Hansard, Tuesday, 3 November 2020

Order. I wish to inform hon Members that I have on 2 November 2020 received a letter from the President on the Third Supplementary Supply and Budget Adjustments (FY 2020) Bill. Pursuant to Standing Order 93(7)(a), I will announce the opinion of the President to Parliament.

"I have accepted the recommendation of the Council of Presidential Advisers, and given my assent to the Third Supplementary Supply and Budget Adjustment (FY 2020) Bill, in accordance with Article 58 of the Constitution. My opinion is based on the Third Supplementary Estimates of Expenditure and Revised Estimates of Revenue for Financial Year 2020/2021 in Paper Cmd 3 of 2020 that accompany the Bill, which states that these lead to a drawing on the reserves not accumulated by the Government during its current term of office. I give this opinion pursuant to Article 148A(1) of the Constitution of the Republic of Singapore."

Order. Questions for Oral Answers. Mr Ang Wei Neng.

1 Mr Ang Wei Neng asked the Minister for Trade and Industry (a) how is the Ministry distributing the $100 tourism vouchers digitally; (b) how will Singaporeans who do not know how to handle the digital tourism vouchers be taken care of; and (c) whether the Ministry will minimise fraud pertaining to the digital tourism vouchers.

2 Mr Melvin Yong Yik Chye asked the Minister for Trade and Industry (a) whether there are plans to help seniors utilise their SingapoREdiscovers Vouchers especially seniors who are staying alone with little family and social support; and (b) what are the safeguards put in place to prevent unscrupulous individuals or companies from misappropriating these vouchers from the elderly.

3 Mr Leon Perera asked the Minister for Trade and Industry whether the SingapoRediscovers Vouchers can be extended to arts-related activities such as festivals and stage plays given the link between the tourism industry and Singapore's ambitions to become a global cultural hub.

Mr Speaker, with your permission, may I take Question Nos 1 to 3 together, please.

Taking Question Nos 1 to 3 together? Okay.

Thank you. I would like to thank the hon Members Mr Ang Wei Neng, Mr Melvin Yong and Mr Leon Perera for their interest and questions about the SingapoRediscovers Vouchers.

The SingapoRediscovers Vouchers scheme aims to encourage Singaporeans to support our tourism businesses, which have been among the hardest hit by the COVID-19 pandemic. The vouchers will be available for redemption from 1 December 2020 and will be valid until end-June 2021. Singapore Citizens will be able to redeem the vouchers via SingPass. And the Government is cognisant that some seniors may need help with accessing the SingapoRediscovers Vouchers or SRVs via SingPass, which is the question that Mr Melvin Yong had raised.

We just wanted to say that while we encourage all Singaporeans to register for a SingPass account, if they have not already done so, and redeem the vouchers digitally, we will provide some physical touchpoints for those who need them.

Klook Travel Technology with UOB Travel Planners, Changi Travel Services and GlobalTix, which are booking platforms for the SRVs, will offer both digital and physical touchpoints. Singapore Citizens who require help making their bookings for tourism products can seek assistance at the physical touchpoints provided by these platforms. These physical touchpoints will span the island to make it easier for people to access them. Currently, STB is working with the People’s Association or PA to supplement these with touchpoints at some community centres and STB will also set up a hotline to handle public enquiries and feedback.

STB is also working with the relevant Government agencies and appointed booking platforms on developing safeguards against fraud. The use of SingPass will provide secure authentication for the distribution of the vouchers and help mitigate fraud. Citizens are reminded to keep their SingPass account details confidential, not to share their one-time password or OTP with anyone and to be careful of unsolicited text messages or web links that direct them to suspicious portals claiming to be SRV booking platforms, to avoid falling prey to scams. Members of the public are advised to make purchases from only authorised platforms. And the ambassadors at the physical touchpoints will also remind seniors of the above safeguards.

STB will also conduct regular checks and audits and leverage data analytics to flag out suspicious transactions for further investigations. Cases of fraud will be reported to the Police.

To the hon Member Mr Leon Perera's question about the arts-related activities, I just want to remind the Member that the point here is that the vouchers are primarily targeted at businesses that derive most of their income from tourists, which include hotels, tourist attractions and tours.

And so, museums and galleries that cater to tourists are already eligible for the scheme as tourist attractions. Arts and cultural organisations which offer complementary products can work with eligible merchants, such as hotels, tourist attractions and tours, to develop bundles to qualify for the SRVs. They can also leverage marketing initiatives by STB to reach out to locals. For example, they could contribute deals and content for the SingapoRediscovers campaign.

I agree with the Member and affirm that the Government recognises the importance of the arts and culture sector here in Singapore. In fact, entities under this sector qualifies for the Jobs Support Scheme, JSS, Tier 2 support till March 2021. The Government has also rolled out the Arts and Culture Resilience Package or ACRP to safeguard livelihoods, retain capabilities in our eco-system and position the arts and culture sector for the post-COVID recovery.

Sir, I appreciate our Members' interest in the SRV scheme. I look forward to their support of our tourism establishments. If Members and members of the public want more information, the information of the redemption process and the list of authorised platforms will be mailed to Singapore Citizens prior to the planned roll-out later this month.

Mr Melvin Yong.

