Mr Speaker, Sir, I would like to thank all the Members of the House who have spoken on the Budget over the past two days. Time will not permit me to address every Member's concern in detail and I will focus on the major issues and leave matters of detail to be considered in the Committee of Supply. With the implementation of GST, we have laid the foundation for a major transformation of our tax system. The necessary tools are now in place to ensure our long-term competitiveness and to support the development of our external economy. This year's Budget builds on this foundation. It fine-tunes the tax system further to meet specific needs. I will now address the specific major issues raised by Members. The Impact of GST on the Economy Let me first review the implementation of GST. On the whole, the implementation of GST has been smooth, considering that it is a new tax with a very comprehensive tax base. Apart from some minor hitches in the initial stages of implementation, businesses and the public have adapted very quickly to the new tax. Fears were expressed when GST was first mooted about its adverse impact on prices and on our overall competitiveness. Some Members had also expressed concern over the administrative burden that GST would impose on businesses. Let me deal with each of these in turn. For a start, the public's fear of sharp price increases on account of GST did not materialise. In the Budget debate last year, Mr Chiam See Tong predicted that GST would raise the consumer price index (CPI) to 9% in 1994. He will be pleased to know that the CPI rose by only 3.6% last year, significantly lower than the 5.5% earlier projected. The low CPI increase was due in no small part to the widespread support given by grassroots shopkeepers to community leaders' appeals not to raise prices and to keen competition in the retail sector. Credit must also be given to the efforts of CASE in publicising prices of essential goods. The implementation of GST has also clearly not dampened our economic growth in any way. The economy grew by 10.1% in 1994. If anything, our concern is with the overheating of the economy, rather than sluggish growth. Unexpectedly high economic growth last year raised GST collections to $1.5 billion, well above the original estimate of $960 million. At the same time, the value of the GST offset package was also increased to $1.7 billion. Overall, the implementation of GST remains revenue negative as promised by the Government. Some Members want to know why there was such a large variance between the projected and the revised figures. Let me explain the reasons for the variance. On the revenue side, the original estimate of $960 million was based on Private Consumption Expenditure (PCE) figures of 1992, adjusted to 1993 and 1994 levels. It assumed nominal GDP growth rates of 7.5% for 1993 and 8% for 1994. As it turned out, the actual nominal growth rate in 1993 was much higher at 13%, while that for 1994 was 14%. Assumptions were also made about the likely reduction in consumption arising from pre-GST purchases, the level of tourist refunds and possible revenue leakage. All of these factors would have reduced GST revenue. As this was the first year of GST implementation, accurate forecasting was obviously not possible. In addition, the PCE figures may also have been understated. The high economic growth in 1993 and 1994 also raised the value of the GST offsets and rebates package above estimates by about $500 million. Most of this increase came from higher revenue foregone from corporate and personal income tax. The revenue foregone figures for corporate and personal income taxes were computed in 1992, based on figures for Year of Assessment 1991 which were the latest figures available then. Income tax collections are highly buoyant and increase rapidly with economic activity. Of the increase of $500 million in the GST offset package, about $160 million was in the form of revenue foregone from corporate tax, while some $270 million was from revenue foregone from personal income tax. In addition, revenue foregone from the reductions in the various indirect taxes accounted for about $20 million of the increase in the total offset package, while the property tax rebate accounted for another $6 million. Additional subsidies for health, education and public assistance to offset the impact of GST accounted for $4 million in the value of the offset package. The fact that actual GST collections have surpassed what was originally projected has led some Members to call for additional rebates to be given to individuals. Concerns have also been expressed over the impact of GST on the lower income groups. When the GST offset package was announced in the 1993 Budget, we had already analyzed the net change of expenditures for typical lower-income households before and after the introduction of GST, including the forecast impact of GST on the CPI. As actual CPI was substantially below forecast, most households should end up being better off after the implementation of GST. I would also like to point out that although GST collections have exceeded original estimates, it does not mean that all individuals are paying more GST as a result. The GST burden borne by individuals varies directly with their spending. For individuals with