year 1st April, 1981 to 31st March, 1982." Sir, I am once again honoured to have been delegated the authority by the Minister for Finance to prepare and deliver the Budget Statement under Articles 144 and 145 of the ConStitution of Singapore. Sir, hon. Members of the House have earlier been given a copy each of the Economic Survey of Singapore 1980 (Cols. 381 - 624). I shall, therefore, not go into detail in reviewing the performance of our economy in 1980. Singapore's Economy in 1980 Singapore's economy grew robustly in 1980, achieving a double-digit rate of growth of over 10% since the first oil crisis of 1973-74. Singaporeans have from all walks of life once again shown their remarkable capacity to overcome great odds. We are restructuring our economy in an inhospitable international economic climate. We did better than 1979 despite slow growth and high inflation in a world economy beset by the sudden contraction in oil supplies following the Iranian Revolution and the Iranian-iraqi War. Business enterprises trimmed and streamlined their organizations, shedding off excess baggage. They mechanized and automated. The Civil Service and statutory boards also rationalized. The Government pushed with higher wages, and pulled with fiscal incentives. Labour productivity surged forward, doubling to 5%. Had there been no productivity gains, the economy would have grown by only 5%, instead of over 10%. Our workers and their unions were fully involved in the economic restructuring. The NTUC was particularly helpful. It cooperated with management to economize on the use of labour, even when it meant the retrenchment of its members. Had our unions been myopic and difficult, they would have protected jobs and resisted change, and we would have all been stuck in the mud. Growth in our economy was evenly spread. Manufacturing grew by 12%, financial and business services by 17%, and transport and communications by 12%. Our external trade expanded by 34%, in dollar terms. In volume terms it increased by 15%, much higher than the growth in world trade of 3%. After recovering in 1979 with a growth rate of 7%. the construction sector grew even more vigorously by 10% in 1980. The rapid pace of construction, however, caused acute labour shortages and escalation in prices of building materials. The key to the long term success of our economic restructuring strategy is not higher wages, nor fiscal incentives. It is manpower development. Reflecting this, the Engineering Faculty in the National University of Singapore took in 40% more students in 1980 than 1979. The Polytechnic and Ngee Ann Technical College also increased their enrolment by 11%. The EDB's Joint Industrial Training Centres expanded their classes by 32%. The Skills Development Fund gave employers grants to train over 10,000, workers. Economic Development Plan for the Eighties In my Budget Statement last year, I outlined the economic objectives and strategies for the Eighties. The Ministry of Trade and Industry has prepared an indicative 10-Year Economic Development Plan for the Eighties. It contains our vision of the future and the path we should take. As an indicative plan, it has to be fleshed and implemented by the executive operating ministries and statutory boards, and more critically by the private sector. All ministries are now preparing their own detailed operational plans based on the strategies and guidelines outlined in the 10-Year Plan. I have given copies of the high-lights of the Plan to the Clerk of Parliament for later distribution to Members of the House (Appendix I (Cols. 357 - 376)). I welcome their comments and suggestions and assure hon. Members that their comments will be studied closely and, where useful or valuable, taken into account in implementation. Appendix I - HIGHLIGHTS OF "SINGAPORE'S ECONOMIC DEVELOPMENT PLAN FOR THE EIGHTIES" (Cols. 357 - 376) We are holding consultations on economic policies with the private sector. These consultations will enable our businessmen to better understand the Plan so that they can identify for themselves the growth opportunities. They will also give us valuable feedback and ideas. The Ministry of Trade and Industry will publish the Plan in a form that is readily understood by the general public. The general public too can give us their suggestions. The prime objective of the Plan is to develop Singapore into a modern industrial economy based on science, technology, skills and knowledge. If we can succeed, we shall be manufacturing high-value products like integrated circuits, computers, industrial electronic equipment, aircraft components, numerical-control machine tools, medical instruments like X-ray machines and blood counters and specialty pharmaceutical products. These new generation factories will employ more managerial staff, engineers, technicians and skilled operators than existing simple assembly plants. They will also pay better. If we succeed, we shall be less vulnerable to protectionism. Textiles, shoes, furniture - these are subject to high tariffs and import quotas beyond our control. Aircraft and automotive components and precision equipment are less exposed. To realize our objective, we require more engineers, accountants, lawyers, doctors, technicians, computer personnel, skilled workers and other managerial and professional personnel. We shall train them. We will also induct talent from abroad. I shall now elaborate on the specific growth sectors of our economy. Industrial Development Singapore continues to attract good quality industries. New investment commitments in 1980 reached a record high of $1.4 billion, excluding petro-chemicals. Average expected fixed investment and value-added per worker of these new industries are 71% and 28% higher respectively, in real terms, than those committed in 1979. More gratifying, many existing international companies are upgrading their manufacturing operations. They are investing in new capital equipment and technology to increase output and labour productivity. To help local industries to upgrade, the EDB encourages them to have joint ventures or licensing arrangements with foreign companies with the necessary technical know-how and access to export markets. In 1980, new commitments by Singapore investors