Hansard, Monday, 21 October 2013

1 Ms Foo Mee Har asked the Prime Minister (a) what is the rationale for the rule whereby banks only deny further credit to individuals when their aggregate debt across all financial institutions exceeds 12 months of their income for 90 days or more; and (b) how does this rule prevent borrowers from racking up huge debts beyond their repayment capability.

Mdm Speaker, in September this year, MAS introduced a limit on an individual's total unsecured debt across financial institutions. This new limit will come into effect in June 2015. So, we are giving it some time to be phased in. We set the limit at 12 months' income for a start, so as to give borrowers who are already over-leveraged time to adjust. For instance, according to Credit Counselling Singapore, the average debt level of individuals seeking its help exceeds 24 months of their income. MAS expects financial institutions to work actively with their affected customers to take steps to bring down their unsecured debt levels. MAS will monitor the situation and is prepared to lower the limit over time if necessary.

The 12-month limit is, however, not the only safeguard against borrowers accumulating too much debt. We also introduced other policy changes for credit cards and unsecured credit facilities in September, which take effect progressively from December this year. So, they kick in earlier. One of the key changes is to require financial institutions to review a borrower's total debt and credit limits with all financial institutions before granting a new credit card or unsecured credit facility, or increasing the credit limit on such facilities. This will ensure that financial institutions do not extend unsecured credit to an individual beyond the limit of 12 months income. So, we are taking some time to bring into effect the rules for existing borrowers, some of whom are significantly over extended, but when it comes to new facilities and new loans, the effect of our new rules is to start helping them early.

Page: 10

Ultimately, everyone has to take personal responsibility for their own finances, and not get into debt-servicing obligations that leave them with little buffer in their incomes. The MoneySENSE national financial education programme has stepped up its education of consumers on factors to consider before taking on debt.

Mdm Speaker, I thank the Deputy Prime Minister for his comprehensive response. I have three supplementary questions. One, given the implementation date of the aggregated debt limit for unsecured loans of 12 times income will only take place 1 June 2015, how can we prevent individuals from chalking up huge debts to well beyond the 12 times income rule?

Secondly, if all the banks decide to call on lines on customers that exceeded the 12 months' aggregated debt limit come 1 June 2015, what is the risk of a credit crunch in the industry or forced bankruptcies on vulnerable borrowers? Would the Minister allow "grandfathering" of existing cases?

Thirdly, how can we prevent individuals from turning to alternative sources of financing, such as moneylenders or pawnbrokers, which usually charge higher rates or tougher terms and are currently not regulated by MAS? There is no centralised cross-agency database that gives the full picture of an individual borrower's debt from the various sources. How can we ensure on an aggregated basis – both the banks as well as the alternative sources – individuals do not over-stretch themselves and how do we close the regulatory loophole?

Mdm Speaker, I thank Ms Foo for those useful questions. They, in fact, come from two different directions, or they reflect quite different concerns. First, what happens between now and June 2015? Ms Foo is concerned that borrowers can still extend themselves even further in the meantime. What we have done is that we are starting off with some softer rules and, eventually, it becomes quite a hard rule in June 2015. Immediately, from December this year, banks will already be required to do a check with the Credit Bureau, as well as income checks on the borrowers, before increasing the credit limit. For those who already are over-extended, we are giving them time to bring down their debts and the financial institutions have to work with them to try to make this possible. But when it comes to increasing the amount of debt that they have, the rules in effect kick in quite early. We are not specifying that the 12-month limit is a hard limit now, the banks do have to make checks with the Credit Bureau to find out that total debt with all the financial institutions, and they have to also do a check on their income status.

Page: 11

It has to be updated as well. That, I think, will have the right effect. Banks can make their own judgement and they do not want to force people into the unregulated market. The banks are able to make a good judgement on that between now and 2015.

The Member's second and third questions, I think, are essentially similar. We have to calibrate these rules such that we do not drive people into the unregulated, let alone, illegal markets. That is an important balance that we have to find, especially for those who already have significant debts. That is why we are giving them time to work their debts down. Through Credit Counselling Singapore and the banks' own efforts, some efforts can be made, case by case, to try and restructure their debts. But it is important for them not to extend themselves even further.

The easiest way to extend yourself even further is to go to the moneylenders or the illegal moneylenders. There, the interest compounds at a rate where you are almost guaranteed to have to increase your indebtedness.

2 Mr Nicholas Fang asked the Minister for Foreign Affairs (a) what will be the long-term impact of President Barack Obama's recent absence from the APEC Summit in Bali; and (b) whether this is an example of potential challenges which can derail the US' strategic pivot to Asia.

It was understandable that US President Barack Obama could not attend the APEC meetings in Indonesia and the East Asia Summit (EAS) and inaugural ASEAN-US Summit in Brunei, given the pressing need for him to remain in the United States. The impact would be far worse if the US government could not resolve its fiscal problem, compared to the cancellation of a US Presidential, which could be reinstated to the region at any time.

Nevertheless, the gridlock in the US' domestic politics and the fact that the US' fiscal position continues to be imbalanced send a worrying signal to the international community. This has implications beyond the economic uncertainty and impact caused by the gridlock. It has led many observers, both

Page: 12

in the US and internationally, to voice concerns about the impact on the US' ability to exercise global leadership. President Obama's presence at the key meetings in Asia would have been a good opportunity to reinforce his personal, high-level commitment to the US' rebalancing policy towards the Asia Pacific.

However, the fact is that the US remains resilient and innovative. It has a dynamic economy that continues to produce and attract top talent. Despite the political challenges and domestic distractions, the US remains a key player in our region. US leaders are fully cognisant of the mutual benefit that all parties stand to gain from the US' continued engagement of Asia.

Secretary of State John Kerry stood in as President Obama's representative. He and the other regional leaders had positive and productive discussions at APEC, the EAS and ASEAN-US Summit. Good progress was made on important issues like the Trans-Pacific Partnership (TPP) agreement. Singapore will host the next TPP Ministerial meeting in December, which we hope will help us work towards its substantive conclusion this year.

Thank you, Mdm Speaker, and I thank the Senior Minister of State for the reply. I have one supplementary question: the solution or whatever compromise that seems to have been reached in the US, appears to have just postponed some of the inherent problems in the system for barely a few more months. With further development and engagement with the US imminent and, as the Senior Minister of State mentioned, with the upcoming TPP, are there greater concerns on the part of the Ministry in terms of how the potential of the "kicking of the can down the road" would continue to impact Singapore and ASEAN and US relations in the months ahead?

Where Singapore is concerned, we will continue to engage our partners – US, China – all in balance. We have to pray that they get their domestic priorities right because what they decide in the future will have a lot of impact on the global world. The constant engagement by the world with the US will continue, so that they understand the impact that their decisions have on the region and the international community.

Page: 13

3 Mr David Ong asked the Minister for Defence if the Ministry will consider providing a more flexible approach to National Service enlistment for our top male athletes so that they can continue to excel at their sport whilst at their prime.

Deferment from full-time National Service (NS) may be granted in exceptional circumstances to individual sportsmen, who are assessed to be potential medal winners at international competitions, like the Olympic Games, and bring national pride for the country. Individuals will have to show why deferment is necessary for them to train full-time and compete successfully at international competitions. Each case will be assessed individually in consultation with MCCY.

Earlier this year, MINDEF received an application from the parents of Joseph Schooling to defer his full-time NS, as he is due for enlistment in 2014. Included in the appeal, were detailed plans which outlined his training schedule and targets with the goal to represent Singapore and compete successfully in the swimming competitions of the 2016 Olympic Games. MCCY supported the appeal for deferment as they assessed that, based on his previous achievements in international competitions, Mr Schooling had the potential to do well in the next Olympic Games. As this appeal satisfied all the conditions for deferment of exceptional sportsman, the Armed Forces Council has decided to grant deferment to Mr Schooling for full-time NS till 31 August 2016 in order for him to train and do well in the 2016 Olympic Games. Mr Schooling will be enlisted for full-time NS once his deferment ends. We wish Mr Schooling every success and hopes that he will do well in the next Olympic Games.

Thank you, Mdm Speaker. I thank the Minister for the response. The sporting fraternity, especially our male athletes, are placing greater emphasis for a longer term investment in terms of sports development, overseas coaching and training, including competitive exposure with top athletes. I have two supplementary questions. First, while MINDEF's flexibility in allowing our elite sportsmen to defer NS on a case-by-case basis is welcomed, can the Ministry provide clarity in its pre-requisites for granting such deferments, and the classification of exceptional sportsmen? Can the Ministry also look at establishing a NS deferment scheme for our elite male athletes and that the eligibility criteria can be made known to our sportsmen for both individual and team sports as this will help them to invest and plan ahead for their sporting career with confidence, and not worry about whether they could

Page: 14

be deferred later on.

There are specific criteria. Our criteria are explicit, so, let me repeat them. They can be considered for deferment in exceptional circumstances and are assessed to be potential medal winners at international competitions, like the Olympic Games, and bring national pride for the country. They have to show why deferment is necessary for them to train full-time and compete successfully at international competitions, and cases will be assessed in consultation with MCCY.

Mdm Speaker, I am glad to hear that Joseph Schooling's application for deferment is approved. I would like to ask: besides the Olympic Games, will the Ministry consider the Asian Games as well? The Olympic Games is the pinnacle, but along the way, there are many other international tournaments.

We do consider those, in other words, competitions apart from the Olympic Games, but they must be sufficiently high level and are exceptional.

The following question stood in the name of Ms Mary Liew –

4 To ask the Acting Minister for Manpower in respect of the Fair Consideration Framework (a) what is the purpose of the exemption limit for jobs with fixed monthly wages above $12,000 and on what basis is this determined; (b) whether this exemption limit is subject to review and adjustments in accordance with economic conditions and inflation; and (c) whether the Ministry will also be looking beyond the application of the jobs bank for PMEs to the rank-and-file jobs.

5 Assoc Prof Tan Kheng Boon Eugene asked the Acting Minister for Manpower whether the Fair Consideration Framework can be extended to the entire employment process to include promotion, retirement and retrenchment decisions to ensure that discrimination is kept at bay in our workplaces.

6 Mr Png Eng Huat asked the Acting Minister for Manpower with regard to the Fair Consideration Framework (a) what is the consideration for excluding

Page: 15

small firms with 25 or fewer employees; (b) what is the current total number of small firms and the total number of workers they employ; (c) what is the estimated average ratio of Singaporeans to employment pass employees at the PME level in all firms; (d) what is the estimated average ratio of Singaporeans to employment pass employees at the PME level in all small firms; (e) what is the percentage of small firms that fall below 30% local shareholding; and (f) what is the estimated average ratio of Singaporeans to employment pass employees at the PME level in small firms that fall below 30% local shareholding.

7 Ms Sylvia Lim asked the Acting Minister for Manpower under the Fair Consideration Framework (a) whether a Singaporean applicant using the national jobs bank can lodge a complaint if it is found from experience that the hiring process may be unfair; (b) what is the timeframe or frequency for checking up on the ratio of Singaporean to foreigner PMEs in firms; (c) what is the low ratio threshold trigger for scrutinising firms; and (d) how are repeated complaints for triggering scrutiny determined and calculated.

Question No 4, please.

Mdm Speaker, may I take the next four questions together?

Yes, please.

The features of the Fair Consideration Framework (FCF) need to be viewed in Singapore's context where there are more jobs being created than there are Singaporeans available to fill. This is a good problem to have. It is a good situation because it allows us to keep unemployment low.

Unlike in other countries that face high unemployment among locals, our economy continues to generate good and diverse opportunities for our people. The purpose of the FCF is to encourage a level playing field for Singaporeans and maintain our values of meritocracy and fairness in the workplace. The FCF, therefore, needs to be designed in a way that is practical and appropriate for Singapore – one that pushes employers to consider Singaporeans fairly but, at the same time, avoids making things too rigid for businesses. Why does this rigidity matter? It matters because when companies can thrive, opportunities are also created for our people. It is really about catering for an open, diverse and dynamic workforce but, at the same time, making sure that there is fair consideration at play. They need not be mutually exclusive.

Page: 16

Let us also be very clear that there are no exemptions to the need for firms to consider Singaporeans fairly. All firms must do this. But some practical exemptions have been made only for the advertising requirement, for a start. The advertising requirement is just one part of the overall framework.

First, firms with 25 or fewer employees are exempted from the advertising requirement, as we believe that many smaller businesses do not have the sophisticated HR management to process many of these applications. One could argue whether it should be 20 or 30 employees. In our judgement and in discussion with the tripartite partners, we believe that 25 would be the number to start off with.

More importantly, however, applying the FCF to the larger firms will yield the greatest benefit, given that they employ most of the EP holders and they generally offer jobs which are more sought after by Singaporeans. In percentage terms, as highlighted in the Frequently Asked Questions (FAQs) appended when we released the information on the FCF, firms with 25 or fewer employees, employed about 25% of all EPs. Essentially, for larger firms with more than 25 employees, they employed about 75% of all EP holders.

Secondly, jobs paying a salary of $12,000 and above a month are also exempted from the advertising requirement. This is because open advertising for jobs, such as these, is usually done in a different manner. Furthermore, such jobs cover only 5% of the local workforce, meaning that the vast majority of jobs would be covered by the advertising requirement.

Thirdly, we have not applied the advertising requirement for rank-and-file jobs, because there are other tools, such as levies and Dependency Ratio Ceilings, which will spur firms to search for suitable Singaporeans before applying for S Pass or Work Permit.

Nonetheless, we will monitor the implementation of the FCF closely, and make adjustments to the exemption framework as necessary.

While there are some exemptions to the advertising requirement, let me again reiterate that there are no exemptions to the need for firms to consider Singaporeans fairly. MOM will impose greater scrutiny on firms with a low proportion of Singaporeans at the PME level for its industry – whether they are small firms or whether they have jobs paying $12,000 and above. The exemptions for small firms with 25 and fewer employees and jobs paying $12,000 and above apply only to one portion of the FCF, which is the advertising

Page: 17

requirement.

Employers will be identified for additional scrutiny based on a range of factors. We will consider how a firm's proportion of Singaporean PMEs compares with others within the same industry. Other factors, such as how fast the proportion changes over time, which could be due to promotion, retirement, retrenchment patterns and so on, are also relevant. We are not expecting each firm to work towards a target percentage of Singaporean PMEs in its workforce, given that it varies across industries. Within each particular sector, there will also be variations depending on what areas of business they are in, and, even within the firm, they have different skill sets in terms of the applicability to the local workforce. What is important is that the firm has fair and meritocratic hiring practices that consider Singaporeans fairly. At MOM, we will have our internal triggers to scrutinise these companies accordingly.

Firms will also be flagged out if there are repeated complaints of unfair HR practices, whether it is for hiring, promotion, retirement or retrenchment. Such firms will be subject to additional scrutiny in their work pass applications and those which are found to have poor employment practices may have their work pass privileges curtailed. In addition, for unfair dismissal cases, we have the Employment Act to protect employees who feel that they have been treated unfairly.

In conclusion, I would stress that the FCF is not just about the advertising requirement. It is also about MOM playing a much more active role to engage firms that do not seem to be doing enough to hire and develop Singaporean PMEs. However, while the FCF signals acceptable norms in HR practices, it is also important for us to understand that it is not the intent nor is it desirable for us to ensure that every single PME job will go to Singaporeans. We do need to make sure that the economy remains competitive and that is probably the best way to look after the interests of all Singaporeans. Employers are best placed to decide which candidates can do the job. What MOM will do is to signal these expectations quite strongly and clearly, and, importantly, to monitor the firms' HR practices closely to minimise instances of unfair practices.