lower purchasing power, the offsets received by them as a group should be sufficient to cover the GST they incur on their basic expenditures. Those with higher purchasing power will tend to spend more. The higher than expected GST collection is therefore likely to have come from this latter group of individuals who, in turn, would have benefited from higher income tax offsets. A Member has expressed concern on the impact of GST on pensioners whose pensions were not adjusted and who do not live in HDB flats. This group of persons would thus not enjoy the rebates on HDB rental and service and conservancy (S&C) charges. In formulating the package of GST rebates in 1993, the Government had recognised that there would be a group of persons, such as retirees and pensioners living in non-HDB properties, who would not be able to enjoy the full benefit of the offset package. The CCC Assistance Scheme was set up precisely to cater for this group of persons. Under the CCC Assistance Scheme, those with monthly incomes below $1,500 may apply for a grant to top-up the difference between the GST they have incurred and the GST offsets they received. At this point, I would like to reassure the House again that the Government remains committed to implementing GST in a revenue negative way in the short term, and in a revenue neutral way in the long term. For FY95, GST collection is estimated at $1.6 billion while the GST offsets package is estimated to cost Government about $1.9 billion. Compliance Cost of GST A survey by the Singapore Manufacturers Association (SMA) in August last year among 130 companies showed that although 72% of them encountered some administrative and accounting problems in the initial months of the GST implementation, the problems were relatively minor. Most of the problems arose out of unfamiliarity with GST procedures. All of these initial problems have since been resolved. Some Members have expressed concern with the administrative burden that GST has imposed on businesses. They argue that the reduction in corporate tax only applies to profits while GST is on revenue. I would like to point out that GST is a tax on consumption and is ultimately borne by the end-consumers and not by companies. Corporations which are GST-registered merely act as tax-collecting agents for the Government. It is therefore incorrect to say that their burden is in the form of the 3% GST on their revenue. Instead, the burden faced by GST-registered corporations should be measured by their compliance cost. The tax savings from the 3% reduction in corporate tax should be more than sufficient to assist businesses in setting up internal systems to comply with GST procedures. Non GST-registered corporations, on the other hand, may incur some form of GST burden as they cannot claim back the input GST incurred on taxable purchases. This is true for those which choose to absorb the 3% GST instead of passing it on to their customers. Even so, the final tax burden on companies which absorb the GST may be minimized somewhat by the fact that their prices will be lower, and hence more competitive than those who pass on the GST to their customers in the form of higher prices. Whether they choose to absorb the 3% GST or not, non-GST registered corporations also get to enjoy the tax savings from the 3% corporate tax reduction. I had promised last year that the tax authority will undertake a study on the compliance cost for businesses one year after the implementation of GST. The preliminary results of the first phase of this study, of a limited number of companies, indicate that compliance cost of GST is low. The tax authority is conducting a second phase of the compliance cost study. Businesses should by now have progressed beyond the learning curve and compliance cost settled at steady state level. We will have a more accurate picture of the compliance cost imposed by GST on various sectors of the economy when the study is completed. If necessary, appropriate measures will be taken to reduce compliance cost for those sectors that require it. Members have also raised several other questions in connection with GST. As these are matters of detail, I will find an opportunity to deal with them during the Committee of Supply. Expenditure on Health Care Mr Ling How Doong quoted figures to show that our expenditures on health care are well below that of other countries. Unfortunately, he has compared donkeys with zebras. I believe that the figures for health expenditures which he quoted for Hong Kong, Japan, USA and Malaysia came from the World Bank's World Development Report of 1993. He said that Hong Kong, Japan, US and Malaysia spent 5.7%, 6.5%, 12.7% and 3% of GDP respectively on health care in 1990 compared to 1.2% of GDP for Singapore. If he had read the tables carefully, he would have realised that the figures he quoted referred to the total health expenditures in each country, both public and private, whereas the figure of 1.2% of GDP he quoted for Singapore refers only to government expenditure on health care in FY 95. For his information, our total national health expenditure, both public and private, currently amounts to about 3% of GDP. We do not base our health care expenditures on what other countries spend but on what we consider is needed to maintain