reached a new high of $203 million, of which about one-third were in joint ventures. The local industry unit of the EDB is now guided by a Small Industry Advisory Committee comprising representatives of local manufacturers. The unit serves local small to medium-sized industries. Young Singaporean professionals and technicians are now venturing out to set up their own manufacturing companies. They can seek financial assistance from EDB's Small Industries Finance Scheme which granted a total of $52 million in small industry loans to 191 companies in 1980. Local industries are also assisted in research and product development under the Product Development Assistance Scheme. Investment allowances are also given liberally to existing local and foreign owned industries to help them to mechanize and automate. Although new investment commitments in 1980 were the highest ever recorded, future prospects are less reassuring. EDB's potential investment pipeline has become smaller since the middle of last year. Recession in the major industrialized countries has led many companies to shelve or defer new investments overseas. High unemployment in these countries has resulted in greater union pressures against companies setting up plants overseas. Excessively high interest rates have also raised the cost of financing new capital investments. Although Japan continues to be a strong foreign investor, they seem now to be putting more of their overseas investments within the markets of the developed countries - in USA and Europe. With increased protectionism, this trend will unfortunately continue. The EDB will therefore redouble its efforts in the face of these more difficult circumstances. Together with the Jurong Town Corporation, it will continue to improve our industrial infrastructure and expand our manpower development to enhance our attractiveness to new and more sophisticated investments. The EDB will seek out specific desirable industries and extend long term financing at fixed interest rates to them. In times of high interest rates, such long term financing will be an effective incentive, especially for the more capital intensive projects. Such fixed interest loans will be extended through leading international and local banks. The Small Industries Finance Scheme has also been very effective in helping local small industries to upgrade and expand. The Scheme has helped young local professionals to be their own entrepreneurs in setting up new manufacturing industries. The Scheme will be extended to include medium - sized local industries with fixed assets of $2-$5 million, from the current ceiling of $2 million. Research and Development (R & D) In my Budget Statement last year, I announced five tax incentives for the benefit of manufacturers conducting R & D. The Income Tax Act and the Economic Expansion Incentives Act have been amended to put these incentives into effect. The EDB has announced the criteria to guide companies and organizations when they apply for these incentives. The criteria emphasize the technical originality, innovative content and commercialization prospects of the R & D work. In addition to these incentives, the EDB will consider extending the tax exemption period to pioneer companies which invest or expand significantly in areas involving R & D activities. Funds for the Product Development Assistance Scheme to encourage local companies to undertake innovative product development have been increased from $1 million to $2 million. Critical to the success of our R & D plan is the training of R & D engineers and technicians. The National University of Singapore (NUS) together with the Nanyang Technological Institute will double their enrolment of engineering students by 1985. The NUS will concentrate on producing engineers with aptitude for R & D work. To enhance undergraduate training and provide engineering students and teachers with a conducive environment for R & D work, the NUS will undertake more engineering research programmes in such fields as semiconductor electronics, micro-processor applications, optical fibre communication, and low-cost construction materials. To stimulate interest in practical research work, the Government will increase its funding for research to public institutions undertaking R & D work. For the next financial year, a sum of $10 million has been included in the Budget to finance research and development. Other measures to promote R & D activities include the development of a Science and Technology Park and the expansion of the material science laboratories at the Singapore Institute of Standards and Industrial Research. Land has been set aside for the development of the Science and Technology Park, adjacent to the NUS campus at Kent Ridge. The Jurong Town Corporation will develop the Park. Trade Development Protectionism will continue to plague our exporters. The long term solution is for our manufacturers to restructure and produce higher value-added products, less vulnerable to protectionism. In the meantime, the Department of Trade will monitor policy changes in our export markets, and make representations to foreign governments on behalf of our manufacturers, when our exports are affected by protectionism. On the brighter side, the international agreements concluded in the Multilateral Trade Negotiations hold some promise that protectionism, at least its blatant forms, will be checked. Under the new Agreement on Technical Barriers to Trade, our exporters can now gain easier access to foreign national and regional certification systems. For the first time, the Japanese Industrial Standards (JIS) mark is open to Singapore manufacturers. This will help promote exports to Japan. As a result of our wage-correction policy, our local manufacturers of labour-intensive products are taking steps to reduce manpower, mechanize their production, and upgrade the value of their products. The textile and garment industry is one of them. Thirty-three textile and garment manufacturers have invested $17.4 million in new and improved machinery. To encourage industries to upgrade the quality of their products, the Department of Trade will only select companies which are prepared to help themselves for overseas promotional activities. The Department