Mr Speaker, I think the Minister of State for his reply. I have one supplementary question. Mr Speaker, I have many seniors living in my Radin Mas constituency. It has been many months since they had been able to gather with their friends and go on community-led outings. Many of them tell me that they are really looking forward to these SRVs so that they can use this opportunity to go on local tours with their friends once again. I would like to ask if the Ministry has plans to work with vendors to create senior-exclusive tours that can be paid for with these vouchers and to hold these tours during off-peak hours where there are lesser crowds, so that our seniors can have a safe Singapore holiday with their friends?

I thank the hon Member Mr Melvin Yong for his questions. In fact, we hope that all Singaporeans will get to enjoy the SRVs and take some time off what is a very busy and difficult year for many of us. Specific to the Member's point, to help seniors who are staying alone or have little social support to use their vouchers, STB will explore working with social service organisations and the PA to facilitate of the usage of the vouchers such as by organising small group tours for seniors where permissible.

In addition to that, the booking platforms, where commercially viable and where there is a demand, are also very much welcome to come up with packages, for example, family packages or packages that are targeted at seniors, and bundle these with F&B and retail as well. These are all possibilities; and we also facilitate, particularly with the social service organisations and PA.

Mr Speaker, Sir, appreciate the opportunity to ask a supplementary question. I thank the Minister of State for the comprehensive reply. Could I clarify with the Minister of State, as we are very concerned that many seniors are still not very familiar with SingPass and they may go and reset the SingPass, so, how many community centres is MTI thinking of designating to help facilitate with SingPass and whether this will be extended to all the community centres because the numbers may be large? Perhaps the Minister of State would want to share how many Singaporeans will be eligible for this scheme and how many percentage of them do you think will need this kind of special service, where they would need a new SingPass account or need help from the ambassadors?

The second supplementary question is, if this scheme is popular – and we hope it is going to be popular – many attractions may be having problems coping with the demand, especially at the peak periods that people want to go. So, how would MTI work with the different attractions to increase the capacity during this period and without compromising the safety of Singaporeans?

I thank the hon Member Mr Ang Wei Neng for his questions. I will just take them in two parts. The second one first, with regard to the capacity at our tourist attractions, we have increased it to 50% for now. As the hon Member has mentioned, the health and safety of our people are paramount. So, we will look into how the COVID-19 situation is being managed.

Also, with regard to the spread of the vouchers, it is meant to be from December all the way up to June. So, we will also encourage Singapore Citizens to utilise the vouchers across the period of time – it covers the December holidays, it covers the March holidays and it also covers the June holidays. But also, in between, where there are off-peak periods, that is where potentially the seniors and potentially those who are not working, can utilise the vouchers.

With regard to the physical touchpoints, currently, STB is working with PA for about 40 community centres or CCs with SingPass counters, and up to 66 physical touchpoints, set up by the appointed booking platforms that I mentioned, or near the CCs to assist the Singapore Citizens to redeem their vouchers. They will also have SRV ambassadors appointed by STB. But we will look into the hon Member's suggestion to potentially expand it to more physical touchpoints so that Singapore Citizen can reset their SingPass and have more assistance in redeeming those vouchers.

4 Ms Joan Pereira asked the Minister for Transport in view of the recent MRT breakdown on 14 October 2020 (a) whether there are sufficient business continuity plans and emergency preparedness exercises conducted on a regular basis to ensure that the relevant teams know what to do in the event of a power failure; and (b) how long has it taken for the crowd control process to kick in and what have been the measures implemented.

5 Mr Saktiandi Supaat asked the Minister for Transport when buses or trains are stranded at peak hours (a) what are the protocols in place to ensure safe distancing measures and good ventilation for the commuters; (b) whether public transport workers are trained to guide commuters to safety and address their concerns; and (c) what are the lessons learned from the MRT disruption on 14 October 2020 with regard to crowd management and safe distancing measures and how will this be improved upon.

6 Mr Dennis Tan Lip Fong asked the Minister for Transport (a) what was the cause of the cable insulation fault which triggered the MRT disruption on 14 October 2020; (b) why did the circuit breaker in the vicinity of Tuas Link and Tuas West Road fail to isolate the cable insulation fault; and (c) why was the cable insulation fault not isolated before SMRT attempted to draw power from the Buona Vista intake station resulting in the power supply disruption to Circle Line.

7 Mr Dennis Tan Lip Fong asked the Minister for Transport (a) given its past experience, whether SMRT could have taken much less time to complete passenger recovery or evacuation during the MRT disruption on 14 October 2020; and (b) what were the reasons for the delay.

8 Mr Dennis Tan Lip Fong asked the Minister for Transport what are the key lessons arising from the MRT disruption of 14 October 2020 and what measures will be taken to ensure that similar future incidents will be avoided.

Mr Speaker, Sir, can I answer Question Nos 4 to 8 together, please?

Yes, please.

The 14 October 2020 incident was significant and affected over 120,000 commuters. As with this House, I am concerned about the disruption. Our imperative must be to get to the bottom of the matter, take follow-up actions and prevent similar incidences from recurring.

The Land Transport Authority (LTA) has, therefore, investigated the incident thoroughly, with inputs from operator SMRT and the equipment supplier Alstom. They identified what went wrong and have started to address the gaps and shortcomings. On 28 October, that is, last month, LTA issued a detailed media statement and its full investigation report. Together with SMRT and Alstom, they held a joint media briefing the same day to explain the cause of the incident, the follow up actions and answered many questions. Their findings, including answers to many of the questions posed by Members, were widely covered in the media.

Mr Speaker, Sir, let me recap the pertinent points.

The disruption was caused by the occurrence of concurrent faults and one mistake.