Mdm Speaker, I have three questions for the Minister. One, how would MOM view advertisements in a jobs bank put up by recruitment agencies that specialise in hiring employees on work passes only? That means they are actually specialised companies hiring employees on work passes. When they advertise in the jobs bank, obviously their intentions are clear: they intend to hire foreigners. How would MOM apply the FCF on such companies? To them, they are just going through the motion, so that after 14

Page: 18

days, they can hire employees on Work Passes.

Two, it is stated in the published FAQs that MOM does not review the merits of a firm's hiring decision. But would MOM consider imposing some additional conditions on the firm if the number of applications for the listed jobs is more than a certain figure? If a job can attract so many locals to apply and yet, at the end of it, not one Singaporean is considered suitable for it, then something is amiss. It is either that the company is bent on hiring non-Singaporeans or maybe our education system is not churning out the right mix to power our economy.

Lastly, I understand the figure of 25 workers and below, and the exemption for advertising that applies to firms with this number of employees, I have asked some numbers but they are not given. Maybe the Minister can share them?

If I may seek a quick clarification on the first question. Is the Member referring to Work Permits or Employment Pass? If you could just repeat it.

[(proc text) The hon Member repeated his question. (proc text)]

Okay, Employment Pass. Mdm Speaker, with regard to the first question whether companies would go through the motion of advertising, as mentioned, under the Fair Consideration Framework, the advertising component is one part of it. We require companies to advertise. That is important, especially in a tight labour market. We do believe that there are Singaporeans out there looking for jobs. Many companies assure us that they are looking out for Singaporeans but cannot find them. By having a jobs bank, there is a lot of utility in that because it ensures that every job that people are considering looking for EPs to come in, Singaporeans can have access to that data bank to look at whether those jobs are available.

If I were to combine the first question and the second one, it is about whether there would be biased hiring, meaning that people are just going through the steps and, therefore, they would just put up the advertisements for 14 days and so on, but would not want to employ Singaporeans. In this case, it would trigger the second criterion, which is for us to go in to look at companies in a much more detailed fashion. We would look for a number of reasons: were there, perhaps, allegations of unfair recruitment patterns brought forward by Singaporeans? For example, there will be jobs that Singaporeans have applied for, and they felt that they are eminently qualified for, but, for one reason or

Page: 19

another, they are not hired.

It is not for us to question companies per se, but if there are certain patterns that occur, we will go in and look in detail at how these companies conduct their businesses.

I would add also that in terms of whether it is the right mix and whether the skills sets are applicable or not, what we will find is that in any economy, there will be jobs where there may not be a lot of Singaporeans going into. So, it is whether from a structural perspective, from the education and training perspective, should we cater more for that type of jobs? Or perhaps, we may not necessarily have a lot of Singaporeans that might be going to that particular sector, but there is a space for foreigners to play that role because, in turn, they contribute and value-add to that particular sector, a particular part of the economy, which, in turn, also creates other jobs and opportunities.

What we will do collectively with the other economic agencies is to analyse the patterns of job creation and local pipeline across the sectors. There may be cases where we recognise that there are certain skill-sets that, perhaps, not a lot of Singaporeans may have but are necessary for the overall economic development of Singapore which would, in turn, provide for our Singaporeans as a whole.

I thank the Minister for his clarification. I would like to ask three supplementary questions. First and foremost, many developed countries have also implemented similar frameworks. I just want to ask MOM what are some of the best practices and lessons learnt from some of these countries in which we have plugged some of these loopholes that are exploited by employers?

In implementing this FCF, are there any specific industries or sectors that the MOM is concerned about with regard to racial imbalance, and what is MOM planning to do about these sectors? Are there certain targets or benchmarks that you are going after? And are there specific actions to be taken for these sectors?

Thirdly, from an employer and business perspective, what is MOM's assessment of the impact to companies bringing global or regional roles here, with the FCF taking effect?

Page: 20

Mdm Speaker, if I may just add on to the earlier reply. I left out some data in responding to Mr Png's questions. Let me address that first. The answer to the number of questions that Mr Png raised is that among all the firms that hire at least, for example, one Employment Pass holder, as of the first half of 2013, approximately 20,000 of them had 25 or fewer employees. So, each of these companies had about two EP holders on average. In terms of the larger firms, meaning employing above 25 employees, they had about 18 EP holders on average.

Some of the other data that Mr Png asked for, about local shareholding, MOM currently does not track small firms with 25 or fewer employees by percentage of local shareholding. What we want to emphasise is that whether big firms or small firms, whether jobs are above $12,000 or less, in terms of the requirements for fair consideration, that is a requirement that we expect of all companies. So, I understand where Mr Png is coming from, it is not the data that we track. Regardless of who are the main shareholders, we expect companies to adhere to some of these requirements. If they do not adhere to that, we will go in and take a look and provide greater scrutiny.

With regard to Mr Zaqy's questions, we have looked at various countries and their measures put in place. It is very much contextual. A lot depends on how it has evolved over time. What is also very clear from many of these countries is that no one particular policy is foolproof. As I have said many times, you can come up with many regulations, people are creative, they will find different ways to get around these. It is not foolproof but I think we have looked at the various measures and we have adapted them to what we believe would work for Singapore. It is not a silver bullet. These measures will not completely solve every single problem because a lot of these are about attitudes and mindsets. What we are doing is to signal clearly, and especially when there are complaints and when there are sectors that fall short of what we deem are acceptable levels, we would go in and look at it in detail.

The Member also asked about whether there are specific targets and proportions. As I have explained earlier, it is difficult to do that because different sectors have different requirements and they vary. Even within sectors, between companies catering to different parts within that sector, the requirements would also vary. We do have our internal thresholds that would trigger us to take a look, and that is something that we will review over time.

As to whether this FCF will impact the Singapore economy, what I would like to say quite clearly is this: Singapore remains committed to being open, dynamic and competitive. That is important because, ultimately, this benefits

Page: 21

our people. Why? Because when companies invest in Singapore, and I would suggest not just foreign companies but local companies as well, it actually generates jobs and opportunities for our people. So, that is something we are firmly committed to.

Being open, dynamic and diverse does not mean that you cannot ensure that fair consideration takes place as well. We accept that some elements of that might have crept into some sectors of the economy, and that is why signalling has been taking place. We have been speaking to different sectors and they have been responding. The FCF is largely put in place to further emphasise this direction that we hope to go into.

At the same time, it is important for us to remember that companies invest in Singapore for a host of reasons. Having an open, diverse workforce is a compelling reason but quality of governance, stability, financial stability, transparency, security, so on and so forth, all these things continue to be important.

It is not so much about balancing the different needs but really striking a position which will continue to ensure that we grow, with good quality growth that will benefit our people but at the same time ensuring that there is fair consideration for Singaporeans.

Thank you, Mdm Speaker. I welcome the Acting Minister's assurance that the Fair Consideration Framework includes the entire employment process, including promotion, retirement and retrenchment. I would like to ask the Acting Minister what are the triggers that his Ministry would rely on when we talk about alleged discrimination in post-hiring employment decisions? Certainly, the Ministry cannot just rely on complaints and I think the FCF will be a toothless paper tiger if it just relies on employees to file complaints.

Mdm Speaker, I would like to thank the Member for his questions. I would add that complaints and information conveyed by employees or from people in the industry represent an important component in the process. We should not downplay the importance of that. What goes on internally in a company is usually not very obvious to the people outside.

I would also add that there are complaints and there are complaints. I read many complaints and we have spent quite a number of man-hours investigating some of them. There will be those that are spurred by very different reasons, as

Page: 22

opposed to whether there was fair or unfair consideration at the workplace. There might be very personal issues as well. But it remains an important component.

The other trigger that we have is in terms of monitoring the various sectors. Over time, we have a sense about each different sector, depending on the make-up of the particular sector, and how many Singaporeans are in that sector. So, one reference point would be in terms of peer sector monitoring – looking at companies within that sector to see the proportion of Singaporeans they hire, and which are the companies that deviate from the norm in a significant fashion. That is one trigger. Another is that we would have our own internal sense of where we think this ought to be. It is an assessment and a judgement based on where we see the whole economy going. That would be also another trigger as to whether there are disproportionate numbers of foreigners in a particular company. There might be good reasons for that, and that is why it is important for us to go in, look into the details, talk to the company, understand the nature of the business and determine whether there is, indeed, adequate consideration for Singaporeans or not.

It is really a combination of these various triggers that have allowed us to go in deeper and to look at the company specifically to make sure that there is fair consideration at play.

Thank you, Madam. Supplementary questions for the Acting Minister. I would like the Acting Minister to refer to the question which I filed, that is, parts (a) to (d). They were filed because I thought that looking at the materials released by MOM thus far, these are still some questions that have not been answered. Earlier, the Minister‘s response also did not address these questions specifically, I thought. Could the Minister shed more light on the questions which I filed?

Mdm Speaker, Ms Sylvia Lim asked a few questions. Firstly, whether a Singaporean applicant using the national jobs bank can lodge a complaint if it is found from experience that the hiring process may be unfair. Yes, they can. As I mentioned, the advertising process is one part of the framework. If individuals find from their own experience and they are also able to provide additional information about what was in particular unfair in the process, they can raise it and we will take a look at it. If there are repeated complaints by different people, that will add to a better awareness of what this company might be on to. As I said, there are many different complaints that we receive, and it is something that we will follow up on. So, yes, they can raise

Page: 23

that.

Secondly, in terms of the timeframe or frequency for checking up on the ratio, like I had mentioned, this is related or similar to the question about whether there are specific ratios and thresholds. We would have our internal thresholds to look at the various companies. As I had mentioned, one would be triggered by signals that will come from complaints or from information that we gathered from various sources. Secondly, we would also have visibility on the overall numbers in the various companies. As we apply the various internal thresholds to this, we will look at the companies and will then have to triage the whole process and decide which companies to go into and to look for further details.

In terms of repeated complaints, as I mentioned, there are many different types of complaints. One of the challenges that we face today, and I would suggest not just in my Ministry but across the Ministries, is that there are many people providing a lot of feedback. I mentioned some are spurred by personal issues, they may have lost a job, they may have lost out on promotion, they are disgruntled, and investigations show that there are not sufficient grounds. Others raise complaints without backing them up. When we want to follow up, they do not want to identify themselves, and there is not enough information to follow through with.

We have a whole range of complaints and issues being raised, and we need to then prioritise to see how best to address them. We will look at the quality of the complaint and information, and see how best to follow up. It is not really triggered by whether they are repeated complaints but more on the types of complaints raised and the information that is provided, and, based on that, we will act accordingly.

8 Mr Teo Siong Seng asked the Acting Minister for Manpower under the coming Fair Consideration Framework, whether the Ministry will link WDA's jobs bank with other established job banks for better efficiency and cost effectiveness.

Mdm Speaker, under the Fair Consideration Framework (FCF), which takes effect from 1 August 2014, companies making new applications for Employment Passes

Page: 24

must advertise the job vacancy on a new jobs bank administered by the Singapore Workforce Development Agency (WDA). Even as we stay open to businesses and continue to complement our local workforce with foreign manpower, the framework will encourage businesses to improve their HR practices in considering Singaporeans more deliberately.

In addition to playing an important role in the FCF, the new jobs bank will facilitate better job matching opportunities between local job seekers and employers. This is particularly important when we do have a very tight labour market. The jobs bank aims to provide local job seekers with an avenue to access a more comprehensive list of job vacancies and seeks to provide employers with better visibility of their job vacancies to a larger pool of candidates. All employers are welcome to post on the jobs bank − in fact, we encourage them to do so − and we seek to develop the jobs bank to become a useful resource to both employers and local job seekers, and I think, importantly, for agencies, because it is a good way to mine data for us to better understand how the economy and workforce are evolving.

We are more than open to consider how we can collaborate with private jobs portals to achieve this. They are concerned. We will be quite happy to work with them. We will consult with them in the months ahead to explore possible areas of collaboration that can improve the overall labour market efficiency and provide as much visibility of job opportunities to job-seekers as possible. So, now, it is how to synergise it across the different job portals so that you can reinforce this as an overall effort.

Thank you, Mdm Speaker. I would just like to come back to the FCF and would like to ask the Minister with regard to Singaporeans who are outside the PME framework —

Mr Singh, just a clarification. Are you going back to the previous questions?

That is correct. I raised my hand four times, and I wish to ask questions.

Mr Singh, you cannot do that. We are now at Question No 8. Can you please direct your supplementary question to Question No 8?

Madam, I just request your permission because it is an important policy affecting Singaporeans, and I would be very obliged if I could

Page: 25

just follow up with a question on the earlier four questions that were asked.

Would you follow up under Parliamentary Question (PQ) 8, please?

Yes, I will follow up under PQ 8, but it does not relate to the jobs bank. It should relate to the FCF framework as a whole, and jobs bank just being part of it.

We have already passed the PQs.

Noted, Mdm Speaker.

Thank you. Mr Patrick Tay.

On behalf of NTUC and the Labour Movement, I thank the Acting Minister for Manpower for rolling out the Fair Consideration Framework as well as the National Jobs Bank. If I may ask the Acting Minister with respect to this national jobs bank, whether the jobs that are published in that 14-day period, are they for Singaporean PMEs only to apply, to access, or is it a transparent open one for anyone?

Mdm Speaker, we are in the process of working out the details of the jobs bank, its look and form and how it would operate. What I would say is that the job portal would be open for visibility for the rest of the people. However, we do envisage that in terms of direct application online, it will be only made available to locals.

9 Mr David Ong asked the Minister for National Development whether there are plans to allow Singapore Citizens with foreign spouses who are neither Singapore Citizens nor Permanent Residents to buy new HDB BTO flats given that the family nucleus criterion is met.

Mdm Speaker, Singapore Citizens with foreign spouses can qualify for Build-To-Order

Page: 26

flats, if they have Singapore Citizen children. Those without children can apply to buy a 2-room BTO flat in the non-mature estates, if they meet the age and income criteria and are HDB first-timers.

I thank the Minister for the reply. My follow-up question is that the current non-citizen spouse scheme has an age restriction of 35 years and they can only buy a 2-room BTO flat. This appears as a prejudice against the younger Singaporean citizens who are married to foreign spouses. Some may be facing pending approval for their application for Long-Term Visit Pass, Permanent Resident or Singapore Citizenship. I think we have now about 8,900 marriages involving such family units in 2011. So, my question is whether the Ministry can review this policy and make it more pro-family so that such younger family units can not only own a BTO flat but perhaps a 3-room flat, so that they can start their family earlier. This is a small step to achieving our bigger national objective of increasing the fertility rate.

Madam, we are always pro-family. Once they have Singapore Citizen children, the age limit of 35 years does not apply. Of course, for those without children yet, the spouse can apply to become a PR or even become a citizen.

10 Mr Gan Thiam Poh asked the Minister for National Development (a) what is the estimated number of Singaporeans married to non-citizen spouses who are eligible to buy new HDB BTO 2-room flats; and (b) whether all HDB blocks which have 2-room flat types will include other flat types as well.

Madam, there are about 7,000 marriages each year involving Singapore Citizens and foreign spouses. As I said, since July this year, such couples are now eligible to buy 2-room Build-to-Order (BTO) flats in the non-mature estates, so long as the Singapore citizen is a first-timer buyer and meets some age and household income criteria. As our marriage register does not capture income or housing history, we are unable to estimate the number as requested by the Member. However, we note that in the July and September 2013 BTO exercises, about 300 such couples applied under this new scheme.

Page: 27

All HDB blocks which have 2-room flats will usually include other flat types as well. This is to promote social mix.