a high standard of health care. On the whole, our health care expenditures are lower than that of many other countries and there are several reasons for this. Firstly, currently we have a young demographic structure, notwithstanding our rapidly ageing population. Singapore's proportion of those aged 60 and above is only 9% now as compared to 16% to 18% for Japan and the United States, and more than 20% for the United Kingdom and Germany. Hence, lower health problems. Secondly, with fee-for-service and other mechanisms to curb excessive demand, Singapore is able to maintain an efficient health care delivery system. In fact, we have been ranked No. 1 in the World Competitiveness Report 1994 in this aspect. This means that we can get more value for money out of our health care system compared to the other nations. Thirdly, our GDP has been growing very rapidly. This reduces our health care expenditure as a proportion of GDP. Notwithstanding our low expenditure, the quality of our health care services has remained high. This is reflected in our low infant mortality rate and long life expectancy, which are on par with the developed nations. Expenditure Tax The Member for Tanjong Pagar GRC has resurfaced his proposal of an expenditure tax in place of GST and income tax. An expenditure tax is conceptually very attractive. However, in practice, it is a very difficult tax to administer. Difficulties will arise with regard to the treatment of durable consumer goods such as housing. Every individual would also need to maintain a comprehensive set of accounts of their cash balances, borrowings and sales of assets. This will create tremendous scope for under-reporting and tax evasion. As savings will not be taxed, the rates of expenditure tax will generally have to be higher to generate the same amount of revenue. Finally, as I have pointed out before, expenditure tax has not been formally adopted by any country whereas income tax is accepted internationally. Over the years, we have built up a wide network of tax treaties to avoid double taxation. The introduction of an expenditure tax will have implications on these treaties as many areas involving cross-border transactions may have to be re-negotiated. Budget Surpluses Some Members have again questioned the wisdom of the Government in consistently maintaining budget surpluses and whether this might not be deflationary. The Government's long term fiscal policy aim is to contain expenditure within operating revenue. The large budget surpluses realised in the past few years are the direct result of strong economic growth linked to careful control of expenditure. We spend only what is necessary and need to create long term growth, not because we have the money or because other people spend more. We cannot presume that the large domestic budget surpluses seen in the past will continue indefinitely. This will be particularly so, as our population ages and the economy matures. Our strong fiscal position gives us some leeway to consider changes to fiscal policies to enhance the economy's competitiveness as it faces new challenges in the next decade, and has to develop new strengths. The Government is committed to reducing the overall burden of taxes and levies on the economy over the long term. However, in the context of our recent rapid economic growth of well above our potential growth rate of 6-7% per annum, running a budget surplus is an appropriate macro-economic policy. An expansionary fiscal policy would aggravate the overheating of the economy and worsen labour cost pressures. Our budget surpluses are not reflective of high taxes. The tax burden, comprising individual and corporate income taxes, property tax and consumption tax, is lower than that of most industrialised countries. It is also no higher than that of other ASEAN countries and the Asian NIEs (except Hong Kong). Recent budget surpluses were higher than expected largely because of revenues from our use of fiscal measures to allocate scarce resources through the COE system and foreign worker levies. These are efficient price mechanisms, but the intention was not to boost Government revenues. On the expenditure side, Government has been consistently investing heavily in education, health care, public housing and infrastructure development. Efforts have also been made to channel some of the surpluses back to citizens via schemes such as Edusave, Medifund and SOTUS. Elected President Mr Ling How Doong touched on the amendments to the Constitution made last year to say that the Elected President's powers to safeguard past reserves had been unduly compromised in the area of defence and security. He alleged that since defence allocation is not transparent, what safeguards were there to prevent future Governments from using the defence allocation to provide subsidies and handouts resulting in a draw on past reserves. Firstly, I should say that although details of the annual budgetary allocation to MINDEF are not made explicit in the House, this allocation is part of the overall budget passed by this House. In passing the overall budget, I am required to furnish a statement to say whether or not the budget is likely to draw on the past reserves. There is therefore no likelihood of the budgetary allocation for defence being used to