will also give them preference in textile quota allocation. Local companies are now becoming more active in promoting their products overseas. In 1980, 165 companies, compared with 102 in 1979, participated in overseas trade fairs, missions and overseas promotional trips. Several local manufacturers have established or are in the process of establishing sales and promotional offices in overseas markets. Various suggestions have been made by the private sector through the Trade Development Advisory Committee to enhance the present package of trade incentives. The Ministry of Trade and Industry will study these suggestions and effect improvements to the trade fiscal incentives if they are necessary to encourage our exporters to intensify their export efforts. Along with the need to improve and upgrade the quality of Singapore-made products, management in industry will have to increase their international marketing skills substantially. The Department of Trade will assist by engaging consultants and experts to conduct marketing seminars and workshops. In 1981, the Department of Trade plans to organize such seminars for the printing and publishing, the furniture and the engineering service industries. Services Development Industrial development concentrates mainly on hardware. We are also emphasizing the software side of development - the brain services. In my Budget Statement last year, I announced that in the Eighties we shall develop Singapore into a financial supermarket offering a wide and sophisticated range of financial services. As part of its operational plan to advance this objective, the Monetary Authority of Singapore is reviewing the structure and operations of the financial sector. It is reviewing in particular, the Insurance Act, the Banking Act and the Finance Companies Act. It will continue to promote new foreign financial institutions to open up branches and offices in Singapore. It will encourage existing local and foreign banks to expand the scope and depth of their business. Banks are responding to the call to expand and improve their services by introducing new schemes such as the gold and silver passbook accounts and by installing more automated teller machines (ATMs). The Singapore Clearing House Association was formed to enable automated cheque clearing. This is in line with the Government's emphasis on increased productivity and computerization and is expected to result in even better services for bank customers. Fixed rate Singapore dollar bonds were issued for the first time last year, giving banks another avenue for tapping long-term funds. The promotion of the computer services industry will form an integral part of our economic restructuring programme in the Eighties. We shall focus on computer education and training, and overcome our main obstacle of not having enough trained computer personnel. The plan to establish the Japan-Singapore Institute of Software Technology has been finalized and the Institute will be operational by the end of the year. Plans are also at hand to set up an Institute of Systems Science at the NUS. Statutory boards, Government companies and other major computer users are urged to train more people than they need. The Skills Development Fund will be used to encourage firms to upgrade their existing staff, and to engage top calibre teachers from abroad to assist them in their in-house training. The public sector will take the lead in computerization. A National Computer Board will be established. It will be responsible for the provision of computer manpower and promotion of computer services in the Civil Service. In addition, the Board will regulate the standard of trained computer personnel in Singapore. Computer hardware in the Civil Service will be decentralized. Ministries which have the critical size for computerization will have their own computer departments. For the time being, the EDB will concentrate on the promotion of computer firms that will bring in foreign experts to train Singaporeans. It will also encourage existing firms to go into software development. Once we have sufficient technical manpower, EDB's promotional efforts will be intensified. Tourism will continue to be an important growth sector for Singapore in the Eighties. Tourist arrivals increased annually at an average rate of 19% in the Sixties and 17% in the Seventies. For the Eighties, we target a more modest but still significant growth rate in tourist arrivals of 12%. We are confident, however, that with more promotion efforts, the 12% target is achievable, provided there are enough hotel rooms. An estimated 14,600 hotel rooms will be available by the end of this year and interest in hotel development is strong. The Ministry of National Development has assured my Ministry that the Urban Redevelopment Authority (URA) will make available sufficient land for hotel development to enable us to achieve the 12% target in tourist arrivals annually. According to STPB's estimates, spending per tourist in real terms has been falling. We aim to increase spending per tourist over the Eighties. Towards this end, the Singapore Tourist Promotion Board (STPB) will consider developing more tourist infrastructure as additional attractions, and to encourage tourists to stay longer. We shall also attract more of the high yield tourists, especially conventioneers. In 1980, we hosted 230 conventions and 45 trade exhibitions, an increase of 46% and 50% respectively, over the previous year. We will host more. Energy Policy Energy will become an increasingly more critical resource for Singapore's economic development. Since my Budget Statement last year, the Ministry of Trade and Industry has been given the responsibility of formulating and coordinating Singapore's energy policy. The Ministry has therefore set up an Energy Unit to monitor prices, supplies and consumption of oil, and to formulate and coordinate the implementation of our policies on energy conservation and security of oil supply. Recently, it took over the portfolio of overseeing the operation of the Public Utilities Board. The PUB has a major role in ensuring the success of our energy policy. Moreover, PUB's role in ensuring efficient and adequate supplies of electricity, water and gas has