11 Er Dr Lee Bee Wah asked the Acting Minister for Manpower (a) whether the Ministry will consider extending the mortgage insurance cover under the Home Protection Scheme (HPS) to HDB flat owners with pre-existing illnesses; (b) how many HPS applications have been rejected in the past three years; and (c) how many claims have been made under HPS during this period.

Mdm Speaker, the Home Protection Scheme (HPS) is a mortgage-reducing insurance which provides protection to CPF members and their families against the risk of losing their HDB flats, in the event of the CPF member's premature death or permanent incapacitation. From 2011 to July 2013, about 2,700 HPS claims with a total value of $221 million have been paid out to insured members to help them pay off their outstanding housing loans. This is an important scheme and it is put in place to look after Singaporeans, and is something that will continue to be applied for all Singaporeans.

However, HPS is not offered to CPF members with serious pre-existing medical conditions. About 1.3% of all HPS applications since 2011 were rejected due to serious pre-existing medical conditions.

Extending HPS coverage to all CPF members with pre-existing medical conditions would have implications on the affordability of premiums for members and the viability of the HPS, and there are significant moral hazard issues that need to be addressed.

These issues and concerns are not unique. These are the same concerns and considerations that apply to every insurance programme and every insurance scheme. So, these issues need to continue to be carefully studied. We understand the concerns raised. But we do understand that CPF members with serious pre-existing illnesses and their families would be concerned about the repayment of the outstanding loans for their HDB flats in the event of death or permanent incapacitation of the member. Various assistance schemes are available to help those members. CPF Board will also work closely with the

Page: 28

Ministry of National Development to study other options to help them as well.

Mdm Speaker, I would like to know how many percent of flat buyers take up HPS and whether there will be further publicity so that more will take up HPS because it is for their own good. Will the Ministry consider making this compulsory?

Mdm Speaker, as at July 2013, there are about 530,000 CPF members using CPF to service their monthly housing instalments. Of these, 95% are covered by HPS or an equivalent MRI. About 2% have lapsed on the HPS premiums while 3% are uninsurable or ineligible for HPS cover.

We understand the concern raised by the Member as to whether we should raise the profile and information. Public education is something that we can continue to do. It is important for the public to understand the importance of HPS. It is about protecting their families and their loved ones. In terms of whether we should make this compulsory, this is something that regularly pops up as to whether it is something we should look at as part of the overall review into how better to look out for our people, some of whom may not be covered or to encourage more people to be covered. That is something we can consider.

12 Mr R Dhinakaran asked the Minister for Transport (a) what impact has the cooling measures for the vehicle industry introduced this year had on vehicle ownership in Singapore; and (b) whether the Government is planning for any additional measures in the foreseeable future.

Mdm Speaker, in February 2013, the Government announced vehicle loan restrictions to encourage financial prudence among motor vehicle buyers. Subsequent to the announcement, the COE prices for vehicles fell and they have since risen but they have generally stayed below their peak level prior to the introduction of the restrictions. The Government has no plans to introduce additional cooling measures in the foreseeable future.

Page: 29

13 Mr Laurence Lien asked the Minister for Transport to what extent has the Land Transport Master Plan 2013 given sufficient emphasis to accessibility issues and to Singapore being a fast-ageing society.

Mdm Speaker, the diverse needs of our society were an important consideration for both the Land Transport Master Plan (LTMP) 2013 as well as the first version in 2008. One of the three key thrusts of LTMP 2013 is thus to ensure that our land transport system supports a "liveable and inclusive community". This includes accessibility for all commuters, including our growing elderly population.

Today, all our train stations and bus interchanges are barrier-free. We have also doubled the number of taxis that can accommodate high-back motorised wheelchairs. All public buses will be wheelchair-accessible by 2020, up from 64% today.

To give more green time for the elderly and disabled to cross the road safely, LTA will extend the Green Man Plus scheme to 500 more pedestrian crossings by 2015. LTA will also extend the audio tactile system to more pedestrian crossings to aid the visually impaired.

Our sheltered walkways, including the 200 km more that will be built as part of the Walk2Ride programme under LTMP 2013, will offer rest areas to make walking more comfortable for the seniors. Another 40 overhead bridges will have lifts installed by 2018. LTA is reviewing design requirements for pedestrian infrastructure as a whole to help seniors using wheelchairs and other mobility aids to get around.

I would like to assure the House that designing an accessible transport system remains a key area of priority for my Ministry.

Thank you, Madam. I would like to thank the Parliamentary Secretary for the comprehensive answer. I would just like to ask whether the Ministry has considered from the user's point of view that accessibility requires an unbroken path of travel door-to-door, not just many parts of the system having accessible features – that if just one part of it

Page: 30

is not accessible, it would be very difficult for that person to make the journey – and that whether in the process of coming up with this Master Plan, ethnographic studies or similar studies have been conducted to validate the experiences of commuters with accessibility issues to make sure that every single part of the system actually works for them. And in this process, whether there were involvement of voluntary welfare organisations and groups that represent these people with disabilities and elderly persons to contribute their ideas to a more accessible Land Transport Master Plan.

I thank the Member for the supplementary question. We also share the same concern that the Member has with regard to accessibility in Singapore. In fact, it is the focus of our attention that we look at the journey as a whole. We also meet different users of our transport network, as well as its ancillary facilities, to ensure that we have that holistic perspective.

For example, I would like to share that we have the City for All Ages Project. It is a multi-agency project where we not only look at the facilities, we speak to individuals, users of such facilities, and we go down to the ground, we work with the VWOs in Marine Parade, for example, to see how the needs of our commuters and pedestrians are well taken care of. I am pleased to share that because of these findings – sharing by our users and commuters – we are able to pilot a few of the initiatives that we have currently in Marine Parade. As we move forward, as we deepen our journey into an ageing society, we will do more, and I assure the House again that accessibility is key to our public transport system as well as beyond in making places all over Singapore accessible to everyone.

Thank you for giving me the chance to ask the question about accessibility. Today, we have a Walk2Ride Programme that has been announced. I wonder if the Ministry is working with the commercial buildings to ensure the Walk2Ride scheme covers those commercial and industrial buildings so that accessibility, especially sheltered linkways to the MRT station, is also part-and-parcel of the Plan.

The Walk2Ride Programme is something we hope to roll out in various parts of Singapore. Looking at the plans of the first phase of such programme, I am pleased to share with Members that we are looking at how we can facilitate the movement of our commuters and pedestrians to the MRT station. If, let us say, such buildings are part of the process or part of the journey in the process of commuters going to

Page: 31

the MRT station, we will look into it and we will consider as and when it is necessary.

Thank you, Mdm Speaker. May I ask the Parliamentary Secretary whether LTA would consider accelerating the installation of pedestrian traffic crossings in estates with a high number of elderly residents? For example, in Tanjong Rhu estate, you gave us an overhead bridge but it is too much effort for the elderly people to climb the overhead bridge. So, we are looking for a traffic crossing. Would LTA consider that?

Mdm Speaker, I would like to thank the Member Mr Lim Biow Chuan for his question. I have discussed this issue with him. I think it is important for us to look at it as a journey. It is important for us to look at the needs of the elderly. One of the areas that we are looking at is how we can we take care of the mobility, as well as the safety, of the silver community. So, this is part of our process. Nevertheless, we have announced earlier some of the areas that we are looking at are, firstly, to install lifts at some pedestrian overhead bridges. That will facilitate movement for the elderly. We also want to ensure that our transport system caters to the majority. For those localised areas that face particular challenges, we will work together with the local Members and advisers of the community to see how we can facilitate the movement of people.

14 Ms Denise Phua Lay Peng asked the Minister for Communications and Information whether specific action can be taken to effectively assist the elderly and less-educated Teletext users to access the information they need in view of the discontinuance of this service.

15 Mr Low Thia Khiang asked the Minister for Communications and Information (a) what has been the usage pattern of Teletext in the last five years; (b) what is the number of users prior to its discontinuance; and (c) what assessment has been made on the impact of its discontinuance on users before the service is withdrawn.

Madam, could I have your permission to answer Question

Page: 32

Nos 14 and 15 together, please?

Yes, please.

Mdm Speaker, I thank Ms Denise Phua and Mr Low Thia Khiang for their questions on the cessation of Mediacorp's Teletext service.

Teletext was launched 30 years ago in 1983 as a commercial service. Since then, media consumption patterns have changed dramatically. The Internet has grown to become a key information source. Increasingly, consumers are accessing information over the Internet through a variety of devices, such as smart phones, tablets, desktops, laptops and connected TVs. These changes in consumption patterns and the wide availability of alternative information sources led to a significant global decline in Teletext users over the years, including in Singapore. For example, MediaCorp previously shared data from a survey conducted in 2011 that showed there were about 187,000 who accessed daily stock price information. This year, the number dropped by 85% to about 28,000. As such, MediaCorp decided to cease the Teletext service, as it was no longer commercially viable. Mediacorp's decision is no different from her counterparts in other countries, such as the United Kingdom, Australia and New Zealand, where broadcasters have also similarly decided to shut down their Teletext services.

Madam, I understand that some of the elderly population are used to getting their information on Teletext and are impacted by the cessation of the service. While the information on Teletext, such as stock prices, weather and flight information, are readily available on the Internet, we do recognise that some of our elderly may still find it difficult to access such information.

To help seniors learn and use technology in their daily lives, the Infocomm Development Authority of Singapore (IDA) runs the Silver Infocomm Initiative (SII). This initiative can help our seniors get online, which will allow them to access the information that was previously on Teletext and more. The Media Development Authority (MDA) has also been working with IDA to ensure that the SII reaches out to the seniors that need our help, so that they can learn how to find and access such information online. Seniors, without home access to the Internet, are able to utilise 124 free web-surfing points, known as Silver Infocomm Hotspots, which have been set up at various Community Clubs, self-help group centres, Residents' Committees and our libraries. Our Libraries, Madam, also offer older Singaporeans courses and workshops on basic

Page: 33

computing as well as how to use common mobile devices and access NLB eResources and eBooks. In addition, seniors can also borrow e-devices, such as iPads and eReaders, from selected libraries. These e-devices are accompanied by training that shows users how to use and care for the devices.

I would also like to share that, apart from Teletext, there are other similar information services in the market. For example, StarHub currently provides an interactive information service to its cable television customers. All StarHub TV subscribers can access information, such as finance, weather and traffic updates, by pressing the interactive button on their StarHub remote, or by tuning in to channel 899. At the same time, Madam, MediaCorp has kept up-to-date by offering information through many other ways, especially through its websites and mobile applications, to better serve their consumers.

Madam, amidst all the discussions on the difficulties that seniors may face with the cessation of Teletext, it has been encouraging for us to know that there have been seniors who have written to the media to share their positive experiences of learning and using computers and smart phones. An example is Mr Lim Chan Kong, an 81-year old grandfather who has written to both The Straits Times and Lianhe Zaobao to share his journey towards computer literacy and his belief that it is never too old to learn. I share this belief and encourage everyone to help the seniors in their family learn how to adapt to this new digital age. Together, Madam, we can make our society a more digitally-inclusive one.

Madam, I have some supplementary questions. I understand from the answer that there were about 28,000 users before Mediacorp decided to terminate the service. My question is, whether Mediacorp has studied the profile of this 28,000, the impact of its discontinuation and whether the Minister is aware that the IDA conducted a survey in 2011 which showed that only 15% of elderly 60 and above used the Internet and a computer, and there are more than 50% of the elderly aged 50 to 59 years who neither use a computer nor the Internet over the past 12 months at the point of the survey. In a situation as such, how can IDA confidently say that it will be a smooth transition for the elderly to be able to access information with the discontinuation of Teletext?

The next supplementary question is: why did Mediacorp terminate the service in such a hurry, before IDA's programme kicked in to ensure that the elderly has sufficiently grasped the ability or have the ability to access the Internet and with a satisfactory mode of replacement of the information?

Page: 34

Lastly, is the Minister aware that there were a lot of complaints on the ground from the elderly about the discontinuation of the service? What is the Minister's answer to that?

Madam, the Ministry and MediaCorp have both received a lot of feedback from the ground, especially from the elderly, about the cessation of the Teletext service. We must expect that people who are impacted will be upset and, therefore, we have to offer them alternatives.

To answer the Member's second question, the programme to assist our seniors is ongoing. In fact, we have started the programme well before the cessation of the service to get our seniors on board onto the digital bandwagon. Many programmes have been rolled out by IDA and MDA to help our seniors to migrate to a digital lifestyle. I can go through the long list of the programmes that IDA and MDA have been doing long before 2011, because we recognise that we have to build a digitally-inclusive society. I cannot question Mr Low's figures – about 60% or 50%, I do not have my figures here. Our data, which were shared by MediaCorp, show that only 28,000 people have been accessing the Teletext service. It does not mean that these 28,000 users do not have an alternative; it is just that they are using Teletext because it is available.

At the moment, with the kinds of services that we are providing to the seniors through our Silver Infocomm Initiative (SII) programme, we have trained about 77,000 seniors, and the programme is ongoing.

Finally, the decision to cease is actually a commercial decision by Mediacorp, in consultation with the Ministry. We have to allow MediaCorp to make that decision and, recognising that there are alternatives in place, we have to give them that leeway because they are in the market and they know better how to conduct such a service.

Mdm Speaker, unlike Mr Low, I am a bit more optimistic. Just as I think the elderly has learnt to use the Teletext many years ago, I think we can help them to learn how to use the Internet. Some of them use Skype as well. But the devil is in the execution. I would really appreciate if the Ministry and IDA could have a more rigorous communication plan and a coaching plan as well to reach out to the people who are affected. They are, indeed, affected and they need support.

Page: 35

Like the Silver Infocomm Initiative, when we reach out to them, do not just use English but make sure multi-languages are involved. Perhaps, also have and encourage community coaches – could be young people and the older people. And also highlight some of the success stories and make full use of the Community Clubs' facilities, the RCs and so forth to help this group of elderly who truly are experiencing some challenges.

I thank the Member for the suggestions. I will take them back to IDA and MDA and discuss how best we can implement them. I want to assure the Member that all our materials are in multi-languages because we recognise that, for the senior citizens, some of them may not be conversant in English. But as for the Member's suggestion of doing more hands-on approach by getting some of our champions to work together with the seniors, it is being done. Some of the CCs do have programmes whereby they get the youngsters to run the programme together with the seniors. I will ask IDA and MDA to follow up on the Member's suggestions.

16 Ms Janice Koh asked the Minister for Law (a) what are the Ministry's plans and timeframe to implement recommendations from the Media Convergence Review to address Singapore's copyright and digital piracy challenges; (b) what is the Government's position on (i) enhancing public education on online piracy, (ii) the provision of more legitimate content sources, and (iii) introducing site blocking as part of regulatory measures; and (c) whether a more robust legal framework is necessary to protect the creative sector and its rights owners.

Mdm Speaker, changing social norms and technological developments require us to review our approach to copyright protection. The Government agrees with the Media Convergence Review Panel that the problem of online piracy has to be addressed through a multi-pronged approach comprising (a) public education, (b) the promotion of legitimate digital content services, and (c) appropriate regulatory measures.

Consumer understanding of and respect for copyright is a key factor in combating online piracy. IPOS has been putting emphasis on public education to cultivate an IP-savvy and respecting population, through its flagship outreach initiative, the Honour Intellectual Property (HIP) Alliance. Recent initiatives

Page: 36

include a Facebook Connect video application to engage the online community and an outreach to 150 Primary schools using an interactive skit to introduce students to the concept of honouring intellectual property from an early age. The annual World IP Day 2013 event, meant to heighten the public's awareness and respect for IP, was well-attended by more than 1,000 members of the public. These outreach activities are complemented by the IP Academy's training courses on copyright for students and professionals in relation to the online environment.