draw down on past reserves without the President knowing it. The rationale for amendments to the Constitution to provide that certain Articles in the Constitution shall not apply to any defence and security measures was clearly spelt out in the speech for the Second Reading of the Constitution (Amendment No. 2) Bill 1994 on 25th August 1994 and I will not go over the same ground. Foreigners Working in Financial Sector The Member for Cheng San GRC has also asked if the same stringent conditions imposed on locals wishing to work in the financial sector are also applied to foreigners. I would like to assure the Member that this is so for foreigners working in the banking and securities industries. In the example on remisiers he has quoted, I would like to inform him that foreigners have to pass the same examinations that Singaporeans are required to pass, in order to apply to the SES to be remisiers. Currently, individuals, whether local or foreign, working in financial futures companies do not need to be licensed by the MAS. However, when the Futures Trading (Amendment) Act which was passed by Parliament on 1st March 1995 comes into effect, both local and foreign individuals working in the financial futures industry would have to be licensed by MAS and be subject to the same licensing criteria. Corporate Tax As expected, the business community was disappointed with this Budget as it did not contain a corporate tax cut. I would like to reiterate that the corporate tax rate of 25% is our medium term target. Our existing tax rate of 27% is already very competitive. With our economy entering into its third year of very buoyant growth, it is unnecessary, and indeed unwise, for us to further stimulate the economy through another cut in the corporate tax rate. Otherwise, we run the risk of overheating the economy, fuelling inflation and undermining our competitiveness. As a measure of our competitiveness, Members should not forget that we attracted a record of $5.8 billion of foreign investment commitments in 1994. Business Costs Some Members have expressed disappointment that nothing was done in this Budget to reduce business costs. They have called for the Government to provide some means to help restore our competitiveness. While Government is fully aware of the need to keep our business costs competitive, we must at the same time recognise that our operating costs reflect our basic resource constraints. Singapore will not be able to match the lower costs of labour, land and natural resources in the emerging economies. We should instead aim to be competitive in high value added and high technology economic activities, while keeping costs as low as possible. In the long run, we must focus on strengthening our capability to enhance our competitiveness. We can achieve this through developing our human resources, our core capabilities in key industries and our local enterprises. Nonetheless, as a measure to reduce business costs and enhance our long term competitiveness, I had reduced the property tax rate for commercial, industrial and let out residential properties by 1% last year, and by a further 2% this year. I have also committed to reducing the property tax rate to 12% in subsequent years. Strong Singapore Dollar Some Members have questioned the objectives of maintaining a strong Singapore dollar and expressed concern about its impact on our overall competitiveness. I would like to point out to Members that it is not the MAS but the international market which determines the value of the Singapore dollar. The value of a currency is determined by the international market's evaluation of a country's fundamentals. The Singapore dollar is strong because our fundamentals are strong. We have a strong stable Government, large reserves, no foreign debt, current account and budget surpluses, low inflation and large inflows of direct foreign investment. All these are factors which support the appreciation of the Singapore dollar against the currencies of other countries which are deficient in one or more of these fundamentals. MAS role is to manage the movement of the Singapore dollar against a basket of currencies of its main trading partners to avoid large specula- tive movements, either upwards or downwards as these can be damaging to the real economy. The Singapore dollar has appreciated by about 3% against the US dollar since the beginning of this year. This has, however, reflected the US dollar's weakness in global currency markets. Against the Japanese Yen and major European currencies, the Singapore dollar has in fact weakened by as much as 4-8%. The objective of the Monetary Authority of Singapore exchange rate policy is to promote long term export competitiveness and to sustain economic growth by keeping inflation low. A relatively strong dollar has allowed us to neutralise imported inflation. This is an important consideration, since imported consumer goods, capital and intermediate inputs account for some 70% of our expenditure and exports. Given our tight labour market conditions, a strong Singapore dollar has also helped to alleviate overheating in the economy and the labour market. By curtailing labour demand and achieving lower CPI inflation, wage growth has also been lower than what it would otherwise have been without an