First, there was a 22kV power cable fault in the electrical zone between Tuas Link and Tuas West Road stations. This is along the Tuas West Extension. This would not have caused a disruption if the circuit breaker, which is a protection feature of the system, had kicked in and isolated the affected electrical zone because, once isolated, the power can flow and service can continue.

But then a second fault occurred, in that the circuit breaker at Tuas West Road station, close to where the faulty cable was, malfunctioned. It was later found out that the trip coil, which is a component of the circuit breaker, was faulty.

A secondary protection mechanism at the sector level did kick in and then isolated the fault. But that cut off power supply across large sections of the North-South and East-West Lines. At that point, the Operations Control Centre then made a mistake and did not isolate the fault before drawing power from the Buona Vista Intake substation. As the Buona Vista Intake substation also supplies power to the Circle Line, this, in turn, affected train services along parts of the Circle Line.

Members have asked: why was the power cable faulty? Why did the primary circuit breaker, which is the first level of protection, not work? Why did it not work? Why did the Operations Control Centre not remotely isolate the fault before powering up?

LTA, SMRT and Alstom have given their explanations during the media briefing. The reasons for the component failures are still unknown. The faulty power cable and the circuit breaker have been sent for forensic examination by the original equipment manufacturer, to ascertain the reasons for failure.

What we do know is that there have been four power cable failures along the Tuas West Extension since 2018. LTA and SMRT had earlier expressed their concerns to Alstom, the supplier, who was forthcoming and had already agreed much earlier to replace some of the cables. In fact, work was on track to start in the later part of October.

Following this recent incident, Alstom will conduct a complete replacement of all the power cables – 150 km of it – along the Tuas West Extension. This is quite a major undertaking and will be completed progressively by the end of next year. The cables will take time to procure and arrive. At the right time, LTA will schedule early closures and late openings on weekends or full Sunday closures for limited periods in 2021 to facilitate the cable replacement works. We will announce these plans in due course.

Alstom will also replace all 113 trip coils in the circuit breakers along the Tuas West Extension by the end of this year. LTA will implement weekend early closures to facilitate the replacement exercise and we seek commuters' understanding for the inconvenience caused. During this time, SMRT will also step up the frequency of mechanical testing of the circuit breakers of this sector from annually to every six months. This is in addition to visual inspections of the trip coils once every 10 days, to ensure that they are in working order.

As for the Operations Control Centre not isolating the fault before drawing power from Buona Vista Intake substation, this was a human error. Members asked if there was a Standard Operating Procedure (SOP) in responding to such a situation. There are, in fact, many sets of SOPs to cater to different scenarios, but one thing we have learnt over the years is that every disruption is different and unique. So, besides being guided by SOPs, the engineers on duty will have to exercise judgement and make quick decisions during an emergency.

I have not been in their shoes and cannot imagine the challenges they are facing. But under the pressure of time and circumstances, the personnel involved, I believe, made an honest mistake. I have no doubt this has been a major lesson for them. They wished they had decided differently and they have much learning to share with their colleagues, so that such a mistake will not happen again.

Members also asked about evacuation and crowd control. I want to assure Members that LTA, SMRT and the Home Team jointly conduct emergency preparedness exercises every year. SMRT staff also regularly get refreshed on their roles and responsibilities during a service disruption. On the evening of the disruption, the SOPs were promptly implemented. About 400 additional SMRT staff were immediately activated to both rectify the fault and help affected commuters.

Safety of commuters is the top priority during service recovery. That is why detraining commuters is always a last resort because to have commuters walking along the track poses risk, especially for those who are elderly or handicapped. So, they need to be very carefully carried out. The Operations Control Centre, therefore, has to balance the risk posed by detrainment against the discomfort and heightened anxiety of commuters in the stalled trains. Therefore, as far as possible, the Operations Control Centre will try to restore power to the trains and then bring commuters through the trains to the nearest MRT station.

However, 40 minutes into the disruption, the Operations Control Centre concluded that it could not restore power to the system quickly and, therefore, decided on detrainment. Train captains carried out the safety protocols, and station staff walked on the tracks to the trains to guide commuters to the nearest stations. All 6,800 commuters on the stalled trains were brought safely to the nearest station platform in under an hour, except for the 78 commuters whose detrainment was delayed by inclement weather and lightning risk.

Free boarding of regular bus services was activated within 10 minutes of the incident to disperse the crowds outside the train stations. One hundred and twenty bridging buses were in place within 35 minutes of the incident and SMRT staff guided commuters to look for suitable alternative transport arrangements to carry on with their journeys.

Despite this, crowds built up around the MRT stations. This is, unfortunately, inevitable in the event of a train disruption. While there is understandably concern about overcrowding, given the current COVID-19 situation, it will not be practical to ensure physical distancing without further inconveniencing the affected commuters in such an unexpected situation. The transport team simply has to do our best to prevent such incidents from happening in the first place and to rectify the incidents as quickly as possible should they occur. Thankfully, on that evening, commuters were very cooperative. They continued to wear their masks and minimised talking to each other, and I thank the commuters for their understanding and for doing their part under such trying circumstances.

In the course of their investigations, our engineers learnt many useful lessons, to improve operations and maintenance. There are also wider, non-engineering lessons, too, for policy makers and, I think, for this House as well. I think there are three lessons.

First, mass rapid transit systems are very complex. Engineers who have worked on mass rapid transit systems and other systems, and have a basis for comparison, will very likely testify to that. Several fields of engineering converge to get a mass rapid transit system to work reliably to carry millions of commuters safely, for many hours throughout the day. Given its complexity, when a major disruption occurs, the circumstances and causes are often unique.