Making legal content available to consumers through a convenient platform and a reasonable price can reduce demand for infringing alternatives. Content owners have recognised this and have been exploring new content delivery models via the Internet or through mobile devices to allow access to content anytime anywhere. Local broadcasters have also been improving their content delivery models and launching various digital content services recently. For instance, MediaCorp launched "Toggle" in February 2013 so that consumers can access and enjoy MediaCorp's Free-To-Air TV content anytime anywhere.

The Ministry of Law and other agencies are currently deliberating the role of site blocking as a measure to help counter the ease of accessing copyright infringing material online. How we do this will need to be carefully considered. We are finalising our review and will be consulting the industry and public on the appropriate approach to site blocking in the coming months.

A sound and pro-business copyright framework requires the protection of the rights of rights owners, as well as the legitimate market access by consumers. Both objectives are crucial to a vibrant creative industry. We are reviewing our Copyright Act to ensure that our laws keep up with emerging technologies and social norms.

Thank you, Madam. I just have three supplementary questions. The first is, given that the consumption of online pirated material in Singapore is not insignificant, and, in fact, one of the highest in the Asia Pacific region, does the Government feel that this message needs to be reinforced, perhaps more visibly and strongly; and what else needs to be done in this area?

The second question is: what does the Government feel are the key drivers leading to people downloading content illegally online here? Is it the lack of or limited access to legitimate content sources and how much of that has to do with our content guidelines which limit the kind of content available in

Page: 37

Singapore, therefore, inevitably pushing consumers to download, for example, uncensored films and TV programmes illegally?

Finally, evidence has shown that even when such content is provided in a timely manner, and affordable, there will still be people who will go ahead and download it illegally from pirated websites. What are some of the obstacles that the Ministry foresees in terms of allowing right holders to go to court to apply for orders for ISPs to block these specific sites so that these torrent sites are not so easily available to Singapore consumers?

Mdm Speaker, on the first question, the Member asked whether the Government feels that the message about copyright protection needs to be reinforced. The answer is "yes". The Government certainly does feel that this is a message that needs to be reinforced. As indicated earlier in my response, we agree with the Media Convergence Review report that public education is extremely important because it is important for people to know and understand the importance of honouring Intellectual Property, as well as respect the rights of the creators of the works.

On the second question as to what the Government feels are the key drivers, as indicated, it is a combination. Clearly, consumers desire to have access to content. If legitimate content is accessible at a reasonable price, then I think most people would be willing to go for that. There would always be those who may be inclined to access pirated material if it is free, but, by and large, if you have appropriate public education, and there is a general sense of respecting copyright and Intellectual Property rights, then people would be encouraged to move towards legitimate content, if it is made accessible. And, as indicated earlier, that is something that the Government is working towards with the content providers.

With respect to the last question, if I may clarify with the Member, she said that even if the content is provided, there are still illegal downloads. She had asked about some of the challenges. Could I clarify with the Member specifically what her question on that was?

Madam, my final supplementary question is, even with the availability of legitimate content sources, evidence, at least in other countries where there is site blocking, shows that people will still go ahead to download it for free – even if the content is available in a timely manner, and even if it is affordable. So, the question is, is site blocking, in this instance, a more effective way? It may not be the most perfect bullet to tackle the issue but

Page: 38

it is an effective way of at least reducing the number of key pirated websites. Are there any challenges or obstacles to enforcing or implementing something like site blocking in Singapore?

Mdm Speaker, I thank the Member for her clarification. It is fair to say that there is not any one single measure which, on its own, is a magic or silver bullet that will resolve online piracy. So, there will have to be a multi-pronged approach of public education, legitimate content and appropriate regulatory measures. On site blocking, that is certainly one measure and, as mentioned earlier, that is something that we are studying. The preliminary view is that site blocking can help to address the ease of accessing copyright infringing material on the Internet.

The International Federation of Phonographic Industry (IFPI)'s Digital Music Report 2013 reported that within a year of five European countries imposing blocks on Pirate Bay, usage levels of the Pirate Bay site fell by about 69%. Site blocking is simple to administer and it targets the infringing sites instead of the end users.

The nature of online piracy is such that it is difficult to police and I do not think that even with site blocking it would be a 100% solution. But from what we have seen in the preliminary review, it is certainly one way that can reduce the online piracy.

17 Mr Lim Biow Chuan asked the Minister for Law in light of claims by a foreign law firm on being a full service law practice in Singapore offering litigation advice (a) whether foreign law firms in Singapore are allowed to practise litigation in Singapore; (b) whether litigation remains a ring-fenced practice area of Singapore law firms; (c) whether he can clarify the intent and scope of formal law alliances; and (d) whether foreign law firms are allowed to practise domestic litigation through formal law alliances.

I think the Member's question may have been prompted by a recent article in the Legal Business magazine, published on 8 July 2013. It quoted a partner of Clifford Chance as saying that it is "the first full service firm in Singapore offering litigation advice". A similar statement was repeated in an 8 July 2013 press release by that firm.

Page: 39

This, and an earlier 11 December 2012 press release, promoted the firm's Formal Law Alliance (FLA) with a Singapore law practice, Cavenagh Law, as "the first international firm with a full service, integrated law practice in Singapore". The statements could be read to mean that a foreign law firm can now practise litigation in Singapore. That would not be accurate.

Singapore Law Practices (SLPs) and Foreign Law Practices (FLPs) based in Singapore may collaborate as two free-standing firms under an FLA. This enables co-branding and billing, and the sharing of office premises, resources and client information. In addition, partners of the firms within an FLA may, subject to the Attorney-General's approval, hold concurrent partnerships in the SLP and FLP. However, foreign participation in the SLP is subject to an overall one-third cap. In addition, both firms should remain separate and distinct entities, and may only provide such legal services as they are respectively permitted to provide.

The legal services sector operates in a global and increasingly competitive market. Our recent changes over the last few years have been beneficial to our economy and to our legal sector which have grown quite well. It gives Singapore firms greater flexibility to collaborate with FLPs to enhance their international competitiveness and grow. It also gives Singapore lawyers access to a greater range of opportunities and work.

However, strict conditions continue to be imposed vis-a-vis the practice of Singapore law. Specific areas of domestic law work, such as litigation, criminal law, family law and conveyancing, are "ring-fenced" and can only be handled by Singapore law firms, through lawyers called to the Singapore Bar. In these areas of law practice, the SLP must use its own letterhead and file court papers in its own name. These areas remain, and must remain the province of Singapore lawyers and Singapore law firms.

My senior officials have called in the partners of Clifford Chance and the local law firm, Cavenagh Law, and told them that their statements conveyed an inaccurate picture and should be stopped.

SLPs and FLPs which have entered into FLAs with each other must exercise restraint in their publicity and refrain from overstating the facts. Their representations to the public and media should be clear as to what their FLA is and is not. I think clever word play should be avoided. We will also not condone arrangements where the SLP is, for all intents and purposes, a proxy of the FLP.

Page: 40

All collaborations must comply with the spirit as well as the letter of the law.

Mdm Speaker, allow me to declare my interest in this question as a practising advocate and solicitor. May I ask the Minister for Law a supplementary question: how does MinLaw intend to ensure that all other foreign law firms involved in these services are aware of the strict conditions imposed? The Minister had earlier said that the Ministry's officials had contacted that particular law firm. Would the Ministry officials also be contacting other relevant foreign law firms about the matter?

The Ministry has regular chats with the foreign law firms, as well as Singapore law firms. The conditions under which they can practise are made quite clear in the documentation that is given to the law firms. These are also on our website. Equally, for example, when a firm is awarded a licence to operate as a QFLP, the terms and framework within which it can practise as such are clearly set out. Likewise, when a firm enters into an FLA, that framework is also set out. The Attorney-General has the right to ask questions where we believe that some questions need to be asked.

On the whole, from what we can tell, the law firms appear to have been complying. Where we have noticed a transgression, or what appears to be a transgression or an inaccurate or misleading statement, we will certainly call them up. In this case, the hon Member has filed a question. I am sure the firms involved will take careful note of what I have said.

18 Dr Intan Azura Mokhtar asked the Minister for National Development whether older Singaporeans who wish to purchase a HDB Studio Apartment (SA) can do so before the age of 55 years old when the CPF Minimum Sum is transferred to their CPF Retirement Account (RA), thereby reducing the funds available for the purchase of an SA.

Mdm Speaker, HDB Studio Apartments (SAs) are purpose-built housing for elderly Singaporeans. They are targeted at elderly homeowners who are right-sizing from a larger flat. Such buyers can finance their SAs using the sale proceeds, with balance set aside for their retirement needs. This is one good option for the elderly homeowners to monetise their flats after their children have moved

Page: 41

out.

Those below the age of 55 have other options, including that of buying a 2-room flat.

Nevertheless, we may exercise flexibility on a case-by-case basis for those slightly below the age of 55 in extenuating circumstances, if an SA is the most suitable housing option for them.

Mdm Speaker, I thank the Minister for the reply. I am glad to hear the assurance by Minister that flexibility may be accorded. I understand the need for the policy but there are also older Singaporeans who may not be able to rent directly from HDB or cannot afford to rent from the open market or live with their children. It seems that the SA is their only housing option. Would the Ministry consider providing an option to eligible older Singaporeans aged 55 and above, for example, those who are economically active who can support themselves, to be able to decide to use their CPF funds to purchase an SA and get a lower monthly CPF payout after the age of 62? There are some of these older Singaporeans who feel that they should take care of their housing needs first before worrying about the monthly payouts seven to eight years later.

Mdm Speaker, I do not quite follow the Member's query. What is the age 62 option?

If I could just repeat that. If the Ministry would provide an option for older Singaporeans at the age of 55 to decide to use the CPF funds to purchase an SA and have less in their Retirement Account, so that they have lower monthly CPF payouts after the age of 62. That can be an option.

I am not very sure. I may need to discuss this with the Acting Minister for Manpower. This affects the CPF rules. As the Member knows, I am always flexible and compassionate. I will discuss this with my coll

Mr Low Thia Khiang.

Thank you, Mdm Speaker. Supplementary questions, please. I would like to ask the Minister whether the SAs are becoming too expensive as an option for the elderly who were initially planning to take up the option. I remember we started off with the SAs costing

Page: 42

about $60,000 per unit. Today, it costs a lot more. Secondly, in view of the term of the lease and the size of the SAs, whether he thinks the current selling price is quite expensive, compared to BTO flats.

The answers to both supplementary questions are no. I think the pricing is reasonable. I pay particular attention to SAs and we look at pricing carefully. I do not know when the price tag was $60,000 per SA, but, right now, it is about $100,000. It does vary with location. I have read some comments in the new media comparing SAs with 2-room flats. They are comparing "apples" with "lemons". Some SAs were in very highly popular locations, vs some 2-room flats in non-mature estates. There must be a price difference to reflect the difference in locations. Generally, I find that the SAs are a good option for those who want to right-size. This is targeted at this group. It is one additional option for them. They are now living in a big flat and this is one option for them.

I did a house-to-house visit over the weekend. I was happy to see an elderly couple, retirees, living in a 5-room flat. They looked a little lonely because they said that the children have all gotten their BTO flats and, one by one, they have moved out. Now, they have a 5-room flat and only the elderly couple are living there. They are seriously looking at the SA option, knowing that once they right-size and monetise, they will have substantial – easily $200,000 – extra funds. I gave them a strong piece of advice, "Please make sure you keep that money. Don't spend it on silly things because you will regret it."

Mr Hri Kumar.

Thank you, Mdm Speaker. A supplementary question: could the Minister clarify the position of residents who may be in transition, those who are old enough to qualify for SAs but may not have the cash or CPF balances to place a deposit, for one, but have equity tied up in their current flats. They cannot sell without buying and they cannot buy without selling. Could these residents be helped?

I have personally encountered some cases in my own constituency. We would always try to render our help. We know that, sometimes, people during this transitional may not have the cash. But the initial deposit should not be a problem; it is just $250.

Er Dr Lee Bee Wah.

Page: 43

Thank you, Mdm Speaker. In fact, these SAs offer a very good option for residents who want to right-size. I have received a lot of good feedback from residents. I would like to ask the Minister: what about for those who would like to right-size in the same zone? For example, in Yishun South, recently, Khatib Court is very popular. A lot of my residents have been asking if they could be given priority when they want to right-size in the same zone.

Yes, Madam. That is why we have a Studio Apartment Priority Scheme. It is precisely for that reason. I think quite a substantial proportion of the BTO offerings is reserved for those seniors who apply who either live there, or have children in that locality. The last time I checked, I recall that we were able to meet all the demand, including those in Yishun.

Mr Zaqy Mohamad.

Mdm Speaker, I thank the Minister for touching on the issue of pricing for SAs. The scheme is a fantastic one. Many of my residents are also thankful for this scheme. However, SAs serve a very niche objective and they also have to be sold back to HDB. There is thus concern about whether the price fluctuations are really impacted by the market, since you can only sell it back to HDB at the end of the lease term.

As I have said, the Studio Apartments scheme is quite a special one and it is designed for a particular purpose. So, Members should not compare it term-for-term with other flat type like 2- or 3-room flats. It is precisely because we impose some of these conditions for that targeted group, that we were able to keep the pricing of SAs fairly affordable, in order to allow the elderly homeowners to be able to monetise with substantial cash proceeds, and, as I had said earlier, I hope they will know how to hold it and not lose it.

Order. End of Question Time.

[Pursuant to Standing Order No 22(3) Written Answers to Question Nos 19-21, 23-30, 32, 34-37, 40-43, 45-46, 48-49, 51, 53-66, 69-74, 76-82 and 84-91 on the Order Paper are reproduced in the Appendix). Question Nos 22, 31, 33, 38-39, 44, 47, 50, 52, 67-68, 75, 83 and 92 have been postponed to the next

Page: 44

available sitting of Parliament.]

[(proc text) "to amend the Criminal Law (Temporary Provisions) Act (Chapter 67 of the 2000 Revised Edition)", (proc text)]

[(proc text) presented by the Second Minister for Home Affairs (Mr S Iswaran); read the First time; to be read a Second time on the next available Sitting of Parliament, and to be printed. (proc text)]

[(proc text) "to amend the Good and Services Tax Act (Chapter 117A of the 2005 Revised Edition) and to make related amendments to certain other written laws", (proc text)]

[(proc text) recommendation of President signified; presented by the Senior Minister of State for Finance (Mrs Josephine Teo); read the First time; to be read a Second time on the next available Sitting of Parliament, and to be printed. (proc text)]

[(proc text) "to amend the Motor Vehicles (Third-party Risks and Compensation) Act (Chapter 189 of the 2000 Revised Edition)", (proc text)]

[(proc text) presented by the Senior Minister of State for Law (Ms Indranee Rajah); read the First time; to be read a Second time on the next available Sitting of Parliament, and to be printed. (proc text)]

Page: 45

[(proc text) "to amend the Road Traffic Act (Chapter 276 of the 2004 Revised Edition)", (proc text)]

[(proc text) presented by the Minister for Transport (Mr Lui Tuck Yew); read the First time; to be read a Second time on the next available Sitting of Parliament, and to be printed. (proc text)]

[(proc text) "to amend the Central Provident Fund Act (Chapter 36 of the 2013 Revised Edition)", (proc text)]

[(proc text) presented by the Acting Minister for Manpower (Mr Tan Chuan-Jin); read the First time; to be read a Second time on the next available Sitting of Parliament, and to be printed. (proc text)]

[(proc text) "to amend the Employment Act (Chapter 91 of the 2009 Revised Edition), the Child Development Co-Savings Act (Chapter 38A of the 2002 Revised Edition) and other written law to give employers greater flexibility in dealing with employment-related matters, to improve employment standards for employees and to refine the benefits for employees and self-employed persons in relation to maternity, adoption, childcare, extended childcare, shared parental and paternity leave", (proc text)]

[(proc text) presented by the Acting Minister for Manpower (Mr Tan Chuan-Jin); read the First time; to be read a Second time on the next available Sitting of Parliament, and to be printed. (proc text)]

[(proc text) Order for Second Reading read. (proc text)]

Page: 46

Mdm Speaker, I beg to move, "That the Bill be now read a Second time."