appreciation of the currency. Productivity growth has also been stronger, as the strong Singapore dollar has propelled businesses to upgrade and automate. It is noteworthy that, apart from China, Singapore's GDP growth - averaging about 10% per annum over the last two years - has been the strongest in Asia. On the other hand, our inflation has been one of the lowest. Indeed, in a situation of full employment, holding down the Singapore dollar artificially, even if we could do this, would only buy temporary improvement in competitiveness. This will be quickly undermined by its inflationary consequences. The MAS recognises that exchange rate appreciation poses short term adjustment problems for exporters. It also recognises the imbalances in demand conditions across different industries. The MAS has thus sought to ensure gradual appreciation of the Singapore dollar against a basket of currencies of our main trading partners. Small and Medium-sized Enterprises Some Members are concerned that little has been done to help the local Small and Medium-sized Enterprises (SMEs). Others have called for greater coordination amongst the various Government agencies in this respect. In fact, many schemes have already been put in place to assist them over the years. Moreover, an extensive multi-agency network has been established to provide assistance in a coordinated manner. Currently, this network involves six statutory boards, nine industry associations and four institutions of higher learning, helping SMEs to develop their operations. I will highlight a few major ones. The Local Enterprise Finance Scheme provides low cost loans to help local companies invest in modern and sophisticated machinery to upgrade their operations and purchase larger factories to expand their capacity. Since its inception, a total of over $3.4 billion worth of loans has been extended under this scheme to help fund about 14,700 projects. The Local Enterprise Technical Assistance Scheme provides grants to help SMEs modernise, upgrade and improve their management and business operations through seeking external expertise and training. In 1994, a total of $8.6 million was given to 656 approved cases. The Business Development Scheme provides grants to help SMEs develop business opportunities in international markets through organised overseas missions. A total of $600,000 was given to 190 approved cases in 1994. Local small and medium-sized enterprises are integral to the economic development of Singapore. They are encouraged to upgrade their operations and technology. In this regard, Government will continue its efforts to facilitate their growth and development. There is, however, no need to set up a new agency to focus on the needs of the SMEs. This is because the multi-agency network in operation now has already made available an immense and diverse range of expertise needed by SMEs to improve themselves. This expertise comes from the various specialist agencies such as the National Computer Board providing IT expertise, NPB - productivity expertise, SISIR - technical expertise, etc. Setting up a separate body would in effect be recreating the various expertise. This is essentially duplicating existing agencies' SME developmental efforts. Moreover, the development of different expertise is difficult to achieve by any one organisation. Two-tier Corporate Tax To help the SMEs, some have proposed that the Government implement a two-tier corporate tax system, with a lower tax rate for smaller companies. Such a tax system will simply encourage tax avoidance through business splitting. The better approach, which we are adopting, would be to lower corporate tax across-the-board over time. Measures to Assist the Retail Sector There have been calls for the Government to come up with some measures to help the ailing retail sector. As the Minister for Trade and Industry will be addressing this issue specifically during the Committee of Supply proceedings, I will not deal with it now. Venture Capital Funds Some Members have called for the Government to do more to help local entrepreneurs venture overseas. I would like to assure Members that there are already a number of measures in place to help local entrepreneurs do so. The pool of venture capital funds allocated to assist local entrepreneurs venture overseas has increased by 33% from $2.6 billion in 1993 to an estimated $3.5 billion in 1994. To-date, more than 150 local companies have received venture capital funding. Of these, 25 have gone public with a market capitalization of $3.8 billion. In addition, a $120 million venture capital fund was set up in 1994 for investment in small and medium-sized businesses in Singapore with the potential to expand into the region. The fund will be managed by the Regional Investment Company which will in turn be jointly managed by the Economic Development Board Investments Pte Ltd and Transpac Capital. Besides the venture capital fund, the Government also provides other forms of assistance to help local SMEs venture overseas. The Local Enterprise Finance Scheme (Overseas) helps local enterprises to set up overseas operations through low-cost loans. Local entrepreneurs can also apply for grants provided under the Market and Investment Development Assistance Scheme to help cover expenses