important bearing on our economic development. There are, however, other public agencies whose work relate to energy. The Energy Unit is, therefore, guided by an Inter-Ministry Energy Coordinating Committee which includes representatives of the Ministries of Trade and Industry, Communications, Finance, Foreign Affairs and National Development. The twin objectives of our energy policy are, first, to ensure that our economic growth in the Eighties is not disrupted by energy shortages, and second, as oil is scarce and expensive, to maximize efficiency in the usage of energy. We have to pay the market price of oil. Our domestic energy prices will, therefore, have to reflect world prices. Regrettably, this must mean higher PUB rates, petrol and diesel prices and bus and taxi fares each time oil prices are revised upwards by the producers. We shall improve the security of our oil supply by making government-to-government purchases of oil from producing countries. Currently, we depend entirely on the oil companies. The Government has set up a fully-owned company, the Singapore National Oil Company, as its operational arm to secure direct oil purchases from producing countries. We are exploring the feasibility of coal to supplement oil to generate electricity. The PUB has engaged an international consultant to advise on the pollution aspects of a coal-fired power station, and the economics and technology to minimize such pollution. Energy conservation will be pursued through campaigns and a system of incentives to encourage energy saving. The Ministry of Trade and Industry will launch an Energy Saving Campaign in May-June this year. It will involve private and public organizations as well as grassroots organizations such as the Citizens Consultative Committees and the Residents Committees. It will be conducted annually to sustain interest in energy conservation. The PUB will set up an Energy Conservation Centre which will provide technical advice to industry, commerce and households on how to cut energy wastage, and use electricity more efficiently. A proper understanding of the energy consumption efficiency of various household electrical appliances will help householders to save on their electricity bills. Cutting out energy wastage is the only effective means of slowing down the increasing cost of energy. So far, accelerated depreciation is allowed only for plant and machinery in industrial enterprises. We shall, in principle, extend the provision on accelerated depreciation to cover approved energy-saving capital expenditure incurred by non-industrial enterprises. The Ministry of Finance and the Ministry of Trade and Industry will study the criteria; guidelines and mechanics of implementing this incentive scheme. We will also extend the investment allowance scheme, administered by the EDB, to include capital expenditure incurred by manufacturing companies to save energy. The EDB will work out specific guidelines on this. Manpower Development In my Budget Statement last year, I dwelt at length on the critical need to train enough manpower for the higher skilled industries and the brain services that we want to promote in the Eighties. Since then, plans are being translated into reality. When fully implemented, these plans will result in an expansion of first-year enrolment at the University by 20%, Polytechnic and Ngee Ann by 40%, and VITB's and EDB's training centres by 125%. The Nanyang Technological Institute will be set up this year to train 1,000 practice-oriented engineers a year for industries. Action is being taken to set up a separate polytechnic to train 2,500 supervisors and skilled workers for the commerce and services sectors. Service is an important sector in our economy and we should upgrade the quality of its manpower through proper training at polytechnic level. Our manpower development programmes will also cover the training needs of existing workers. The VITB is working out an operational plan to step up continuing education and training to retrain existing workers to meet the higher skills needed by industries and services as they upgrade and restructure. The Skills Development Fund can be used to subsidize employers who release their workers for such continuing education and training courses. We are seeking the assistance of the Japanese Government to set up an Institute for Continuing Occupational Development. For our training programmes to produce effectively trained manpower, we need the support of employers to take in students and trainees in our tertiary institutions and VITB training centres for short-term practical attachments. To help defray the cost to employers of taking in such trainees, the Skills Development Council will be asked to consider the provision of grants to participating employers. Our efforts to prepare workers, employers and managers for the difficult task of economic restructuring will have to include the inculcation of proper work and management attitudes. So far, we have concentrated on workers' attitudes. We must now extend our focus to include managers and employers. As there is much that we can learn from the Japanese experience, we have approached the Japanese Government for assistance in getting Japanese management experts to give courses and seminars to our managers here, and to receive missions of local managers to visit Japanese enterprises to see and learn for themselves how Japanese managers interact and work with their workers as a team. The Ministry of Labour is coordinating the programme. I would estimate that the interests of the workers and management overlap in 80-90% of the areas. The 10-20% areas where their interests may diverge should not be allowed to pull them apart. Teamwork is the key to success of an enterprise. It is the only basis for building a nation. Concluding Remarks on Economic Policy Last year, when I presented the Budget Statement, the prospects for the world economy in 1980 did not appear then to be bright. The world economy, indeed, suffer,ed great strains from the second oil shock, from inflation, exceptionally high interest rates, slow growth, and massive unemployment. The OECD countries grew by a paltry 1%. The United States went into a recession, Likewise, for Britain. The German economy also weakened. Singapore, however, grew stronger, by 10.2%, because we were realistic in our expectations and assessment of the difficulties ahead. We had prepared ourselves and we tackled our problems boldly and totally. We began to restructure - in types of industries, in production methods, in management and work attitudes. 