The Property Tax (Amendment) Bill 2013 comprises three amendments. Two amendments will give legislative effect to property tax changes announced in the 2013 Budget Statement, while one amendment arose from the periodic review of our property tax regime.

A public consultation exercise on the draft Bill was held from 25 July to 14 August this year. MOF has evaluated the feedback received and, where relevant, incorporated them in the final Bill. I will now explain the three amendments in the Bill.

First, the property tax refund for vacant residential and non-residential properties will be removed. Currently, there are provisions for owners of some vacant properties to apply for property tax refunds, such as for those undergoing repairs to render them fit for occupation. This is inconsistent with the intent of property tax, which is a tax on property wealth that does not depend on whether the property is vacant or the reason for it being vacant.

With the change, owners whose properties are vacant due to repair works will be taxed at owner-occupied rates, similar to properties that have been torn down and rebuilt, provided that the properties are intended for owner-occupation after the works are completed. Likewise, vacant properties held for investment purposes would be liable for property tax even if they are not rented out. The removal of the provisions for property tax refund will, therefore, ensure consistency in the tax treatment of all vacant properties. Clause 3 provides for this change.

Second, we will amend the Act to allow the Minister to prescribe the types of properties which will be subject to the progressive property tax rates introduced in Budget 2013. A more progressive tax regime on property wealth is socially equitable and has the added advantage of not hurting the competitiveness of our overall tax regime or reducing the incentives for enterprise. The change is provided for in clauses 4, 5 and 6.

Third, clauses 7 and 8 amend the Act to extend the deadline for objections and appeals on property tax assessments from the current 21 days to 30 days. This change gives taxpayers more time to evaluate and make more considered objections and appeals. Mdm Speaker, I beg to move.

Page: 47

[(proc text) Question proposed. (proc text)]

Mdm Speaker, thank you for allowing me to speak on the Property Tax (Amendment) Bill 2013.

I rise in support of the amendments in the Bill. I would like to touch on the changes in the Bill that differentiate the treatment for residential property and non-residential property and the introduction of the progressive property tax structure on residential properties effective 1 January 2014. The new tax structure will allow the first $8,000 Annual Value (AV) of residential property to enjoy 0% tax and different tax rates to be applied for subsequent AV amounts. With these changes to the Property Tax on residential property, more households with lower value property will benefit as they will pay less property taxes than what they are paying currently.

Therefore, as the Minister has said, it is socially equitable and it is fair that the changes will result in tax increases that will impact mainly those who can afford higher end property. This will mean that they will have to pay more. And with these amendments, those benefiting from investments in property will also pay more than owner-occupied property.

The changes do, however, add to the complexity of residential property tax. The progressive nature of the tax (more tiers for the different tax rates), as well as the fact that computation of the amount of property tax as a percentage of the annual value of the property (based on the estimated yearly rent that the property can fetch if it were rented out), does make it quite complex.

Variability of the annual value of the property does lend uncertainty to property tax. So, while the annual value may not vary year over year, the fact that this will vary with market conditions implies no ability to guarantee the impact on the taxpayer. For many of my residents who are retirees and live in the property that they own, this does cause some level of anxiety. So, while they own their own property and live in them, they are anxious about the amount of tax they have to pay despite not making any rental income from their home.

While I support the amendments in the Bill, I would like to put forward a consideration for a different treatment of "owner-occupied residential property", and I assume that some of the tax people might fall off their chairs with this.

Page: 48

The consideration I am asking for is, do not treat owner-occupied residential property as a tax on wealth.

I do understand that this is not a trivial consideration and it is a fundamental shift from the current intention of the tax which is a tax on wealth. Property is definitely an important form of wealth or asset in Singapore, whether owner-occupied, rented out or used for investment purposes.

This will have a significant impact on tax revenue, as asset tax, which property tax and owner-occupied rental tax are part of. It is estimated to form about 7.4% of Government Operating Revenue in the financial year 2013, thereabouts it is about $4 billion. This will impact the programmes and initiatives that this revenue also funds.

The rationale for my putting forward this consideration is not just from a tax perspective but rather that of housing policy, nation building and rootedness to Singapore.

The Home Ownership for the People Scheme was introduced in 1964. And this gave Singaporeans a tangible asset in the country and a means of financial security. Home ownership has also helped Singapore in our economic, social and political stability. As we know, over 80% of Singaporeans live in public housing, with about 95% owning their HDB flats, that is, they are owner-occupied.

As the Prime Minister said in his recent National Day Rally Speech, I quote, "Housing has and will continue to be an important way to share the fruits of our progress with all Singaporeans and to level up the poor. The HDB programme is not just about the roof over our heads. It is also a valuable nest egg. But it is not just a valuable nest egg. It is also a home, a home where we sink roots, where we raise families, where we build ties, friendships, emotional ties with our fellow Singaporeans."

A person living in his/her house – HDB or private – is really not fully realising the value of the asset. We have an ageing population and a growing middle class that has worked hard over the years to own their own homes, public or private. Many are living in them. As they retire or slow down in their career, they increasingly depend on their savings. And for those who do live in them, while, yes, they do have wealth, that is, their homes, they are not really fully realising the value of their wealth unless they sell their homes. For our seniors, we do want them to be able to continue to live in the community and

Page: 49

environment that they are familiar with and where they have built their bonds. For those who have investments and own other residential properties, they should continue to be taxed on them.

I support the amendments in the Bill as this would be moving in the right direction and I am not asking for the consideration to happen now as it has significant impact on both tax revenue and the programmes that the revenue supports. I do, however, believe that there is merit to think about the perspective of commitment to Singapore through the basics of Singapore's home ownership fundamentals and the treatment of tax on homes.

Thank you, Mdm Speaker. I would also like to thank Ms Jessica Tan for her comments on the changes that we are about to introduce.

Ms Tan has pointed out that owners who occupy their residential properties do not realise any gains from the property until the property is sold and suggested that we limit property tax to owner-occupied homes only at the very high-end so as not to impact middle-income groups as well as retirees.

Mdm Speaker, property tax is our sole tax on wealth. It is not a form of income tax and, hence, property tax is payable, regardless of whether it earns rental income for the owner. The principle of taxing property as an asset that is part of the owner's wealth-holding is a common practice in several other countries, including the UK, Malaysia and Hong Kong, where property tax is payable on owner-occupied properties just as in Singapore. So, we are not the only ones that levy property tax on owner-occupied properties.

An important feature of our property tax system is that owner-occupied residential properties are already taxed at significantly lower rates than those held for investment purposes. And this is not the case in Malaysia and Hong Kong. For example, the property tax on a home with an annual value of $30,000 is $880 if it is owner-occupied, and $3,000 otherwise. So, we have already made quite a distinction between residential properties that are owner-occupied or held for investment purposes, and there is a big concession being offered to owners who use it for residential purposes.

I share Ms Tan's concern for middle-income and retiree households and we were particularly sensitive to this group of owners when we reviewed our property tax structure to make it more progressive. And that is why only the top 1% of homes will pay higher property taxes as a result of this change. The remaining 99% of homes, which include all owner-occupied HDB flats and

Page: 50

private properties with annual values of less than $59,000, in fact, enjoy property tax savings of up to $80 per household. And this will be based on their 2013 annual values.

Just to give an example. A retiree residing at Teachers' Housing Estate where almost all terraces and semi-detached houses have annual values of $30,000 or less, will enjoy property tax savings. Overall, the changes in the property taxes do not hurt most middle-income and retiree households. In fact, most will enjoy some savings.

As for the complexity of the new property tax rate structure, the majority of homes will, in fact, fall within the first two tiers of the property tax structure of 0% and 4%. But even so, property owners need not worry about calculating their property tax as IRAS will determine the annual value of the property and calculate the property tax payable accordingly.

Property owners who are interested to find out the property tax payable on their properties may also use the online property tax calculator available on IRAS' website to compute the tax amount.

I also wanted to touch briefly on Ms Tan's concern that some property owners may be worried because they do not know for a fact how much property tax they are required to pay the next time round. It is a valid concern and it has, in fact, influenced the way we decided on the basis on which to calculate property tax.

In Singapore, as in Hong Kong, the property tax is calculated on the basis of Annual Value, which is an estimate of the rental that potentially the property could receive if it was put on the market for rental.

The alternative, which some other countries use, is to base property tax on the Capital Value – what you would realise at the point of sale, for example.

We have chosen to use Annual Value rather than Capital Value for two reasons. The first is that there are far more rental transactions to base Annual Value computations on, as compared to Capital Value, which is based on sales transactions. So, this is one advantage – many more transactions that we can use. And as a result, there is less volatility, more stable.

The second advantage of using Annual Value instead of Capital Value is that rental tends to be more stable than sales. Sale prices are very much

Page: 51

impacted by sentiments, the point of the economic cycle that you are in. So, simply by choosing Annual Value instead of Capital Value, we are providing more certainty for home-owners, meaning from year to year, the changes should not be too large.

Nonetheless, I take the Member's point and we will endeavour to ensure that these changes are properly explained and help property owners understand how the property tax is being computed. Of course, we will continue to review the new property tax structure to ensure that it remains as a progressive wealth tax.

I just have a final point, Madam, which is that Ms Tan had talked a little bit about the impact in dollar terms. One of the points that should be highlighted is that this set of changes to property tax was not designed, was not introduced for revenue-raising purpose. It was purely to make our property tax structure more progressive, which was something that we did in 2011 and we are taking it one step further. With that, Madam, I beg to move.

[(proc text) Question put, and agreed to. (proc text)]

[(proc text) Bill accordingly read a Second time and committed to a Committee of the whole House. (proc text)]

[(proc text) The House immediately resolved itself into a Committee on the Bill. – [Mrs Josephine Teo]. (proc text)]

[(proc text) Bill considered in Committee; reported without amendment; read a Third time and passed. (proc text)]

[(proc text) Order for Second Reading read. (proc text)]

Mdm Speaker, I beg to move, "That the Bill be now read a Second time."

Page: 52

The Income Tax (Amendment) Bill 2013 covers both the income tax changes announced in the 2013 Budget Statement, and other changes arising from the periodic review of our income tax regime.

The draft Bill was released for two public consultation exercises, one held from 17 June to 7 July and the other from 18 to 31 July this year. MOF has reviewed the feedback received and incorporated relevant points in the Bill tabled in Parliament.

Madam, the tax changes announced in the 2013 Budget Statement have already been debated in this House. Let me highlight the key changes.

First, the Productivity and Innovation Credit (PIC) Scheme has been further enhanced to allow SMEs that license intellectual property rather than acquire it outright to also qualify for PIC benefits. Clauses 17, 18 and 23 of the Bill provide for the changes.

Second, qualifying businesses which make productivity investments will be provided a dollar-for-dollar matching PIC Bonus. This bonus, which comes on top of existing PIC benefits, is applicable for Years of Assessment (YAs) 2013 to 2015 and is capped at a total of $15,000. It gives additional support to businesses that are making an effort to boost productivity and innovation and also helps to defray their operating costs. The PIC bonus is provided for in clauses 24, 25, 38, 39 and 40.

Third, a 30% corporate income tax rebate of up to $30,000 per YA will be granted to companies from YA2013 to YA2015. This is provided for in clause 35.

Fourth, the Start-Up Tax Exemption (SUTE) Scheme, which is aimed at encouraging entrepreneurial risk-taking, is no longer available to property development companies and investment holding companies incorporated after 25 February 2013. These companies can still enjoy the partial tax exemption generally available to all companies. Clause 27 provides for the change.

Fifth, a personal income tax rebate of 30% will be provided to all resident-individual taxpayers for YA2013, capped at $1,500 per taxpayer. Taxpayers aged 60 years and above will get a higher rebate at 50% capped at $1,500 per taxpayer. This will help taxpayers, especially seniors, with the increase in the cost of living. This is provided for in clause 51.

Page: 53

Sixth, housing accommodation provided to employees will now be taxed based on their market value instead of using a prescribed formula. This will simplify tax compliance and make our tax system more equitable. Clause 4 provides for this change.

Madam, I shall now outline the tax changes covered in this Bill relating to our Exchange of Information (EOI) regime. These changes follow a comprehensive review of the current EOI framework, and represent a further major step by Singapore to enhance cooperation with other tax jurisdictions.

Members might recall that in 2009, Singapore had endorsed and implemented the internationally-agreed EOI Standard, which sets out how tax jurisdictions should address cross-border tax evasion by entering into effective information-sharing arrangements.

Since then, international tax cooperation practices and standards have continued to evolve and strengthen. There is also a growing international movement against cross-border tax evasion, which undermines the legitimate revenue collections of governments. As a trusted financial centre, Singapore will act responsibly and uphold EOI standards in line with international norms. Let me highlight three key changes we are making.

First, we will amend the Act to extend EOI assistance in accordance with the internationally-agreed EOI Standard to all our agreement partners, without having to individually update our bilateral tax agreements. In recent years, most countries have adopted the EOI Standard, and EOI requirements have converged. There is, therefore, no longer a need to cater to individual countries' unique EOI requirements in the respective bilateral agreements.

An important principle of EOI

Page: 54

assistance is reciprocity, meaning that we provide assistance to the same extent that a partner jurisdiction assists with Singapore's information requests. The changes are provided for in clauses 34 and 41 to 44.

Second, we will allow IRAS to obtain information protected under the Banking Act and Trust Companies Act for EOI purposes without having to seek a Court Order. This is aimed at streamlining EOI administration.

Members may be concerned that the removal of the need for IRAS to seek a Court Order compromises safeguards that protect the confidentiality of taxpayers' information. Let me assure the House that each request for EOI assistance is carefully considered and not acceded to indiscriminately. Even though a Court Order is not required, IRAS will render EOI assistance only for clear, specific and legitimate requests.

In the last four years, IRAS has, in fact, gained valuable experience in EOI administration, and is now well-placed to evaluate and assist on requests in line with the internationally-agreed Standard. Taxpayers can make representations to IRAS to highlight issues with specific requests, which IRAS will take into account when evaluating them. IRAS' decision can also be subject to judicial review.

The third amendment to the Income Tax Act gives legal effect to the Singapore-United States Foreign Account Tax Compliance Act (FATCA) Intergovernmental Agreement (IGA), for which negotiations are expected to conclude in the coming months. This agreement is, therefore, short-formed known as FATCA IGA. FATCA is a US law that aims to prevent US Persons from using offshore bank accounts to evade US taxes by requiring Foreign Financial Institutions (FFIs) worldwide to report the information on bank accounts maintained by US Persons to the US Internal Revenue Service. Non-complying FFIs will be subject to a 30% withholding tax on payments received from the US, such as US-sourced dividends and interest. We have decided to enter into a FATCA IGA with the US in response to feedback from our financial institutions, as doing so will help them meet their FATCA obligations.

The amendments provide IRAS with the necessary information-gathering powers to fulfil Singapore's role in facilitating FATCA-compliance under the IGA. These powers include the routine collection and transmission of relevant information, as well as enforcement powers to sanction non-compliance. Clauses 3, 34 and 48 provide for the change.

These changes in our EOI regime support Singapore's international tax cooperation with partner jurisdictions to combat cross-border tax offences. They also strengthen our position as a credible and respectable member of the global community. The remaining legislative changes are mostly technical in nature or relate to improvements in tax administration.