incurred for activities such as feasibility studies, overseas missions and marketing and development trips. In addition, double tax deductions are allowed against income of approved expenditure incurred in initiating and developing investment outside Singapore. Property Tax Some businessmen have complained that the property tax cut will not help to reduce business cost. They argue that its benefit is negated by increased annual values of their properties. The annual value of a property is determined by market forces. Just as annual values are adjusted upwards when the property market is buoyant, it is also readjusted downwards when rentals fall. Businessmen should remember that without a tax cut, their property tax burden would have been even higher when annual values rise. Some small businessmen who rent their premises have complained that the property tax cut will only benefit landlords, as they do not pass on the tax cut to their tenants in the form of lower rentals. I am pleased to say that the Jurong Town Corporation had passed on their tax savings to their tenants last year and are likely to do so again this year. HDB is currently looking into doing the same. I would like to urge private landlords to follow their example and do likewise. The certainty that the property tax rate will be cut to 12% over the next couple of years should also give tenants greater scope to negotiate for better rental rates with their landlords, and thus benefit from the tax cut. Rising Aspirations of Singaporeans Some Members have asked what the Government plans to do to meet the rising aspirations of younger Singaporeans. It is good for the nation as a whole for each generation to have higher aspirations than the last. That is the way to progress, as aspirations are what drive all of us to apply our minds to achieve even more. However, a distinction needs to be drawn between realistic and unrealistic aspirations. While realistic aspirations drive progress, unrealistic ones simply breed resentment and disenchantment. Singaporeans should realise that dreams will forever remain as castles in the sky if they are not tempered with a dose of reality. The Government has tried and will continue to try to meet the aspirations of all Singaporeans. We will continue to invest heavily in education to enable every child to flourish, in our road system to enable more Singaporeans to own cars, in our public transport system to make it more comfortable and convenient for commuters. More land will also be released to meet the housing needs of the population. However, Singaporeans must realise that there is only so much that the Government can do. We cannot promise every Singaporean a landed property nor enable everyone to own a car, as the Prime Minister has said. As I have also said in my Budget Statement, the quality of life in Singapore has to be taken as a package. Tax Changes to Encourage Singaporeans to Work Abroad Some Members have asked the Government to do more to help Singaporeans who are posted overseas to work. When Singaporeans work abroad, they are liable for personal income taxes in two countries; firstly in Singapore, and secondly, in the country they are working in. This gives rise to two major concerns. One is the possibility of double taxation of the same income. The other is the likelihood that Singaporeans will have to pay higher personal income taxes in the country in which they are working. To address the concern of double taxation, the Government has concluded 30 Avoidance of Double Taxation Agreements (DTAs) with other countries. For countries with which Singapore has yet to conclude DTAs, the Government has been giving unilateral tax credits for foreign tax paid on employment income earned by Singaporeans in these countries since the Year of Assessment 1993. The second concern of Singaporeans who have worked abroad is that they have to pay higher personal income taxes in the countries in which they are working. This arises because most other countries impose higher personal income tax burdens than Singapore. However, we cannot recognise the additional income taxes paid to other governments for Singapore's personal income tax purposes. Doing so would be tantamount to the Singapore treasury paying the additional income taxes, on behalf of Singaporeans working abroad, to foreign treasuries. Nonetheless, in my Budget last year, I had announced two tax changes to help Singaporeans working abroad. The first is the reduction of tax rates used to compute non-resident tax reliefs in Singapore. The second is the tax exemption of voluntary CPF contributions by overseas posted employees which are obligatory by contract of employment. These tax changes will result in a lower tax burden on the Singapore source income of Singaporeans working abroad. They have taken effect from the Year of Assessment 1995. We will continue to look into what other personal tax changes can be made to encourage Singaporean employees to venture abroad. Personal Income Tax Dr Wong Kwei Cheong has asked that the 10% personal income tax rebate be made a permanent feature of our tax system. He has also suggested that the personal income tax marginal rate be reduced to the corporate tax rate level. For the Year of Assessment 1995, a 10% rebate has been given. Its effect is equivalent