1981 will be a difficult year for us, and 1982 even more so. The current world economic ills do not appear responsive to treatment. World economic growth will continue to slow down in the first half of this year. At best, the industrialized economies will begin to recover in the latter part of the year, barring major upheavals caused by wars and sudden disruptions in oil supplies. Inflation is a chronic malady. The Iranian-Iraqi war and the volatile political situation in Poland hold grave perils for the world. An unsettled world will hurt our exports and discourage investment flows generally throughout the world. We expect our real growth rate for 1981 to be lower than last year's. If we end up 1981 with a creditable growth rate, it will be because of our current growth momentum and the realization of the investments we have attracted in the past few years. The crunch will come in 1982-83 if the world economic and political outlook does not improve. Already, investment commitments from Japan are beginning to decline. Japanese companies are increasingly switching their investments to the major industrialized countries to protect their markets. We will still be able to attract some foreign investments, because of the very strong assets we have built up over the years, namely, political and economic stability, sound infrastructure, competitive skills and a capacity for hard-headed and practical adjustments to changing circumstances. But we must expect keener competition for investments and markets. We cannot wish the depressing outlook away. We must, as before, assess the problems realistically and respond accordingly. Singaporeans have never allowed difficult problems to daunt them. We shall survive, work together and press on intelligently with economic restructuring, plus a change in work attitudes. If we develop new cooperative habits on the factory floor, complete with Quality Circles and a close worker-management relationship, we shall make it. THE FY 1981 BUDGET Mr Speaker, Sir, I shall now move on to the FY 1981 Budget. The Budget has been prepared in accordance with the priorities identified in the Government's 10-Year Economic Development Plan for the Eighties. In particular, emphasis is given to manpower training, infrastructural, industrial and commercial development, and defence capability upgrading. A total of $4,578.9 million will be required in FY 1981 to meet the recurrent expenditure of Government programmes. This will be fully met by the expected revenue of $6,334.7 million. The recurrent expenditure is 14% higher than that for FY 1980 largely because of the modernization of the Armed Forces, restructuring of the education system, expansion of the National University of Singapore and other training institutions to cope with the demand for skilled, technical and professional manpower, as well as higher maintenance costs. But staff increases are held down to the absolute minimum so that more manpower can be made available to industries and other key economic areas. A total of 84 posts was created in the course of FY 1980 for new areas of work such as the Information Services Division in the Ministry of Culture, Professionals Information and Placement Unit of the Public Service Commission, and Jurong Junior College. However, this was offset by the deletion of 465 posts which have been found to be redundant or in excess of requirements. This includes 27 posts which are no longer required following the transfer of the functions of the Ministry of Science and Technology to the Ministries of Trade and Industry, Health and Education. In all, there is a net total reduction of 381 posts. Less manpower will be required because of mechanization and computerization of routine operations and increased staff productivity. Proposals for mechanization, automation and computerization have therefore been generously supported. The total number of posts on the FY 1981 establishment will be 68,845 as against 69,226 on the FY 1980 establishment. Despite the decrease in the establishment, many Ministries are likely to experience difficulties in filling their vacancies because of the tight labour market. As at 30th November 1980, a total of 8,353 posts or 12% of the permanent establishment was vacant. The bulk of the vacancies is in the Ministries of Education, Health and Home Affairs. Other Operating Expenditure (excluding the Armed Forces expenditure) will rise by $121 million or 38% in FY 1981. About half the increase is due to rising costs of public utilities, fuel and lubricants. The balance is accounted for by higher maintenance costs and a bigger provision for payment of agency fees to URA for sale of land on behalf of Government. Grants, Subsidies and Other Transfers will expand by $101 million or 21% compared to FY 1980. This is attributed mainly to:-
(a) annual salary increments, increase in CPF/MPF contribution and a contingency sum for the NWC wage supplement in FY 1981 for the staff of Statutory Boards, tertiary education institutions and aided schools; and (b) increase in the rate of contribution to the Skills Development Fund and in the number and value of PSC scholarship awards. In the past, recurrent expenditure always exceeded development expenditure. For the first time more than half or 52% of the FY 1981 Budget, or $5,044.2 million, is for development. Economic, social and community services together account for 92% of the total development budget. Expenditure on economic services will take up $2,600 million or 52% of the development outlay. This includes a sum of $2,002.6 million for industrial and commercial development and $339.3 million for the development of Changi Airport and roads in the Republic. Included in the provision for industrial and commercial development are $1,625 million for the Petrochemical Corporation of Singapore, Ship Financing Scheme and lines of credit to the Development Bank of Singapore; $202 million for the