One such improvement is the simplification of the capping rule for tax deduction for third-party voluntary contributions to the Medisave Account of an Employee or Self-Employed Person which took effect from 1 January 2013. This change will encourage employers and eligible companies to contribute to their employees' MediSave accounts, and, likewise, for self-employed persons.

Page: 55

Clauses 5, 7, 13 and 18 provide for this. Mdm Speaker, I beg to move.

[(proc text) Question proposed. (proc text)]

Mdm Speaker, thank you for allowing me to speak on the Income Tax (Amendment) Bill 2013. I support the tax changes in the Bill and would like to touch on two areas of the changes in the Bill: first, the refinement and amendments to existing tax policies and administration of the Exchange of Information (EOI) regime; and, secondly, the changes to the Productivity and Innovation Credit (PIC)

On the EOI amendments. First, let me touch on our market here, our openness and our efficient business model have helped Singapore become a leading global wealth management centre. The Bill includes refinements and amendments to existing tax policies and administration of the exchange of information regime to safeguard and reinforce our reputation as a fast-growing financial services sector.

The changes in the Bill will enable the steps to be taken to strengthen the EOI framework for international cooperation to fight against the cross-border tax evasions. These changes will increase, as the Senior Minister of State has indicated, the number of jurisdictions from 41 to 83 that Singapore will be able to exchange information with. It will also further streamline the administration of EOI under the standard and help ease the compliance burden for financial institutions in Singapore with the Foreign Account Tax Compliance Act (FATCA).

The amendments to EOI will also require financial institutions operating in Singapore to have greater disclosure requirements and monitoring obligations. With this, of course, there may be concerns on the impact of confidentiality and the banking secrecy standards. I was heartened to hear the Senior Minister of State touch on the point that every EOI request will be scrutinised and not indiscriminately adhered to and that care will be taken to ensure that that is given the right attention. We must recognise that while it is important that we continue to maintain strict policies to protect confidentiality of client information, it cannot be a reason for the flow of illicit funds. Confidentiality cannot also be a reason to stop cross-border exchange of information for crime investigation. For Singapore to remain a leading and reliable financial centre, we must have a clean regime that protects our financial institutions and the

Page: 56

legitimate monies and eliminates illegal funds.

These amendments will send a strong clear signal that Singapore sees our financial integrity as crucial to uphold our reputation as a leading wealth management centre.

Let me now touch on some of the changes with regard to PIC. I will not go into details of debating the PIC itself because those have been debated earlier. But I do want to touch on the new section 371A which deals with the payment of cash amounts known as the PIC bonus of up to $15,000 over the three years of assessment from 2013 to 2015. This is meant to help businesses defray their operating costs, and encourage them to continue investing in productivity improvements and innovation based on certain expenditures which qualify for certain deductions or allowances under the Act.

This will be welcomed by businesses, especially as they deal with the necessary business transformation required to address current business competitiveness, costs and manpower constraints.

To qualify for the PIC Bonus, the conditions for the payment of PIC bonus for each year of assessment are:

the person must have incurred a minimum of $5,000 of qualifying expenditure in the basis year for that expenditure;

he is carrying on a trade or business during the time the Comptroller is considering his case for the bonus; and

he must have made contributions to CPF for at least three local employees based on the payroll for the last month of the basis period or such other month as determined by the Comptroller.

The challenge facing SMEs, especially the very small SMEs, continues to be manpower constraints and attracting locals to certain jobs. Hence, the need to invest in productivity improvements and innovation for these SMEs is crucial. I would ask that we review the condition for making CPF contributions for a least three local employees as a qualifying criteria for the PIC Bonus. While small SMEs can still qualify for PIC tax deductions and allowances under PIC, the PIC Bonus for incurring a minimum qualifying expenditure with a dollar-for-dollar matching would definitely be a great help for small SMEs to invest in productivity improvements and innovation to reduce their dependency on

Page: 57

manpower. The fact that the PIC cash payout is paid out on a quarterly basis is also another plus point for small SMEs.

The changes in the Bill also talks about the enhancements to the PIC Scheme to include Intellectual Property (IP) in-licensing. This will help businesses that license IP rights instead of acquiring the IP for innovation or productivity improvements incurred for Year of Assessment 2013 to 2015. These would definitely, again, help the very small industries and, therefore, a very welcome change. With that, I support the Bill.

Mdm Speaker, I will speak on the parts of the Income Tax (Amendment) Bill that relates to the agreement with the United States to implement the Foreign Account Tax Compliance Act (FATCA).

The amendments contained in this Bill are effectively facilitating compliance of our financial institutions with FATCA to assist the US government with identifying tax evaders as deemed so by the laws of the United States. FATCA affects financial institutions and is a matter of relationship between the US government and financial institutions with US source income streams. Typically, foreign governments are not obliged to help facilitate this relationship. Singapore is taking an extraordinary step to facilitate compliance.

As of June 2013, the United Kingdom, Denmark, Mexico, Ireland, Switzerland, Norway, Spain, Germany, France and Italy have concluded inter-governmental agreements (IGAs) to cooperate with the US on FATCA implementation. Japan and South Africa have consented to cooperation as well. We will be the first and only country in ASEAN to take such an action of cooperation with the US. Various other countries, such as Hong Kong, are in talks with the US on their own IGAs.

The Senior Minister of State has explained the reasons for Singapore to enter into IGA with the US on FATCA. The US has made it clear that financial institutions operating in countries that do not sign IGA with US IRS by the end of this year must sign individual agreements with the US tax authorities. Failure to do so will subject the financial institutions to a 30% withholding tax, as the Senior Minister of State has explained. Given the importance of the US as a political and economic partner of Singapore and the trend of countries complying with FATCA, it is understandable that Singapore will want to work

Page: 58

with the US on this matter.

The US Department of Treasury provides two IGA models. Model 1 involves financial institutions in the partner countries reporting information about US accounts to the partner country's tax authority, which then provides the information to the US authorities. Model 2 involves financial institutions reporting directly to the US Internal Revenue Service and partner countries agreeing to lower legal barriers to reporting.

All the countries that have concluded IGAs with the US are on Model 1, except for Switzerland, which concluded a Model 2 agreement. Japan is also considering Model 2 as well. According to the Swiss Finance Minister, Model 2 "better protects privacy and sovereignty." Swiss banks will have to report accounts belonging to US taxpayers above a minimum balance, but client's data will only be exchanged once the US authorities have requested administrative assistance. Singapore had signalled that we will be implementing Model 1 IGA with the US.

I would like to raise six areas of concerns with the Senior Minister of State on this matter.

First, it is about mutual benefits. In a reply in Parliament in 2009 to a question regarding Singapore being on the OECD's "grey list" of countries committed to internationally agreed tax standard, then Second Minister for Finance Mrs Lim Hwee Hua had said that "Singapore is starting talks with several countries to update our DTAs (Double Taxation Agreements) with them on a mutually beneficial basis, including having exchange of information provisions that are in line with the new international Standard."

In the matter of bilateral agreements, governments form arrangements on a mutually beneficial basis. There will be compliance costs. There will be cost incurred by our Government to collect data on behalf of the US. We will be facilitating the US government to implement one of their laws.

Singapore currently has comprehensive DTAs with 71 countries providing for exchange of information, but not with the US. We have only a limited treaty with the US covering shipping and air transport income.

I would like to ask the Senior Minister of State if we are currently negotiating a comprehensive DTA with the US or seeking other concessions

Page: 59

from the US in view of us facilitating FATCA. If so, what are these?

My second area of concern is about the cost of compliance. Countries that opt for Model 2 will let the financial institutions deal directly with the US IRS. There will be compliance costs for the financial institutions as they need manpower to deal with queries from the US and to change their IT systems to comply with FATCA. In the Model 1 supported by Singapore, our Government will collect data from financial institutions for the US. While this will make compliance with FATCA easier for our financial institutions, compliance costs will be transferred to the Government and, therefore, to the taxpayer. What is the expected annual compliance cost and would our Government be carrying this cost? If not, how will this cost be borne?

In the IGA reached between Switzerland and the US, three of the six objectives are to:

increase "legal certainty by clarifying which Swiss financial institutions are subject to FATCA implementation";

"reduce implementation costs including by suspending, under certain circumstances, certain withholding and account closing obligations"; and

"simplify the necessary due diligence procedures".

The joint statement with Japan also has similar provisions benefiting Japanese financial institutions. Can the Senior Minister of State clarify what are the similar provisions in our proposed IGA on FATCA?

My third concern is about the impact on Singapore citizens. FATCA does not only affect US citizens but is targeted at anyone who is potentially earning a US taxable income stream. A person takes the definition of a "US person", which is indicated by any one of the following:

US citizenship or permanent residence (green card status);

A US birthplace;

A US residence address or a US correspondence address;

Page: 60

Standing instructions to transfer funds to an account maintained in the United States, or directions regularly received from a US address;

An "in care of" address or a "hold mail" address that is the sole address with respect to the client; or

A power of attorney or signatory authority granted to a person with a US address.

This definition could see many Singapore citizens being identified as a US person. In a Model 1 IGA, our Government may have to automatically transmit information on Singapore citizens who are deemed as US persons to the USA. What is the Government's estimation of how many Singaporeans will be deemed as US persons in the implementation of FATCA?

Are there any safeguards to limit extraterritorial implementation of foreign laws to prevent overreach by any foreign government on Singapore citizens? Generally, as the Senior Minister of State had stated, it is expected that any treaty or international agreement should be fully reciprocal. What reciprocal rights will we have on US citizens on similar matters?

This leads to my fourth concern, on the risk of political blowback. Even with full reciprocity in agreement, there are already some quarters in the USA resisting FATCA for fear of reciprocity requirements by foreign governments will compromise the constitutional privacy rights of US credit union members and bank customers. Requests for information by foreign governments, including Singapore Government, in the USA may be stalled in their courts. What would our Government do in the event of limited reciprocity due to US domestic politics when we have implemented our IGA with the US?

My fifth concern is whether this concession to the US may open the door for demands for similar concession by other countries. The Bill provides for similar implementation with any other countries beyond the US that Singapore will make similar type of tax compliance agreements with in future. Are there similar agreements some of our other big trading partners will be expecting of us soon in their efforts to identify their own tax evaders in the form of their own FATCA? If so, which are the countries? Would this lead to a situation where many account holders in Singapore financial institutions become subject to foreign scrutiny, with greatly increased compliance costs?

Page: 61

My final concern is to understand the parliamentary process. This Bill allows the Minister to negotiate and conclude the IGA, declare it as effective and to implement it. There is no need to debate and ratify the IGA in Parliament. In Switzerland's case, the IGA was entered into in February 2013. The Swiss Parliament voted to ratify it in September 2013. Our Government is now asking Parliament to approve the implementation of an IGA with the USA that does not yet exist and for which we do not have the details on. Should Parliament not have more details of the IGA so that we can better understand the full implications of this Bill?

In conclusion, there could well be international pressure and good reasons for Singapore to enter into compliance with FATCA and, in future, with other countries on a similar type of agreement. At the same time, there are questions that Singaporeans would want answers to, and to know the implications of our compliance with FATCA. Therefore, I seek the Senior Minister of State's answers to the questions I have raised.

Mdm Speaker, the Income Tax (Amendment) Bill 2013 proposes 28 tax changes to the Tax Regulations. I would like to focus my speech on amendments relating to the Exchange of Information (EOI) regime.

Singapore amended its laws in 2009 to implement the internationally agreed Standard for EOI for tax purposes or the International Standard. Recently, the Global Forum on Transparency and Exchange of Information for Tax Purposes affirmed Singapore's alignment with the International Standard. It is only natural for Singapore to continuously and systematically strengthen our EOI regime in order to uphold our reputation as a trusted and responsible financial centre, committed to combating illegal cross-border tax offences.

However, I would like to highlight my concerns about the amendments in this Bill in the following three areas:

First, Madam, the implementation of the EOI regime will add significant complexity and operational costs which will have to be borne by taxpayers, individuals and businesses, particularly financial institutions; whilst also increasing the administrative burden on individual Singaporeans.

Page: 62

Mdm Speaker, please allow me to illustrate this point by referring to new sections 105I to 105P, which are intended to implement Singapore's obligations under the agreement reached for the purpose of the Foreign Accounts Tax Compliance Act of the United States of America (FATCA), as well as other corresponding or substantially similar agreements that Singapore may enter into with other countries.

The truth is: financial institutions in Singapore and around the world are struggling to prepare themselves for FATCA, whether they are IGA or non-IGA. It does not matter if you are on IGA Scheme or non-IGA. Everybody struggles with FATCA. Even the US, the originator of this very intricate scheme, has had to push back its implementation deadlines because of FATCA's exhaustive scope and complexity. Millions of dollars have been spent and will continue to be spent by financial institutions to implement systems and change end-to-end processes in order to maintain verification and due diligence procedures, to identify accounts held by US taxpayers, obtain documentation of each identified account holder to determine US or non-US status, and report detailed information regarding such US accounts.

Banks have had to redesign their entire client on-boarding and management systems to comply with FATCA even if some of them handle a negligible amount of business for US clients. Apart from US taxpayers, who are identified by a set of indicia; non US-taxpayers are also required to provide documentation, such as Form W-8, to prove their non-US status. This non-US status needs to be updated periodically. So, not only US persons have to prove, but non-US persons also have to prove their non-US status. So, many in the financial industry actually could scarcely believe the scope and the onerousness of these requirements when they first learnt of it.

Burdensome complexity brings with it the risk of non-compliance and the accompanying cost of penalties.

There is also opportunity costs associated with bankers spending their time collecting information on clients' tax residencies instead of their clients' financial needs. These are but some of the challenges facing financial institutions in Singapore and around the world, in dealing with FATCA.

Thus far, I have spoken only about the requirements imposed by the US regulators. What if other countries decide to follow suit? This prospect is not far-fetched. A recent International Tax Review article reported that Europe's five leading economies had agreed to automatically exchange a wide range of tax

Page: 63

information multilaterally, while the finance ministers of Belgium, the Netherlands, Poland and Romania backed the creation of a global system of automatic information exchange that could be based on the US FATCA.

Singapore's network of EOI partner jurisdictions is expected to more than double, from 41 to 83. I am concerned about how this would add to the volume of requests and thereby the administrative costs of handling them. How can we justify the significant increase in effort and costs, including Singapore taxpayer dollars, to implement what is essentially a comprehensive information disclosure exercise for another jurisdiction. I hope the Minister can shed some light on how we may resist the trend that FATCA might set.

Mdm Speaker, my second area of concern relates to the amendment that gives IRAS access to information currently protected under the Banking Act and the Trust Companies Act for EOI purposes, without having to first obtain a Court Order.

Notwithstanding the existing EOI regulations which have been in place since 2009, foreign clients continue to regard Singapore as a major financial centre and wealth management hub. Why? Many of these clients value Singapore's political stability, robust regulatory environment, strong judiciary and internationally recognised rule of law. I am concerned that the proposed lifting of the current requirement – that IRAS first seek a Court Order before pursuing privileged client information – lifting this may undermine the confidence that clients and investors have in Singapore's banking privacy laws.

Members of this House may recall that when the "Court Order" requirement was instituted in 2009, the Minister for Finance Mr Tharman Shanmugaratnam explained to Parliament why there was a need for safeguards to protect against unauthorised disclosure under the Banking Act and the Trust Companies Act.