to a 3% proportional cut in income tax rates. This method of lowering the personal income tax burden of individuals provides the Government with the flexibility to vary the reduction in income taxes according to Singapore's economic performance. The use of this method must be viewed in the context of Singapore already having one of the most competitive personal income tax systems in the world. The top marginal personal income tax rates in Malaysia, Taiwan, South Korea, Australia and Japan are 32%, 40%, 45%, 47% and 50% respectively. Ours is only 30%. In this regard, some people may assert that Hong Kong has a more favourable personal income tax system than Singapore. Hong Kong's marginal tax rates range from 2% to 20%, with a cap of 15% on the effective tax rate. Hong Kong's personal reliefs also appear to be more generous. However, the reality is that our personal income tax burden is lower than Hong Kong's, except for some very high income people. By way of illustration, a working couple with two children will pay less income tax in Singapore than in Hong Kong for assessable incomes not exceeding $459,700. Also, our average tax burden is lower than Hong Kong's. In the Year of Assessment 1993, Singapore's average tax rate for resident individuals, which is a measure of the total tax assessed over the total assessable income, was just 7%. The corresponding figure for Hong Kong was 9%. S&C and Rental Rebates The Member for Cheng San GRC has commented that the relief given to the 1- to 5-room HDB flat residents in terms of service and conservancy (S&C) charges and rental rebates is too low compared to the revenue loss for the 10% rebate given to individuals. The 10% tax rebate is given to individuals who pay income tax and contribute directly towards the cost of public services. On the other hand, the HDB S&C and rental rebates benefit mainly individuals who do not pay income tax. Nonetheless, as these people have also contributed to the growth of the economy, the Government has decided to share the nation's wealth with them by giving them these rebates. However, there is a need for the Government to ensure that relief given in this form is not too excessive and does not result in a welfare mentality. Otherwise, Singaporeans will come to expect increases in such handouts year after year. Rising Cost of Living for Retirees Mr Chin Harn Tong has expressed concern for retirees. He feels that retirees are experiencing difficulties in coping with the rising cost of living. Therefore, more should be done to assist them. There are about 250,000 individuals aged 60 and above in Singapore. Of these, only about 5% are paying income tax. The other 95% do not pay income tax, and therefore cannot be helped through the personal income tax route. Nonetheless, the Government recognises the contributions of these older Singaporeans to Singapore's development and is looking into ways to assist them through non-tax routes. Tax Incentives for Care and Re-employment of Older Workers The Member for Tanjong Pagar GRC may wish to know that older workers are already eligible for higher earned income relief. The relief which is given to encourage skilled and experienced people to work beyond their normal retirement age is $3,000 for those over 55 years and $4,000 for those over 60 years. The lower CPF contribution rate for older workers has also made it easier for employers to employ such workers. There is thus no need for new tax incentives on this issue at this time. Skills Development Fund Dr Ow Chin Hock has suggested that part of the collection of the foreign workers levy be channelled to enlarge the resources of the Skills Development Fund so as to provide more incentives and programmes, particularly for on-the-job training. The monthly salary ceiling for Skills Development Levy will be raised from $750 to $1,000 with effect from 1st April 1995. This is estimated to increase the funds available for skills development by $14 million in FY95 and will enable more skills upgrading programmes and on-the-job training to be undertaken. There is thus no need for Government to contribute to the SDF at this point of time. The Government can consider doing so should there be a shortfall in the SDF. However, even in that event, the contribution need not be tied to the foreign workers levy collection. CPF SOTUS The aim of SOTUS is to help citizens to enhance their assets through share ownership and other investments. The top-up should be in cash to allow citizens to choose whether to use it to purchase shares, invest in property, or simply retain as cash in their CPF accounts. In other words, the investment decision should be left to individual citizens. Some Members have questioned the need for co-payment under CPF SOTUS and pointed out the burden this imposes on the lower income groups. We should remember that CPF SOTUS is not intended as a handout or welfare benefit. Hence, the principle of co-payment. Seen in this light, it is appropriate that the individual citizen be prepared to come up with his share of the cost for enhancing his own assets. In the case of SOTUS II, he has to deposit a sum of $750 in his CPF account over an 18-month period before he is eligible for the $300 top-up. The deposit requirement, which works out to $42 per month, has been