That leads us to the second lesson – because of the nature of mass rapid transit systems, we should never be complacent. Keep learning and keep improving. Always emphasise building up engineering and operational capabilities and experience. Regularly review SOPs and conduct staff training to ensure processes are up to date and everyone in the team knows what to do when the need arises.

Third, MOT, LTA, SMRT and SBST must work as one team. This is the spirit of the One Transport Team. We coined the term to remind ourselves of the imperative. This was how we managed to significantly improve the reliability of our MRT system, bringing the Mean Kilometres Between Failures or MKBF from under 200,000 train-km just five years ago to more than one million train-km today. With the recent disruption, the morale of the teams on the ground has taken a hit.

Nobody wishes for an incident like this to happen, but when it did, we should not let it break our spirit. There are honest and hardworking people who have toiled over the past few years to make our MRT system amongst the most reliable in the world. By believing in them and in ourselves, we can stand tall, be united again and press on with our work. So, as a team, we take collective responsibility, not finger point, and we will do our best, close the gaps and address the shortcomings. Only then can we continue to fulfil our collective mission of serving commuters well.

Ms Joan Pereira.

I thank the Minister for the reply. I have one supplementary question. The Minister mentioned about elderly commuters. I would like to find out how SMRT took care of our elderly and wheelchair-bound commuters when the trains broke down. How did they evacuate these vulnerable commuters, especially from trains that were stuck above ground?

I thank the Member for the question. This is one of the reasons, in consideration of elderly and wheelchair-bound commuters, that detrainment had to be a last resort. Yes, there are risks, especially for this group of commuters. But when we have to, you cannot have wheelchairs on the tracks. But on the Circle Line, in the tunnels, you can have wheelchairs because there is a side platform that you can push the wheelchair on. So, evacuation on the Circle Line is much faster. In fact, that evening, it took half an hour to evacuate three trainloads of passengers because of the side platform.

For viaducts, the North-South East-West Line, it is not as straightforward. Typically, even when evacuation and detrainment start, the rest of the passengers can walk but the elderly and those with mobility challenges will stay on the train until further manpower, including SCDF, arrives. If need be, we use stretchers to carry such passengers to the nearest station. The stations are also equipped with what we call battery-powered motorised trolleys that we can use and deploy to ferry them to the nearest station.

So, SOPs are in place. We are very careful about it. Walking on the viaduct has its risks and we will always be very careful. But most importantly, is to prevent such incidents from happening.

Mr Saktiandi Supaat.

Mr Speaker, I would like to thank Minister for the answer to our questions and also to thank the One Transport team for quickly responding to the situation on that particular day and helping out commuters. I have two supplementary questions.

The first is in regard to Minister's answer earlier that it took 40 minutes before a detrainment decision was taken and thereafter the commuters got off the trains in separate moments. My question is, is there a specific SOP – because there could be rising anxiety within the trains. In my question, I was asking about good ventilation for commuters within the train itself, especially if you are stuck in the train for an hour or more before eventually detrainment, typically, how long is the SOPs before a decision is made? That is my first question.

Secondly, in regard to this incident, will companies like say SMRT be taken to task? Will there be a fine being made against SMRT for such incidents; not just SMRT, but other providers going forward, in the future, if such incidents happen?

I thank the Member. For specific SOP, typically the guideline is half an hour; 30 minutes. But I want to emphasise you are balancing two unpleasant things. One is being trapped in a train and I can imagine the discomfort and anxiety. Whenever there is a disruption like that, the battery does kick in the train. The battery cannot power the aircon but that there will continue to be a bit of light and some ventilation through a fan. It is warm and it is uncomfortable. There is a battery that will operate for about an hour.

Within an hour, you then have to decide whether to do the other unpleasant thing which is detrainment. Detrainment, as I have mentioned, has risks. You can trip. There is a 750 volts DC, third rail, and you are walking next to it. You got to make sure you disable it, double confirm, triple confirm, quadruple confirm because it is no joke walking next to a 750 volts third rail. Then, like on that night, there could be inclement weather and then there was lightning risk. Once there is lightning risk, you should stop. Never put passengers' lives in danger. So, you are balancing between these two things. But typically, after half an hour, a decision should be made whether to do detrainment.

In this case, there was some hope that they could repower, but the repower went wrong and brought down CCL, or sections of it. So, 40 minutes later, detrainment was decided. Not an easy task but the Operations Control Centre of SMRT has to make those decisions. And I think the decisions they made that night, in terms of detrainment, was correct.

On companies that could be taken to task, if the operator has made a big boo-boo, resulting in a big disruption, of course, some of these actions would have to be looked into and there is a disciplinary framework. But I think in this case, the investigation report went up. The equipment supplier came forth, agreed to replace all 113 of trip coils, and 150 km of cable wires and within SMRT and LTA, everyone self-reflected what they could do better.

So, I think what is more important than meting out punishment, is the team able to come together, reflect upon what could be done better and take it upon themselves, take responsibility to say, "I can do things better". And together, without finger-pointing, work together to better serve commuters. The mood can easily change and go wrong. When it becomes one of penalty and punishment, then the mood changes when everyone become defensive, everyone, to put it crudely, will cover their behinds. And after a while, you do not get the best outcome.

So, as far as possible, there is a disciplinary structure and we will use it if we have to. But as far as possible, I feel, hold the team together, be able to work together for the benefit of commuters – that is a lot more important.