development of industrial estates by the Jurong Town Corporation as well as $141 million for the Economic Development Board's Capital Assistance Scheme and Product Development Assistance Scheme. Although priority is given to economic development, substantial funds are also allocated for the upgrading and improvement of social and community services. A sum of $2,036.7 million or 40% of the development budget is set aside for this purpose. Of this, $1,464 million or 72% is for public housing. We have been fortunate to be able to balance the recurrent budget every year. Sustained high economic growth has generated sufficient revenue to meet everincreasing expenditure. But we must continue to exercise the most stringent control on recurrent expenditure. We must ensure that every dollar spent is spent productively. REVENUE AND TAX CHANGES I now come to the section on Revenue and Tax Changes. For FY 1981, total revenue is estimated to be $6,335 million, which is an increase of $886 million or 16.3% compared with the revised estimates of $5,449 million for FY 1980. The healthy growth expected in revenue receipts is due largely to good economic growth in 1980. Income tax will continue to be the mainstay of revenue. Over 70% of income tax collections are derived from corporate income taxes as compared with 68% prior to FY 1978. For FY 1981, total income tax collections are expected to reach $2,460 million, which is an increase of $553 million or 29.0% over the revised estimates for FY 1980. The total budgeted expenditure for FY 1981 is $9,623 million, of which $4,579 million is recurrent expenditure and $5,044 million development expenditure. The revenue of $6,335 million estimated for FY 1981 is therefore insufficient to finance total recurrent and development expenditures. I now come to tax changes for the new fiscal year. TAX CHANGES Revision of Domestic and International Passenger Service Charges The existing rates of domestic and inter-national passenger service charges are $4 per passenger for flights to Malaysia and Brunei and $10 per passenger for flights to other destinations. With effect from 1st April, 1981, the domestic and international passenger service charges will be raised to $5 and $12 respectively. The revised charges will apply to the Changi, Paya Lebar and Tengah Airports. This will help to defray the increased recurrent expenses at the new Changi International Airport which is expected to open in July this year. The additional revenue yield is estimated at $5 million in the first year. Duty on Bets At present, the duty on bets is 10% of the amount of bets. This duty has not been raised since 1947. It may be one reason why the amount of bets has increased from $7.3 million in 1950 to $320 million in 1979. I have, therefore, decided to raise the duty on bets from 10% to 15% of the amount of bets. The revision in duty which is expected to yield an additional $16 million per year will take effect from 1st April, 1981. Entertainments Duty In September 1980 the Cinematograph Film Exhibitors Association applied for approval to merge the present two lower admission classes of cinemas and to do away with the lowest class. I have decided to allow the merger of the two lower class seats. This will result in some saving in manpower for the cinema operators. At the same time, the entertainments duties for cinemas, including drive-in cinemas, amusement parks, trade fairs and exhibitions, will be changed to an ad valorem rate of 35%. The present rates are specific and graduated. They work out to an average of 34.2% The present graduated duty rates for open-air cinemas and live-shows, such as stage-plays, variety shows and circuses, will also be replaced by ad valorem duties of 15% and 25% respectively. The existing rates of 15% for professional boxing and wrestling and 10% for games and sport other than trial of speed of animals, vehicles, motor vessels or aircraft, will remain. The changes in entertainments duties, which will be effective from 1st April 1981, will not result in any significant increase in revenue. Duties on Petrol The duties on premium and regular petrol have not been increased since January 1976. The specific duties of premium and regular petrol amounted to 47.6% and 51.0% of pump prices respectively in 1976. Since then, prices of petrol have gone up significantly without any adjustment in duty. As a result, the specific duties of premium and regular petrol form only 33.3% and 34.5% of pump prices today. It is proposed to adopt an ad valorem duty for premium and regular petrol. The present import and excise duties are specific in nature, being $3.60 per dal (decalitre) for premium petrol and $3.45 per dal for regular petrol. These will be replaced by an ad valorem duty of 40%, using pump prices as the basis of assessment. The change from specific to ad valorem duty will result in an estimated increase in revenue of $10 million in the next fiscal year. The new duty will be implemented after the Customs Act has been suitably amended. TAX CONCESSIONS (i) Separate Assessment on Unearned Incomes of Married Women Option for separate assessment on earned incomes was first given to married women in 1963. It is clear today that many married women are capable of deriving unearned incomes in their own right. This, however, has not been given due recognition by our tax laws and I propose to amend it to reflect the current income position of married women. From the Year of Assessment 1982, all married women who can satisfy the Comptroller of Income Tax that their unearned incomes are derived from their own earned incomes in the past shall be allowed to have these unearned incomes assessed in their names. This will reduce the combined tax burden of husbands and wives. It should encourage married women to remain in the workforce, particularly those with tertiary or professional qualifications. The loss in revenue is estimated at $3 million. (ii) Relief for Disabled Persons This is the International Year of Disabled Persons. As our contribution, I am increasing the earned income relief for handicapped persons from $1,000 to $2,000. This is in recognition of the contribution of disabled persons in our workforce and to encourage more active participation from our disabled