The Minister said, and I quote:

[(proc text) "IRAS will make an application to the High Court for a production order to access the requested information. The affected taxpayer and bank or trust company will have the right to apply to the Court to discharge or vary the Court order. I should emphasise that these procedures are not meant to frustrate or delay the information exchange process. Rather, they are intended to provide a fair and independent assessment of the validity of requests, and allow us to render effective assistance to valid requests. They are essentially similar to procedures used in the United Kingdom, which relies on a tribunal process, or the United States which relies on the courts." (proc text)]

Page: 64

Madam, today, these reasons given by the Finance Minister in 2009 remain sound and the principles behind them remain very valid. Our courts are known to work efficiently and with minimum delays. I am given to understand that we have actually consistently met our EOI commitments since its implementation in 2009, with the requirement for an application to the High Court in place as a requirement. So, could the Minister please clarify why is it now necessary to remove the "Court Order" requirement?

I urge the Minister to consider retaining the "Court Order" requirement whilst fully meeting our obligations under the International Standard, and continue to uphold the confidence of clients in Singapore's Banking system that is robust and independent.

Mdm Speaker, my last area of concern relates to the apparent lack of safeguards for taxpayers' rights which is supposed to be an integral part of the internationally agreed Standard.

Whilst I fully agree that Singapore's financial system must never be used to serve financial criminals, it must be equally accountable to clients who have trusted the system, and client confidentiality would not be compromised without justification.

So, let me use an example. Let us suppose that a foreign client has proven his source of wealth in a Singapore bank account to be legitimate. So, it is legitimate money. Let us further suppose that this same client resides in a country where corruption is rampant and the politics unstable. And that, one day, the government of his country changes suddenly to one which does not like him, and he becomes the target of a political witch-hunt.

The so-called "incriminating evidence" is fabricated and such material is used to support a request for this client's information in Singapore. I think Members of this House will not find such a scenario so implausible. The question is: how are the relevant agencies in Singapore to react to such a request?

Could the Minister clarify how the affected taxpayer's rights would continue to be protected and how such a taxpayer may be afforded the right of appeal should he or she believe the basis for such request for information to be unjustified? The right of appeal should be spelt out clearly in the same provisions within the EOI regime.

Page: 65

I note with further concern, Madam, the new section 65E, which requires that the Comptroller's notice to obtain information be kept confidential from the affected taxpayer so as to prevent the person from being tipped off. In this case, the person involved may never have the chance to tell his or her side of the story, or be given the opportunity to appeal against the Order.

Without the requirement for a Court Order, the onus to ensure supremely fair and robust processing of EOI requests would lie solely with IRAS. On what basis does IRAS judge the EOI requests to be clear, legitimate and relevant to the enforcement of the requesting jurisdiction's tax laws, especially in cases where they have not had the input of the taxpayer being scrutinised? Could the Minister please clarify what processes are in place to protect taxpayer's rights under such circumstances?

Lastly, Mdm Speaker, please allow me to briefly comment on the amendments relating to the tax changes announced in the 2013 Budget Statement meant to support companies to restructure for higher productivity. Despite the many schemes that the Government has rolled out over the years, it is disheartening to see labour productivity in Singapore slip 0.3% in the second quarter of 2013, compared with a year ago – the sixth straight quarter of decline.

I would like to ask the Minister whether she is assured that the vast resources being dedicated to supporting productivity programmes are, indeed, effective, or whether we need a review of the productivity programmes or change initiatives.

Do we need to measure success differently at this stage of our restructuring journey to shed light if our efforts are bearing fruits, even if we are not able to see improvements in the top line official productivity indices?

It is troubling that IRAS' audit has revealed that one in three claims for Government grants and subsidies to boost productivity were found to have errors, with a few firms clearly setting out to "game" the system. I am glad to see deterrent penalties for flagrant and reprehensible abuses of the schemes are part of the changes proposed in the Bill. MOF must find ways to institute relevant measures to ensure productivity grants and subsidies are, indeed, linked to value-added activities.

Of course, we continue to hear feedback from companies, especially SMEs, that they are often lost in the sea of complexity of schemes available, unsure

Page: 66

about which scheme to apply and how to go about it. I would like to suggest again a much more tailored-sector level intervention and support, working in close collaboration with trade associations, to quickly address each sector's unique challenges, replicate best practices and develop shared services capabilities.

To conclude, in the end, the Government can only do so much to push for productivity. The rest is really up to individual companies, managers and their employees to truly work towards the vision of a more productive and innovative Singapore, where skilled workers are fully engaged in meaningful jobs and pulling their weight in the competitive global landscape. Madam, I support the Bill.

Order. I propose to take a break now. I suspend the Sitting and will take the Chair again at 4.25 pm.

Sitting accordingly suspended

at 4.05 pm until 4.25 pm.

Sitting resumed at 4.25 pm

[Mdm Speaker in the Chair]

[(proc text) Debate resumed. (proc text)]

Mdm Speaker, I refer to clause 3B of the Income Tax (Amendment) Bill, which amends section 6 of the original Bill. Why should the Government allow the Comptroller of Income Tax to share information with a foreign country, pursuant to our agreement with the United States to implement the Foreign Account Tax Compliance Act (FATCA)?

Are there other ways that local financial institutions can comply with FATCA, without amending the Income Tax Act? Was FATCA approved by this Parliament? Even if we have to pass a Bill, I suppose we can debate the full

Page: 67

scope of FATCA.

I understand, of course, that the Ministry of Finance aims to place Singapore in line with evolving global standards on the Exchange of Information regime. Our main competitors are the major global financial centres, Switzerland and possibly Hong Kong, too, are signing up to FATCA. But there are still tax havens, such as Liechtenstein and the Cayman Islands, that do not fall under the current scope of FATCA. Does our Government believe that FATCA will ultimately be effective and fair to all countries?

I also refer to clause 35, in which the Income Tax Act is amended by providing for the remission of tax of companies for the Years of Assessment of 2013, 2014 and 2015. I would like to ask if the Ministry had considered the potential amount of tax loss incurred arising from this provision. Can the Minister inform us of this amount of potential tax loss?

If the intention is to manage the increase in business costs, can the Government design a more practical scheme? For example, if the bulk of business cost increases is due to rentals, is it not better for HDB and JTC to provide more affordable commercial and industrial facilities? Many SMEs cite overly high rental costs as the biggest contribution to increased business costs today.

I now refer to clause 24, on the Productivity and Innovation Credit bonus. According to the Ministry of Finance website, the intention is to defray business operating costs, especially for SMEs, and encourage them to invest in productivity improvements and innovation.

I would like to ask the Minister if dead-weight loss was considered. That is to say, what if an SME is not run efficiently on a good business model? What determines improvements and innovation? Can they be objectively measured?

Lastly, I would like to seek clarification from the Minister whether this arrangement is compliant with World Trade Organization rules and with the Free Trade Agreements that Singapore has signed. Would this open us to possible trade disputes with foreign firms who may allege that our SMEs and our products are unfairly subsidised against foreign competitors?

Page: 68

Mdm Speaker, I would like to declare my pecuniary interest as a banker and a co-chair of the Private Banking Industry Group in Singapore, alongside the MAS.

Mdm Speaker, two things in life are certain, death and taxes. It is not easy to craft an interesting speech about tax. We all pay it. In Singapore, we are lucky. The rules are clear and it is normally automatically deducted.

But in the global arena, tax is not so simple. Some countries have global taxation, others do not. Some have double tax treaties, others do not. Some have inheritance tax, capital gains tax, dividend tax; the list goes on. As Singapore thrives on being an open economy with free trade and open financial markets, we have billions of inflows and outflows globally. How then do we ascertain that these dollars are tax-compliant?

What this Bill does is that it clearly sets the bar high for Singapore. It says to the world, "Singapore is not interested in becoming a tax haven to anyone who wishes to avoid paying tax. Please do not come here to hide your money."

In the long run, this is both good for our country and good for our financial industry in building a good, sustainable long-term business. After all, we want our financial industry and wealth management industry to be built on solid foundations based on sound practices and good governance.

So, we all agree on one thing. This is the pill we need to swallow to make us stronger in the long term. And as we say in Chinese: 良药苦口利于病.

The Bill covers a number of issues, including amendments and extension of the tax treatment of transactions of relevance to the banking industry. In general, the banking industry supports these changes. However, the Act also introduces changes in the rules related to tax evasion and grants the IRAS certain additional powers. It is this signalling of the changes in our tax laws, the actual implementation, the potential lack of clarity and the potential high costs associated with it that is becoming an issue.

What I am trying to bring up to this House is that it is not so simple. And here are some challenges to the financial industry and to businesses.

One, the rising costs and uncertainty. It has been clarified that the Government will assist in the application of the FATCA requirement by the US

Page: 69

government and other "Exchange of Information" (EOI) requests. Because of the criminalisation of tax crimes as an AML offence, and the various new tax requirements coming into play – FATCA/FATF and so on, all banks have stepped up their compliance and security processes. We have to ensure that everything is in place and that the client onboarding, KYC, AML, due diligence and surveillance are best-in-class. We have no choice. We will do it. But where do we draw the line? How far do we need to go in our tax due diligence?

Let us take an example of a typical entrepreneur, say, a European passport holder living in Asia, owning a garment business in Indonesia that imports cotton from India and sells everything online. In all honesty, how do we ascertain that he has paid every single level of tax, from his business level, to his income level, capital gains or dividends? Chances are that the client himself may not even know.

So, we tell the clients, go and get a tax expert, get proper advice. But when the tax accountant comes onboard and does his job, he then tells the banks he cannot reveal anything to them due to client-confidentiality laws. So, this does not solve our dilemma.

Sometimes, it is also a matter of not knowing what we do not know. Though the client may be honest in all his business dealings, he may not know that there are other levels of tax he needs to pay. Often, even tax accountants tell us they do not know everything, too.

Industry practitioners are telling us that the costs of compliance keep getting higher. Some have considered shutting down or selling their businesses, which may mean the loss of jobs for Singaporeans.

The overarching concern is not stricter rules or extended IRAS powers. In fact, our industry leaders met with the IRAS and we know that they are an effective gatekeeper. The concern is with the uncertainty of the extent and application of the rules and the powers granted to IRAS. At risk is whether clients who are not trying to evade tax may decide not to bank here as they become more concerned about what may happen to their personal information. This would not be in the interest of Singapore and may not, in fact, help the overall cause of avoiding tax evasion. This is why timely clarity of the rules and practical enforcement is practical.

Two, difficult to ensure full compliance even if the right processes are in place. We may need to understand the motivation behind some of these tax

Page: 70

enquiries. Why? Some supposed tax "crimes" may be politically and not economically motivated.

There are countries with high taxes and clean jurisdictions; there are also countries that have lower taxes and corrupt jurisdictions. With the EOI standards, we have to ensure that this "Exchange of Information" does not lead to abuse. Sometimes, it may also depend on how much budget deficit the country in question has, to see how motivated they are to increase their tax coffers. The bottom line is to be clear about the difference between a high-risk country and a high-risk tax country.

Three, global companies have global complex structures. It is debatable if there is a fine line between tax evasion, tax avoidance and tax planning. What could be classified as a tax crime in one jurisdiction could be perfectly legal in another.

Recently, global firms like Apple, Starbucks, Google and Amazon have come under fire for having complicated tax structures that have helped them to save billions on tax payments. For example, Amazon in the UK had sales of over £3 billion and a tax expense of only £1.8 million because they booked their profits elsewhere. These structures were perfectly legal but this tax avoidance has now become a moral issue. And the tide of public opinion is turning due to the public naming and shaming of these companies on social media.

This has led to the OECD terming this "Base Erosion and Profit Shifting" (BEPS), which refers to this interaction of different tax rules that can lead to double non-taxation or taxes that are even lower than single tax. The proposed actions to counter this are wide and have far-reaching consequences.

Four, funds can be transferred in and out without using the actual banking system:

Money coming in to buy properties, for example, do not go through the same tax compliance or KYC checks. Money launderers or tax avoiders may also use other means like buying gold bars, diamonds or precious metals and so on.

The rise of the non-bank payment agent. Banks are no longer the only institutions that receive funds and pay out funds. Telcos and online companies are fast becoming payment agents. From Paypal to Amazon, from Alipay to Tencent, many online companies can set up online payment platforms that

Page: 71

bypass banks. If they do not have the same regulatory regime, they will be able to receive payments without the level of due diligence done by banks. Tax avoiders will wise up to this, if not already, and may use this as a way to move their illicit funds around.

Lastly, the rise of the digital economy. The rise of the digital economy has posed many challenges about tax collection. The new ways of doing business online make it more difficult to ascertain where value creation sits and where income should be taxed. The question is, are our tax frameworks able to adapt to the changing economic challenges caused by such online businesses?

I have detailed a few examples of the practical challenges we face in a more complex world of inter-connected activities, different tax laws and different motivations. Holding the high ground on tax is all very good, but being aware of the challenges and being able to face up to them will be key. And whilst we face up to these challenges and show the international community that we will be responsible in this fight against tax crimes, let us also balance the need for banking confidentiality against the request for information from the IRAS. In this respect, I suggest that the Government establishes clearer guidelines in the manner in which the IRAS can collect information from banks.

In the long term, we may need more sustainable solutions globally. Countries need to strengthen their tax administrations to deal with an ever-changing globalised and digitalised economy, and more needs to be done on client education.

Hopefully, Singapore can start to set these standards rather than just follow them, and, hopefully, we can gain more credibility in the long term by showing that whilst we remain open for business, we are serious about setting and executing on only the highest international standards. Doing this can only add to our reputation, our economy and, of course, better job opportunities for Singaporeans. Mdm Speaker, I support the Bill.

Mdm Speaker, I thank Members − Ms Jessica Tan, Ms Foo Mee Har, Ms Tan Su Shan, Mr Yee Jenn Jong and Mrs Lina Chiam − for their comments and suggestions. The comments and suggestions fall into two main parts and I propose to address those relating to PIC first and then we can focus on the Exchange of Information (EOI).

Page: 72

Madam, Ms Foo Mee Har has asked about the effectiveness of productivity-related grants and subsidies and the potential for abuse. Ms Jessica Tan suggests refining the criteria to better support micro SMEs where the eligibility for the PIC Bonus is a concern.

Madam, the raising of productivity is a medium to long-term endeavour that would take much more than grants and subsidies to bring about. Government support is, therefore, much broader than the PIC scheme and enhancements which this Bill addresses. It includes the setting up of the National Productivity Fund and the efforts to design targeted strategies in different sectors where productivity is lagging, including working with industry associations, as mentioned by Ms Foo, as well as significant investments in continuing education and training to help Singaporeans keep pace.

All these efforts require changes at the micro level of individual enterprises, as well as at the macro level of industries. It is, therefore, not surprising that it takes time for the results to become visible. In the meantime, we can expect short-term productivity fluctuations due to economic cycles and volatility. In fact, economists know this – it is often more sensible to compare productivity changes from decade to decade and to monitor sector-specific productivity measures rather than to look at productivity changes on a quarter-to-quarter basis because that is masked by too many short-term volatile factors.

At this stage of our push for productivity-driven growth, what is most important is for businesses to get started on their productivity journey, to learn, to invest in improvements and to sustain the effort over time. And this is why we have designed the scheme to be broad-based to support as many businesses as possible and also kept the criteria for the schemes as straightforward as we can.

In this regard, it is heartening that a survey conducted by the Singapore Chinese Chamber of Commerce and Industry earlier this year revealed that over eight in 10 of the companies in Singapore are trying to raise productivity levels. And also the feedback from businesses suggests that more of them now see raising productivity as a key priority, especially given the tight manpower situation. So, mindsets have shifted and we are seeing greater awareness of the schemes available to support the productivity push.

In terms of potential abuse, I should, firstly, highlight that the vast majority of the errors in claims which Ms Foo cited are due to the lack of familiarity. The vast majority of them were unintentional. As businesses gain more experience

Page: 73

in claiming PIC benefits, we can expect the error rates to come down.