I thank the Minister for his comprehensive answers. I just have two supplementary questions. One, beyond the suspension of the two staff, will LTA look into how the SMRT or indeed, both rail operators, can improve their work processes in future to prevent or mitigate against similar staff, human error in similar situations like this?

Two, in respect of the proposed replacement cables by Alstom, whether LTA will require more stringent tests to be conducted on the replacement of the upper layer cables, to ensure that similar faults which were spotted on the current cables on the previous four occasions, as well as which caused 14 October disruption, will not be present in the future replacement cables.

Let me answer the second question first – will more stringent tests be conducted? I think to put it in context, this set of components and equipment are not new. It has been used on other lines. And they typically have a life span of 20, 25, or 30 years. So, this is a bit premature to have four faults in the last few years, which I think explains why Alstom is stepping forward and replacing everything. I do not want to prejudge why the cable was faulty. It is going through forensics and once the results come out, I am sure it will provide insights.

But there is an SOP and there is an inspection regime for all cables and trip-coils throughout the system. For this stretch, while the components are being replaced, we will step up, double the frequency, so that we make sure it works.

As for the first question, I should I emphasise, suspension does not necessarily mean we are blaming the workers or they are being punished. Because they may not have committed wrong. If there is gross negligence, in fact, if there is wilful wrongdoing, disciplinary actions will be taken, including even bringing in the Police, if there is wilful wrongdoing. But in most operations involving live operations and in a place where there is a strong safety culture, suspensions are not uncommon. It is actually carried out, quite routinely, as a matter of professional conduct and safety protocol. You will find that in the SAF, you find it in bus operations. You have a near-miss, or a side swipe of a bus, the captain might be suspended for a week. It does not mean it is a punishment. Sometimes, it is not their fault, or even running theme parks or manufacturing plants, process plants. These are always carried out. It is part and parcel of a professional conduct of an engineering company.

The purpose, depending on the circumstances, need not always be punishment. Sometimes, it is really a matter of retraining, refresh what you have learnt, self-reflect and go back, you do better and share your learnings with your colleagues. And I think it is a good system to ensure that we keep on improving.

The question specifically asked if there would be improvement in work processes. Definitely. As I have mentioned, every time there is a major disruption, it is always unique. This time, it is also unique. SMRT has not encountered such a situation before where a cable fault, coupled with a trip-coil fault, resulting in a disruption. So, they will be improving their SOPs. But frankly, when it happens, you do not have time to go and refer to them. It has to be internalised into the experience and lessons learnt by all the operators, and by the engineers. And I think this incident provided a lot of lessons for them.

Mr Pritam Singh.

I thank the Minister for that broad-ranging explanation as to what occurred. Just one supplementary question specific to the faulty cable. The Minister mentioned that the cable is now being forensically examined as to the reason its failure. For the earlier episodes of cable failure, was it a consistent reason as in there were not two or three different reasons so that the OEM could not identify why the cable is failing in the same way, or could this have been pre-empted to an extent if the earlier cable failures were all down to the same reason or same cause?

There were four. Two was when the system was first commissioned; that was 2018. So, of course, there were concerns. In 2019, there were no failures.

And this year, there were two earlier failures, now this one. So, the reasons for the failure has not been established which is why, given that what has happened, we should send it for forensic examination and understand the reason why.

In the meantime, regardless of the reason, the cables would be replaced.

Mr Lim Biow Chuan, next question.

9 Mr Lim Biow Chuan asked the Minister for Education whether Autonomous Universities can provide clear communications with their students whenever there are allegations of misconduct involving teaching staff and students so that students can be better protected.

The question raised by Mr Lim Biow Chuan follows the recent media coverage of the case involving a former teaching staff at the National University of Singapore or NUS who was dismissed for being in an intimate relationship with an undergraduate, which is a clear contravention of NUS' Code of Conduct for staff. Given the undergraduate's allegations of sexual misconduct against the individual, a Police report was made and the investigation is underway.

Where allegations of serious misconduct are made, the Institutes of Higher Learning, or IHLs, will immediately require the accused individual to stay away from campus temporarily, if they assess that the alleged offender may pose a danger to any member of their community. If the case involves a student or staff from the same institution, the IHLs may also impose a No-Contact Order to ensure that the alleged offender is prohibited from contacting or being in the vicinity of the party making the allegations.

A Police report is typically made for allegations of serious misconduct, and where the alleged offender is proven and charged in Court, this will be a matter of public record.

Separately, the IHLs also conduct their own internal investigations to determine if the alleged offender has breached their Code of Conduct. Those who do so are subject to disciplinary sanctions, including possible suspension or expulsion of students, or dismissal of staff.

In the course of addressing allegations, MOE expects institutions to be open and timely in their communications, while taking into consideration the facts of the case, the need to ensure the safety of their communities and safeguard the well-being and privacy of victims and other members of the community who are directly impacted, and the need to ensure that Police investigations are not impacted.

MOE will continue to work closely with the IHLs to ensure that the well-being and safety of students and staff on campus are protected.

Mr Lim Biow Chuan.

Sir, one aspect of the unhappiness by members of the public is that the disclosure was not timely. So, may I ask the Minister of State, what is the time frame when we say that MOE expects the institution to be open and timely in their communications with the students. As an undergraduate, if you are approaching a lecturer, you would want to know whether the lecturer is under investigation and whether the lecturer is likely to be a predator. Given the unequal relationship between a student and a lecturer, I think it is justifiable that a student would ask for timely disclosure, so that they would be able to know and assess how to deal with the lecturer.