population. This relief will take effect from Year of Assessment 1982. (iii) Personal Income Tax Rates I have in my Budget Statement last year stressed the importance of spreading the income tax net to cover as many individuals as possible. Let me reiterate the reason for this. The more citizens. we have paying income tax, the greater will be the appreciation amongst Singaporeans of the basic fact of life - how to finance various programmes, like health, housing and social welfare. Our people will have a keener understanding that more expenditure on welfare programmes and subsidies must mean an increase in their income tax. Those who have to pay income tax to meet the costs of welfare programmes will at once ask themselves why they must work to subsidize the laggards and the indolent who are able-bodied but reluctant to work. I am pleased to inform the House that there was an increase in the past year of 91,868 taxpayers. This is a threefold increase over the number of new taxpayers in 1979. They include new entrants to the labour force, hawkers and taxi-drivers, self-employed .individuals and others who have previously evaded tax. As at 31st December, 1980, there were 481,255 individual taxpayers which is 45% of the employed labour force. The overwhelming majority are wage-earners who cannot evade tax. Because of the nature of Singapore's society where the many self-employed can evade tax, income tax has been an inequitable tax borne largely by wage-earners and those professionals who are paid by customers or clients who report their payments to claim tax deduction. Other professionals not paid by corporations behave like taxi-drivers and hawkers in evading income tax. It may be many years yet before we bring all the evaders within the tax net; but this is an exercise that the Inland Revenue Department is vigorously pursuing. The Inland Revenue Department is studying the possibility of presumptive taxation of hawkers, restauranteurs, taxi-drivers, property brokers and other free-lancing commercial intermediaries who do not keep proper accounts. Under this scheme, the Department will take sample investigative surveys to determine what these groups are earning. All those in these groups will be deemed to have chargeable incomes based on the findings. The onus of proof will then be on them; it is up to any one of them, hawkers, restauranteurs, property brokers, etc, to rebut presumed taxable income by accounts which show his true income to be lower. We are now restructuring our economy. For this to succeed, we must make it worthwhile for workers, especially the young, to spend time and effort in acquiring skills and knowledge. They will find it worthwhile if they can earn more and retain more of their incomes. A worker's effort must not be penalized through too steep a tax. While tax rates must be progressive and linked to ability to pay in order to lighten the burden on the lower income groups, they must never be so high as to suppress the will to strive and to excel. Last year, every taxpayer was given a reduction in tax ranging from 6.8% to 19.9%, depending on his tax bracket. The average reduction in tax was 16.1%. For the Year of Assessment 1981, I propose to retain the existing tax rates. Inflation, however, has pushed many wage-earners into higher income tax brackets. To take account of the pernicious effect of inflation on tax burdens, and to give Singaporeans further incentive for their effort, I propose to give a tax rebate of 10% to every resident taxpayer on his total tax liability. In other words, if a resident taxpayer is assessed to have a tax liability of $5,000 on the existing rates, he will be given a tax rebate of $500 or 10% of his assessed tax. If his tax liability is $300, he will get a tax rebate of $30. The total revenue loss is estimated at $45 million. I am not revising the tax rates for the Year of Assessment 1981 because tax returns have already been sent out and computer assessments based on the existing programmed rates have begun. Any change in tax rates for this year will delay the work of the Inland Revenue Department inordinately. I propose to make the following changes to tax rates but applicable only from the Year of Assessment 1982, i.e. on incomes earned this year. With your permission, Sir, may I table the revised Rates Schedule (Appendix II (Cols. 377 - 380)) which will be effective from the Year of Assessment 1982? May I also have your permission to circulate the Schedule to Members of the House? [Copies of the Schedule handed in to the Clerk and distributed to Members.] In the revision of tax rates, I have paid special attention to the senior clerical, supervisory and skilled grades, and the middle-income group. These are the groups whose chargeable incomes generally fall within $5,000 and $75,000. They will enjoy the largest reduction in tax in percentage terms, a reduction ranging from 17.8% to 25.9%. Appendix II - Individual Income Tax Reduction under Revised Rates Schedule from Year of Assessment 1982, Distribution of Tax Burden in 1980 (Cols. 377 - 380) In changing the Rates Schedule, I have decided to merge the lowest two tax brackets and levy a common tax rate of 4% for this new first taxable bracket of up to $5,000 chargeable income. Taxpayers in the existing lowest tax bracket of $1 - $2,500 will not benefit from any tax reduction. For the Year of Assessment 1980, there were 141,843 taxpayers or 37.2% of the total number of taxpayers in this bracket. Together they contributed only 1.4% of total personal income tax collections. The average tax assessed was $45 which is not onerous. In contrast, the top 14,547 taxpayers, constituting only 3.8% of the total number, paid $266.8 million or 59.9% of total tax collections of $445.5 million. A large proportion of the tax incidence was, therefore, borne by this small group of taxpayers whose chargeable incomes exceeded $35,000. The Table, which is attached to the Schedule which I have earlier distributed to Members, shows the distribution of the tax burden among the various income groups. I have decided to give substantial reductions in tax as our objective is to encourage, not to smother, individual drive and enterprise. The highest marginal rate of 55% will be reduced to 45%, and