set sufficiently low to enable most eligible citizens to qualify for the top-up. For the first SOTUS exercise which had a similar deposit arrangement, 1.17 million of eligible citizens were able to enjoy the full top-up of $200. Another 90,000 citizens who were unable to deposit the full amount also received a pro-rated top-up. $200 CPF Top-up The objective of the $200 CPF top-up which I announced in this year's Budget is different. It is meant to reward all our citizens who have contributed to the good economy last year. One could regard it as a kind of dividend payment to all citizen shareholders. As such, every Singaporean, rich or poor, whether working or not, should be eligible for the top-up as long as he is aged 21 and above and has a CPF account. Again, let me emphasise that the $200 CPF top-up is not intended to be a handout or a welfare scheme. There are other schemes in place to help the lower income groups. One of them is Medifund which, through contributions from the annual budget surpluses, provides a safety net for those in the lower income group who are unable to afford basic healthcare. Other schemes include the Public Assistance Scheme, Small Families Improvement Scheme and the CCC Assistance Scheme. The Member for Hong Kah GRC has suggested that the Government should top up the accounts of citizens who cannot attain the CPF Minimum Sum even after working until age 60. The Government recognises that there may be a case to help the older generation of Singaporeans who have missed out on the CPF scheme for the most part of their working life. However, this should be looked into separately from the top-up scheme. The Member for Ayer Rajah has suggested that the $300 and $200 CPF top-up be credited into the Medisave Account of those who are not paying CPF and those who are above 65 years of age. The top-ups will be credited to the CPF Ordinary Account to give citizens maximum flexibility on the use of the grant. Citizens can choose subsequently to credit all or part of the top-ups to their Medisave Accounts, if they choose to do so, and to open Medisave Accounts for this purpose. Use of CPF Funds Mr Peh Chin Hua has asked the Government to consider allowing Singaporeans to invest their CPF in certain designated overseas projects. This is not advisable. The risks involved in investments in foreign projects are high. It is also not practical to designate specific projects for investment of CPF funds. CPF members who invest in this way will receive little or no protection for their savings. Edusave A Member has asked for more assistance schemes to be set up to help the lower income groups. He has suggested that more could be given in Edusave to children from lower income families. Edusave is a scheme designed to maximise the potential of every school-going child. It represents Government's commitment in investing in the most important resource we have, which is its people. I would not like Edusave to become a social assistance scheme. As I have mentioned earlier, we have several assistance schemes for lower income families and their children. These include the Public Assistance Scheme, Small Families Improvement Scheme and the CCC Assistance Scheme. Families with school-going children who require further financial assistance should apply for these schemes which have been specifically set up to assist them. White Collar Crime Prof. Walter Woon has expressed concern that the existing penalties are insufficient to deter white collar criminals. I agree with him and I would like to inform him that I have already asked my officials to work with the Attorney-General to review the adequacy of penalties under the various Acts under my purview. Nevertheless, I will convey Prof. Woon's concerns to the Attorney-General. Prof. Woon may also be interested to know that the Criminal Procedure Code and the Penal Codes are already currently under review. I am also aware of Prof. Woon's pet monster, the Companies Act, and I will refer his suggestions to my officials for consideration. Mr Speaker, Sir, let me now sum up the debate. We have had two years of exceptional growth. The outlook for 1995, while slightly less sanguine, is nevertheless still very rosy. The projected economic growth of 7.5% to 8.5% still surpasses our medium growth range of 6% to 7%. In short, the future looks bright, barring unforeseen circumstances. However, we must note that at the end of the day Singapore is a very open economy; highly susceptible to the vagaries in the rest of the world. It is tautological to say that no one can predict the unforeseen. The Kobe disaster, the devaluation of the Mexican peso and the record slide in the US dollar which now threatens the recovery of the Japanese economy all took the world by surprise. What these events highlight is that we should never take the good times we have enjoyed for granted. We have to stay vigilant, capitalise on our strengths and draw upon our resilience to seize the excellent opportunities that abound in the booming Asian economies around us. Singaporeans should ride on the wave of progress that is sweeping through this region, exploit its momentum and raise our nation to even greater heights. I have every confidence in the vitality and versatility of Singaporeans to rise to this challenge. [Applause].