In that sense, may I ask MOE how would the Ministry want to keep the student community safe in circumstances like that? Can I also ask MOE whether they can provide this House with an update on the number of similar incidents in the past years?

I thank the Member for his supplementary questions. We agree that communication is very important and we will ask the IHLs to do more on this front, while bearing in mind the context and specificities of each case.

In the present case regarding this specific lecturer, I have shared that NUS required the accused individual to stay away from campus and that a No-Contact Order was swiftly made out. These were carried out and disclosed by NUS in its media conference.

Let me be very clear. We do not condone instances of sexual misconduct as well as sexual offences that happen on campus. MOE will work closely with the IHLs to protect our students.

On the second question that the Member raised, on the number of incidents, the AUs handled a total of 56 disciplinary cases involving sexual misconduct committed by students from 2015 to 2017. This translates to an incidence rate of around 0.21 sexual misconduct cases involving student perpetrators per 1,000 students. In 2018, the AUs handled 17 such cases. The corresponding incidence rate is 0.

16. In 2019, the number of such cases fell to 14 with a corresponding incidence rate of 0.13.

If we look at the IHLs as a total and if we look at sexual misconduct cases committed by both students and staff, the IHLs handled a total of 172 disciplinary cases involving sexual misconduct committed by students and staff from 2015 to 2019. This translates to an incidence rate of 0.12 sexual misconduct cases involving staff and student perpetrators per 1,000 staff and students.

I also want to add that our IHLs are key public institutions and they are expected to uphold high academic standards and professionalism. They also owe a duty of care to their students. That is why we have zero tolerance when it comes to sexual misconduct instances that happen on campus.

There can be open discussions; we have very bright teaching faculty, we have students who are also discovering themselves, exploring their passions. But all that said, these discussions must have academic rigour and be constructive. Staff are expected to uphold professional codes of conduct in their interactions with students. When there is a breach of the IHLs' codes of conduct, the punishments are swift. Students can be suspended, they can be dismissed from school and the same goes for staff. And we see that in this case, the teaching staff was dismissed very quickly and NUS has shared that it will endeavour to do better when it comes to communications.

Speaker, I thank the Minister of State. I would like to ask two supplementary questions with regard to this, whether MOE has any plan to engage relevant experts in handling of sexual assault cases to provide training and sensitisation to personnel in IHLs as well as Secondary schools and tertiary institutions, given that in this digital age, our children are getting exposed to sexual material and content very easily and at a much earlier age through digital media?

Secondly, will MOE consider putting in place a requirement, if it does not currently have this requirement, for educational institutions to create or set up a small team or committee of properly trained personnel to handle such cases, going forward?

I thank the Member for her questions. There is some overlap in the two questions. So, if I may just take the two of them together.

Firstly, I think it bears noting that from April last year, a Victim Care Unit was set up at NUS; and they have something similar in the other AUs as well. The Victim Care Units, or VCUs, are staffed by professionally trained care officers and their objective is to provide the first line of care and support to victims of sexual misconduct. So, I hope that helps to allay the concerns that the Member has.

The Member has asked about what happens in Secondary schools at the younger ages and at tertiary education, I think we all recognise that different age groups have a different understanding of sexuality. We have to ensure that sexuality education is targeted in its delivery. So, starting from Primary schools, students are made aware of how they can protect themselves. In Secondary schools, teachers also provide certain scenarios so that students are aware of how they can protect themselves. Specialised training for sexuality education teachers is conducted by very specialised staff within MOE.

In sum, MOE takes this very seriously how students of different ages can protect themselves, and we deliver that education in a targeted manner. Where, unfortunately, a sexual offence has occurred and victims require help and support, we have dedicated personnel, who serve as the first line of support for the victims. They centralise the care and support, and students and affected individuals do not have to go about looking for different individuals for help. They can go directly to the dedicated personnel.

I have two supplementary questions. The first is whether there are any plans to make any investigations into such complaints about sexual violence and sexual misconduct, whether to make them independent to give students better confidence? So, basically, independent in the sense that it is not undertaken by the Universities or the institutions themselves.

My second question is, as Ms Carrie Tan mentioned earlier, the Minister of State has responded regarding Secondary school level, steps taken for these students to make sure that they are aware of sexuality and issues relating to consent, is the Ministry taking any proactive steps to making sure to examine whether this is also a problem at younger levels, and whether there is any studies being conducted at the Secondary school level to see whether there are any problems? So, just being proactive and find out whether it is an issue.

I thank the Member for her two supplementary questions. On the first, I would like to share that there are two tracks of investigations when an offence around sexual misconduct is highlighted in the IHLs. Firstly, a Board of Discipline may be convened by the IHLs. There is a certain structure in the Board of Discipline; students are also included in the Board of Discipline to provide their perspectives on the issue. Investigations are carried out through campus security and the issue is very seriously considered by the senior management of the IHLs.

Separate from that, there is the criminal justice system. When there are concerns of a serious offence having occurred, a Police report is made and investigations are carried out by the Police. So, there is an independent track of investigations. That is with regard to the first question that the Member highlighted.

On the second question with regard to Secondary school students, we take in feedback from parents. Sexuality education is such that it does not happen in a vacuum. I mentioned earlier about scenarios being used to teach students; or, rather, to also solicit inputs from them. So, it is a two-way process. Otherwise, as part of the education process, we do not really quite know whether the students have imbibed what has been taught. So, sexuality education educators are well aware of the sensitivities around this topic and when they teach it in classrooms, they are very sensitive about it and then use scenarios, so that the students best know how to apply those lessons to undertake self-care.