IRAS makes it a point to highlight common mistakes found in PIC claims through its website and conducts seminars, including in the heartlands, to reach out to small businesses. IRAS also has ongoing compliance programmes to review and audit PIC claims because there are, indeed, a number who try to take advantage. If businesses are found to have artificially inflated their claims or abused the PIC scheme, IRAS will not hesitate to take stern enforcement actions against these businesses and any consultants helping them. So, for example, a company director was recently sentenced to eight weeks' jail for making fraudulent claims for the PIC cash payout for his company. He also paid a penalty four times the amount of the cash payout fraudulently claimed.

Notwithstanding the strong stance against abusers, IRAS is mindful not to burden businesses with excessive documentation which would especially discourage micro SMEs from even getting started.

In response to Ms Jessica Tan's suggestion, I should clarify that all businesses can enjoy the PIC benefits, regardless of the number of employees. The requirement of three local employees only applies to the payment of PIC Bonus and to businesses claiming the cash payout. I think this was also a point that I recall Ms Foo and Ms Tan Su Shan raised when we first debated the PIC enhancements as they were introduced. This condition of requiring the businesses to have at least three CPF-paying local employees is really intended to reduce the risk of abuse which we talked about earlier and ensure that the cash payouts really go to active businesses, not those that are just set up for the purposes of gaining from the scheme.

However, the businesses that have fewer than three local employees can still benefit from the enhanced tax deductions under the PIC scheme. And many of them, including micro companies, have claimed these deductions. So, Members will be pleased to know that the PIC take-up rate for micro companies − and for that we are referring to companies with less than $1 million in annual turnover − has improved. And based on the corporate income tax returns filed as at April this year, about one in four active micro companies have claimed PIC and this is up from one in five that we have seen in the previous year. So, it is an improvement. I would say also that there is still a lot of room for us to reach out and help these micro SMEs get onto this productivity journey. We are not stopping at having seen the improvements, we will push forward.

Page: 74

Madam, I would now like to turn to comments relating to changes in our EOI with other tax jurisdictions. The first point to make is, as Ms Tan Su Shan rightly pointed out, that Singapore is not a tax haven. We have a diversified economy where manufacturing is the largest contributor to GDP; accounting for 21%, followed by retail and wholesale trade at 17%; business services and financial services each contribute another 12%. So, we are a diversified, substantive economy.

Our tax system seeks to attract and anchor economic activities that create good jobs for Singaporeans. In fact, the corporate sector contributes a very significant share to the budgetary resources which are needed to implement the Government's programmes. We have also ensured that our financial sector is built upon the quality, breadth and depth of services we offer. We have established strong and consistent regulatory policies and demonstrated firm commitment to the rule of law.

Our strict anti-money laundering regime, for example, is held in high regard by the Financial Action Task Force (FATF), an international body which conducts peer reviews of jurisdictions' anti-money laundering regimes. Singapore clearly does not condone abuses of our laws for tax evasion purposes.

To this end, we co-operate actively with other jurisdictions through exchange of information for tax purposes based on international standards. This is world recognised and our practices and laws have been assessed by our peers to be in line with international norms.

Members have supported the EOI-related amendments but expressed concerns about the impact on Singapore's attractiveness as a financial centre. Singapore is not alone in adjusting our EOI regime to be more aligned to international standards. Several key financial centres, such as Switzerland and Hong Kong, have recently announced key shifts in their EOI regime. Switzerland recently signed the Multi-lateral Convention on Mutual Administrative Assistance and Tax Matters. And Hong Kong announced that it, too, will be negotiating a FATCA agreement with the US, as was pointed out by Mr Yee Jenn Jong.

Singapore has similarly reviewed our EOI regime to ensure that we adhere to the spirit of international tax co-operation. Ms Foo Mee Har, Mr Yee Jenn Jong and Ms Tan Su Shan highlighted the considerable cost of complying with the EOI standards and, in particular, those imposed by the US FATCA. I think Ms Foo highlighted that the financial institutions could scarcely believe how

Page: 75

much work they have to do in order to comply. Ms Foo also expressed concern about the volume of requests when the number of partner jurisdictions expands.

Madam, enhanced international standards have, indeed, increased compliance costs for financial institutions around the world. The amendment to extend EOI assistance to all our agreement partners without having to update each agreement bilaterally means that however many partner jurisdictions there are going to be, it is still the same internationally agreed EOI Standard that applies. This, in fact, gives financial institutions a much higher degree of certainty and removes the problem of further complexity due to differing standards. Although it is not yet possible to assess how voluminous the request will be, as I have said earlier, IRAS will evaluate each request carefully and draw on its experience to provide assistance to only those which are clear, specific and legitimate. And I will have more to say about the processes that it employs.

As for FATCA, I should emphasise again that the burden it places on financial institutions is felt worldwide. Everywhere in the world, and not just in Singapore, does not matter where you are located, FATCA is going to hit you.

Following intensive consultation with the industry, we started discussions with the US on an arrangement whereby information would be reported to IRAS before onward transmission to the US Internal Revenue Service. This, as Mr Yee shared with us earlier, is Model 1 of the Inter-Governmental Agreement (IGA). What this means is that financial institutions in Singapore will only need to deal with IRAS instead of additional reporting to the US Inland Revenue Service. So, that is one benefit. Another benefit of the IGA is that financial institutions in Singapore would automatically be deemed compliant and will not be subject to a withholding tax unless they fail to meet their reporting obligations subsequently. So, the assumption is that you are compliant unless you fail to meet your reporting obligations.

Through the IGA, therefore, we hope to reduce the cost of compliance and complexity for financial institutions in Singapore. Specifically to Mr Yee's question on who is bearing the compliance cost, the vast bulk of the cost of compliance is to be borne by the financial institutions. I heard loudly and clearly Ms Tan Su Shan saying, "We have no choice. We will do it." The cost to IRAS is, in fact, minimal, since we are merely aggregating the information provided by the financial institutions for onward transmission.

Mr Yee also asked whether we could estimate the number of Singapore citizens who could be considered US persons and caught under the FATCA. It

Page: 76

is not possible to estimate with any accuracy because Singapore citizens working, living in the US, are not required to register with our Embassy. So, we do not have an exact number.

Mr Yee also asked, "What about reciprocal rights?" Indeed, that is our intent. And to do that, we would first need to have a Tax Information Exchange Agreement (TIEA) or a Double Tax Agreement (DTA) with the US.

In relation to Mr Yee's other question, we are always keen to establish Double Taxation Agreements that will benefit Singapore-based businesses, and that, of course, includes the US. It is not confined to the US but it includes the US. Specific to the US, in fact, Singapore has been pro-active in pursuing the DTA.

Our agencies will continue to work pro-actively with banks and all other relevant parties to streamline processes and make compliance easier. Where banks are required to provide information, for example, under FATCA, we will ensure that the guidelines are clear and practical. We remain open to suggestions from practitioners on what else can be done to address their operational concerns.

Let me address briefly Mr Yee and Mrs Chiam's questions on whether the IGA ought to be debated in Parliament. The Government is authorised within prescribed limits to negotiate and sign international agreements, and this includes the IGA. To meet the commitments of the IGA, we need to make several changes to our Income Tax Act. And for these changes, we are seeking Parliament's approval.

Let me now turn to safeguards. Ms Foo asked whether the removal of the court process would affect Singapore's reputation as a banking centre. She reminded us that the Court Order process that is being removed was only introduced in 2009. Madam, having dealt with over 500 EOI requests, IRAS' experience with the EOI Standard is much better than it was four years ago in 2009.

Initially, the Court Order process helped IRAS to assess the validity of requests. As IRAS gained experience, its own evaluations were increasingly validated by the Court Order process. That experience has been very helpful and IRAS is now sufficiently well-versed with the range of EOI requests and has in place established processes to evaluate them.

Page: 77

To reassure Members, the removal of the Court process does not mean that IRAS will freely share information with our EOI partners. There are robust safeguards in the international EOI Standard to ensure that only clear, specific and relevant requests are acceded to. And this is the case whether or not a Court Order is needed. In particular, the requesting foreign jurisdiction will, firstly, have to explain why the request is being made, and has to put forward the case for why they are making the request. Secondly, they have to identify the taxpayer under investigation or assessment, and declare that it has pursued all available means in its own jurisdiction to obtain the information. So, firstly, explain why you want the information. Secondly, tell us who is being investigated. Thirdly, declare that you have, indeed, exhausted all other means.

Where requesting jurisdictions do not explain clearly how the requested information is relevant to its investigation or assessment, IRAS has and will continue to seek the necessary clarifications before agreeing to release the information.

Ms Foo had also asked about the anti-tipping off provision in the Bill. Such provisions are necessary as there may be certain sensitive investigations whose success might be undermined by tip-offs. This provision is, in fact, already part of our existing EOI regime. The only difference being that the court makes such orders now, whereas it is IRAS which will issue the order after the Bill is passed. This change, however, does not take away the right of the taxpayer to make representation to IRAS or lodge a request for a judicial review should he become aware of the request.

Both Ms Foo Mee Har and Ms Tan Su Shan expressed concerns that the information obtained through EOI requests might not be used solely for tax purposes. As all major financial centres have committed to the international EOI Standard, such risks are not specific to Singapore. Singapore's way of mitigating such risks is to ensure that we have a robust tax administration that will screen the request carefully to ensure that they meet the requirements of the Standard.

As Ms Tan Su Shan has noted, IRAS has been an effective gatekeeper. It will certainly strive to uphold this hard-earned reputation. Fundamentally, we depend on all our treaty partners to uphold the spirit of international cooperation and ensure that the information exchanged is used only for tax purposes, in accordance with the Standard. The assurance we have is that their adherence to the Standard is subject to continuous peer review by the international community, and any abuse could lead to an unfavourable assessment by the peers and a negative impact on their reputation in the global

Page: 78

community.

Madam, in conclusion, I would also like to assure Members that as Singapore adjusts our EOI regime in support of international tax cooperation, we will push for continued international recognition of the following principles: first, EOI standards must be implemented on the basis of a level playing field across all financial centres to prevent regulatory arbitrage; second, tax cooperation between EOI partners must be fully reciprocal; third, tax cooperation can only take place within a strong legal framework that safeguards the integrity of taxpayer information and where information being exchanged is only used for authorised purposes.

These principles will not remove the costs and complexity of compliance, but they will help to ensure that the financial institutions operating in Singapore are not disadvantaged, and that taxpayers' legitimate rights and confidentiality are reasonably safeguarded.

If it surfaces that cooperation is not implemented in accordance with the terms of the tax agreement, then the principle of reciprocity, which I had spoken about, comes into consideration, and we would be entitled to review our level of cooperation with specific partner jurisdictions. I hope this addresses the question raised. Madam, having addressed these issues, I beg to move.

I would like to thank the Senior Minister of State for your very comprehensive reply. I am still not quite sure about the part on the Court Order. The argument that it was a good safeguard, as the Minister for Finance Tharman Shanmugaratnam explained in Parliament in 2009, I believe still remains valid. I am unsure we are now removing it because we feel that IRAS has a lot more experience and, therefore, we do not need this additional step but actually it is within our control as long as Singapore is able to meet the deadline laid down by the EOI regime. What I am arguing is that, as long as we can meet the deadline, do we have a choice to keep the additional step to give clients and investors optically the confidence that they would have access to the judicial process?

Mdm Speaker, I thank Ms Foo for the supplementary question. Taxpayers still have access to the judicial process through a judicial review. Now, I would just like to add that what we are seeking, in terms of removal of the court process, is not unlike the practice in the US. In the US, no court order is required for the tax authority to be able to share information. A court process is only required if the tax information to be shared applies to a

Page: 79

class of entities.

What we are doing is not unlike some of the other jurisdictions' practices that are already in place. In fact, in the UK, which has the tribunal that you also mentioned in your speech earlier, it is not a court process. It is something that is administrative and the powers do not reside within their judiciary. In a sense, we are aligning more closely and not deviating from what other jurisdictions are already practising.

Madam, I thank the Senior Minister of State for her comprehensive answers. Earlier, the Senior Minister of State listed the number of EOI safeguards that must be fulfilled before information will be released. I would like to know how these are applied under FATCA. Do these apply or are information auto-transmitted?

Madam, in response to Mr Yee's question, the exact implementation details of FATCA are yet to be worked out. I should remind the House that we have not concluded negotiations with our US counterparts. These details have to be worked out. After the Bill is passed, if we get Parliament's approval, then we can be in the position to sort out the details of the implementation.

[(proc text) Question put, and agreed to. (proc text)]

[(proc text) Bill accordingly read a Second time and committed to a Committee of the whole House. (proc text)]

[(proc text) The House immediately resolved itself into a Committee on the Bill. – [Mrs Josephine Teo]. (proc text)]

[(proc text) Bill considered in Committee; reported without amendment; read a Third time and passed. (proc text)]

[(proc text) Order for Second Reading read. (proc text)]

Page: 80

Mdm Speaker, I beg to move, "That the Bill be now read a Second time."

The Jurong Town Corporation (Amendment) Bill 2013 comprises three sets of amendments to the Jurong Town Corporation Act (JTC Act).

The first set of amendments provides a new function and powers for JTC Corporation (JTC) to obtain statistical information relating to industrial properties from members of the public, private establishments and selected Government agencies.

Today, the Urban Redevelopment Authority (URA) collects, compiles, analyses and disseminates a wide range of statistics on the residential, commercial and industrial property sectors.

As the industrial property market grows more diverse and complex, we need to channel more dedicated efforts and resources to gathering and analysing statistics in this sector to improve market transparency and stability. As such, JTC, as the main Government agency overseeing the industrial property market, has been tasked to undertake the statistics function for the industrial property sector.

The proposed amendments will bring about two key benefits. First, with access to timely and comprehensive data, JTC will be better able to ensure sufficient supply and stability in the industrial property market.

Second, JTC will be able to release public information on the industrial property market which will be more comprehensive and representative of the various industrial segments, for example, statistics on different industrial zones. Through the REACH website, the public has provided other suggestions to improve the comprehensiveness of the industrial property market data published. The Government appreciates this constructive feedback. JTC will take in these suggestions in coming up with its industrial property market reports.

To minimise the burden on respondents, JTC will continue URA's current practice of using administrative data provided by IRAS in its compilation of statistics, instead of expending duplicative efforts to collect the same information from the public. The amendment will explicitly allow JTC to obtain property tax and stamp duty data from IRAS for such statistical purposes.

Page: 81

In addition, JTC will obtain additional industrial property data from URA, which will continue to collect data from mixed-use developments that are predominantly commercial but do contain some industrial components.

Mdm Speaker, I will now describe the various safeguards to protect the confidentiality of the data collected and the integrity of the datasets.

Internally, JTC will separate its industrial property developer and statistics collection functions. A Research & Statistics Department (RSD) has been set up in JTC to undertake the statistics collection function. To prevent unauthorised access and misuse of data, the RSD will be physically and electronically ring-fenced from all other JTC departments. Data collected under the Act will be stored and handled within the RSD office and accessible only to RSD officers.

Externally, to both the public and other Government agencies, JTC will only publish data obtained under the JTC Act in the form of aggregated statistics, or share individual data under the exceptions explicitly set out within the Act.

To guard against any leaks, the proposed amendment also includes a maximum fine of $2,000, or imprisonment for a term of up to 12 months, or both, as punishment for unpermitted disclosure.

Consequential amendments to the Urban Redevelopment Authority Act (URA Act) will be made to align the provisions on collection of statistical information in the URA Act with those in the JTC Act.

Mdm Speaker, the remaining two sets of amendments to the JTC Act are administrative in nature.