on chargeable incomes exceeding $750,000. With the proposed change, very few individuals will be paying tax at more than 40% effectively on their chargeable incomes. Except for the first tax bracket, the reduction granted varies from 12.5% to 25.9% and the overall average reduction is 13.0%. The revenue loss is estimated at $78 million. Most of the taxpayers in the first chargeable income group are young workers. They should quickly move up to higher income levels and benefit from tax reductions. It bears repeating that personal income tax must never be used to equalize disposable income. To do so is to blunt the spur to excel, to outperform one's peers, the very basis of our vigorous growth. Singaporeans must be encouraged to aspire to higher incomes, through acquisition of higher skills and more knowledge, and their diligent appli- cation to the production of quality controlled goods and services. Everyone must be encouraged to enlarge his contribution to the national economy. Only then will there be bigger and bigger rewards for all. Then even the semi-skilled will enjoy higher wages because they are part of the total effort. (iv) Estate Duty Members may recall that in the 1979 Budget, an additional exemption of up to $200,000 was granted in respect of residential houses in an estate. This is in addition to the $100,000 exemption which is granted for assets other than residential properties. To ensure that the concession continues to give relief to beneficiaries in the lower and middle income groups, I am raising the exemption ceiling for residential properties from $200,000 to $600,000. This is to take account of the rise in property prices in the last two years and to protect the dependants of the deceased who might otherwise have to dispose of their family homes to pay estate duties. The new exemption ceiling will apply to all deaths occurring on or after 1st January, 1981. The loss in revenue is estimated at $23 million. Concluding Remarks The tax changes this year is a continuation of the liberalization of the tax system begun in FY 1978, when the Minister for Finance reduced personal income tax rates substantially. Further changes in the tax system, including income tax, may be expected in the next two or three years. We shall adjust our tax regime as income patterns change, as spending habits change, and as investment behaviour changes. Our taxes are designed not to punish effort both collective and individual effort. They are also designed to encourage investments in order that we can enjoy a more productive future. Business enterprises have been encouraged to invest and expand through various tax concessions introduced in previous Budgets, e.g. realistic capital allowances for plant and machinery, equipment and other assets, rationalization of stamp duties, investment allowances and incentives to encourage research and development. Individuals are encouraged to excel through periodical adjustment of the income tax rates to take into account inflation and growth in the economy. It is our ability to enlarge the economy through intelligent hard work that allows us to reduce tax rates even as Government expenditure increases. We must, however, not be complacent. It is a mistake to believe that we will continue to clear hurdles easily just because we have won a few races in the past. We will not, unless we take each hurdle seriously and make adequate preparations before we come to the obstacles. We must press on vigorously with our economic restructuring. We must bring about a qualitative change in economic activities by the end of this decade. We must work together to enlarge our national income. Workers must pull together with management to attain corporate objectives. Management must look after the interests of the workers. They must have an easy relationship of trust, one as between partners in a common endeavour. Our major task in this decade is to inculcate new work attitudes and establish this close working relationship. The Government will motivate and reward. Enterprises and individuals who excel will be rewarded accordingly. Economic growth, desirable as it is, is not an end in itself. It is the means which enables us to forge the kind of society we want.. Singaporeans are not homogeneous. There was no quality control in our past immigration policies. Nevertheless, we have succeeded in getting the different races together, to build up a team spirit instead of dissipating our energies in quarrels, jealousies and strife. We must build on this strong foundation. We want to have a stable and durable society built on tolerance and equality of opportunities. We want to be a self-respecting, self-reliant people, free of poverty, free of bigotry, free of communal, religious, linguistic and other social tensions. The building brick of our structure is the family unit, closely knit by abiding ties of mutual love and mutual support. Without these strong bricks, each bonded to another by lasting ties of mutual respect and trust, the whole structure of our society will crumble under its own weight of intolerance, divisiveness and strife. For our society to remain durable the old must take care of the young, and the young the old. The able must support the disabled and the destitute. The employers must look after the interests of their staff, and staff must be loyal to their companies. The Government must work for the people. The people must work with the Government, to bring about a cohesive and harmonious society, where our children and our children's children will continue to live, work and play in an ever-improving Singapore. Singapore belongs to all Singaporeans. It is our niche in the world. We face difficult times. It is an uncertain world. There is disharmony between the superpowers. The political equilibrium in the world is precarious. We must be prepared for the worst but the worst mUst hold no fear for us. Recession, unemployment, higher oil prices, protectionism, regional conflict, security threats, international turbulence - all these threaten our livelihood. We cannot avoid getting wet in bad weather, but if we have made adequate preparations, we can put our raincoats on, and when we get indoors, change into dry clothes. Sir, I beg to move. [Applause]