10 Mr Liang Eng Hwa asked the Minister for Manpower (a) to date, what is the total number of Singaporeans who have received the Workfare Income Supplement (WIS); (b) what is the range of the wage supplements; (c) what is the demographic breakdown of the recipients; and (d) what has been the impact of WIS on employment.

11 Assoc Prof Jamus Jerome Lim asked the Minister for Manpower what is the current number of Singaporeans who earn $1,300 or less a month on a take-home basis, excluding employer and employee CPF as well as other deductions of income, for (i) full-time employment and (ii) part-time work or self-employment where their income will be $1,300 per month or less on a take-home basis were it to be extrapolated to full-time equivalent work.

Mr Speaker, the International Labour Organization or ILO’s definition of earnings includes contributions of employees to social security and pension schemes. Singapore’s approach is broadly aligned with the ILO and considers personal income to include —

Mr Zaqy Mohamad, are you taking both questions? Question Nos 10 and 11?

Yes, Speaker, I will take both questions together.

Yes.

I will repeat the answer again. Sir, the International Labour Organization or ILO’s definition of earnings includes contributions of employees to social security and pension schemes. Singapore’s approach is broadly aligned with the ILO and considers personal income to include the Central Provident Fund or CPF contributions and the Workfare Income Supplement or WIS payouts, as these can be used for necessities including healthcare and housing.

In particular, Workfare provides cash supplements and CPF top-ups to encourage eligible lower wage Singaporean workers to work regularly and build up their CPF savings. CPF contributions and top-ups also go towards retirement savings.

Including Workfare and CPF contributions, there are about 30,000 full-time employees among Singaporeans receiving less than $1,300 per month; likewise, for 22,000 self-employed persons. These lower wage workers also receive further support from the Government, such as Silver Support, ComCare, GST vouchers and U-Save rebates.

Workfare remains a key pillar of social security for Singaporean lower wage workers. Studies have consistently shown that Workfare has been effective in motivating less educated Singaporeans, particularly those in the older age groups, to enter and stay in the workforce. This is important as workforce participation is key to supplementing their household incomes and their ability to save for retirement.

Workfare has been regularly reviewed since its launch in 2007. The qualifying income ceiling and payouts for Workfare were raised on four occasions to ensure continued support for deserving workers. From 2007 to 2019, over $6.8 billion has been disbursed to 890,000 unique lower wage workers.

In the past three years, an average of about 400,000 individuals receive Workfare annually. About 11% are aged 35 to 44, 21% are aged 45 to 54, and 18% are aged 55 to 59. Slightly less than half, or 49% of all Workfare recipients are aged 60 and above.

During the same period, the average Workfare payout received annually was about $1,560, while the maximum was $3,600.

The Government will continue to provide holistic support to low-wage workers. Besides Workfare and the schemes already mentioned, there are also efforts to raise standards of living for low-wage workers in other meaningful ways, such as providing access to quality healthcare, enhanced housing grants and subsidies to help them own their own homes, education for their children and adequate support in their retirement.

Mr Liang Eng Hwa.

Sir, the Workfare Income Supplement scheme is indeed a commendable scheme. It uplifted the low-wage workers' income and yet not compromising on the employability. A big credit to the Government for this scheme. I just want to focus on the 32,000 or now, the Minister of State mentioned, it is 30,000 low-wage workers that earn $1,300 and below per month. Can I find out from the Minister of State, what is the profile of the 32,000 or 30,000 low-wage workers and more importantly, what is the Government doing to support this group of workers here?

I thank the Member for his clarification. The first question was 32,000 and now, I have reported 30,000. I suspect Mr Liang was referring to Member Dr Koh Poh Koon's speech last month when he cited 32,000. The difference is because, when we run reports, our labour statistics is based on resident statistics. Here, the Member, Assoc Prof Jamus Lim asked about Singaporeans, so that is the difference between resident profile and the Singaporean statistics.

On the Member's question about the profile of the 30,000 workers, among the 30,000 employees are office clerks, F&B workers, cleaners, shop salespersons as well as several other smaller groups of occupations. Many of them have lower education profiles, of which four in five have post-Secondary qualifications and below, while half of them have Secondary education and below.

More than third of them are aged 50 and above, which reflects an older profile who have less access to higher education as compared to the current generation. They are also potentially at a higher risk of disemployment and are likely to face greater difficulties in finding jobs, if they are displaced. So, they are less skilled and therefore more at risk at finding jobs in the current climate.

Notably a third of them are youths aged between 15 and 24. Some of us have been there before; they are in vacation jobs. It is also useful to consider another group in terms of the existing household support. Out of this group of 30,000 full-time Singaporean employees, half of them live in households with household income per capita above $1,300. Basically, per capita income implies that if you have two persons living in the home, you probably have a household income of more than $2,600. If you have four persons at home, you have household income of more than $5,200 per month.

Therefore, half of this group have alternative means of support and which also suggests that they are not the primary breadwinners of the household and have other means of support too.

In short, of these 30,000 Singaporean employees who still earn less than $1,300 a month today, half of them are staying in households where they are not the primary breadwinners and have others in the household providing income support. The majority of these 30,000 employees have low education and work as clerks, F&B workers, cleaners and shop salespersons. And more than one third are older Singaporeans at higher risks of disemployment, while the other one third of them are youths on vacation jobs.

Besides the monthly Workfare Income Supplement wage top-up they would already receive, this group of 30,000 Singaporeans will continue to be supported by the Workfare Skills Support scheme that will enable them to upskill and earn higher wages, and by other schemes such as the Silver Support, ComCare, GST voucher and U-Save rebates for their daily and medical needs as well as retirement needs in the future.

Additionally, the Government will continue to raise the standards of living for low-wage workers in other meaningful ways such as providing access to quality healthcare, enhance housing grants and subsidies to help them own their own homes, education for their children and adequate support in retirement.

Assoc Prof Jamus Lim.

I thank Senior Minister of State Zaqy Mohamad for his clarifications. With all due respect, I wonder if I could get a clarification, specifically with respect to the question, which is that we are wondering how many receive a take-home income of $1,300 and below, excluding all these supplementary schemes. An alternative way to look at this question is, if we could look at the breakdown of wage earnings only, so what is the share or the number of Singaporeans that receive less than $1,300 based on wage earnings only versus those who receive $1,300 and below, after you take into account all these supplementary schemes.

Sir, I thank the Member for his clarification. On this, I just want to reiterate that the holistic understanding of Singapore's system, of how we use personal income including CPF and Workfare income payouts. CPF is part of income too, as these can be used for necessities. Workfare Income Scheme or WIS gives you cash. As for CPF, I think many of us use it for housing and healthcare. I think it is worth it to note that 75% of our Workfare recipients, lower income workers, also own their own homes and therefore there is a direct impact from CPF into your home ownership. That is still income which, in other countries, you would have had to use your cash to pay for your own homes or mortgages.

In line with the International Labour Organization (ILO) – so this is not a pure Singapore definition – if you think about the alignment, the concept and definition of gross earnings, the data collected is before tax deductions and inclusive of CPF contributions. If you use the ILO statistics of earnings for example, they define to include social security, pension schemes, insurance premiums, union dues and other obligations of the employees. So, this is how it is done internationally. Therefore, we keep the same conventions because it provides a meaningful comparisons and benchmarks.

Calculations to exclude CPF contributions, as asked by the Member, how do you do that? Or deduction of other incomes will require various other assumptions. For instance, income tax deductions will differ based on individual profiles, and some do get different sorts of reliefs for example.

Moreover, almost all the Minimum Wage systems internationally including in the US, UK, Netherlands, Germany, South Korea, Spain also stipulate that Minimum Wages are subject to taxes and social security contributions. That also implies tax as well as social security, your pensions, your CPF. This means that that Minimum Wage levels are also before deductions.

Given this these considerations, it would not be meaningful nor accurate to consider income according to the parameters of the Member's query.

In fact, I would like to turn the question around to the Member and ask for clarification of the Workers' Party's position on the Minimum Wage level that it is advocating for.

According to the Workers' Party manifesto 2020, it calls for all working Singaporeans to receive a minimum take-home wage of $1,300 per month for full-time work and pro-rated for part-time work. Yet, in the September 2020 Debate on the President's Address, Member Assoc Prof Jamus Lim suggest that the appropriate Minimum Wage levels should be – well, he was suggesting that we should have a national commission to determine this. Thereafter, in October 2020, in the Ministerial Statement just last month, Member Assoc Prof Jamus Lim said that the Workers' Party is proposing a Minimum Wage of $1,300. Member Mr Pritam Singh also asked Member Mr Edward Chia, if he would be agreeable to pay the 32,000 workers $1,300 as a business employer.

Both these statements suggest a gross Minimum Wage of $1,300 per month. But Member Assoc Prof Jamus Lim's current query seem to suggest that the Workers' Party is now proposing for a minimum take-home pay of $1,300. That is a shift in where the line is.

If this is the case, then the gross wage inclusive of CPF contributions should be higher – between $1,600 and $1,700, thereabouts.

Given the statements put out recently and in line with ILO's definition of earnings to include contributions to social security and international conventions of Minimum Wage to be before tax deductions and social security contributions, could I ask the Member to clarify what is the Minimum Wage level that the Workers' Party is proposing. Because I think it is useful for us to all have this same level of benchmark now, so we can have meaningful debates in the future.

Assoc Prof Jamus Lim.

I thank the Senior Minister of State for the opportunity to clarify. If I may just quickly expand on the question. I appreciate that the ILO has a particular definition, but I am that he would also appreciate that for a worker who works full-time in Singapore, they will have a notion of how much their labour effort is worth every month.

Importantly, to the average Singaporean, what they care about is not necessarily limited to just how much they receive in terms of CPF payments. Because, of course, many Singaporeans justifiably think that the CPF payments are what ultimately is what is owed them after all they have saved for that for that amount.

If I may just step quickly into this Minimum Wage clarification. I should note that the premise of my question had nothing to do with the Minimum Wage per se, the question did not specify anything about Minimum Wage, it was about the idea of $1,300. In part, the reason why we raised $1,300 was because that was the notion of how much a reasonable basket of goods and services for adequate living in Singapore would entail. So, that was in very much, in fact the reason why I had raised this question about $1,300.

Mr Speaker, I think the Member is evading the question because I have shown that in the manifesto, it was $1,300 mentioned. In the last few debates too, the same figure was mentioned but in different definitions. So, I think the root of the issue now is the Workers' Party changed its definition for its Minimum Wage line.

Let me be clear. I do not think I was evading the question because I think the Senior Minister of State Zaqy Mohamad imputed an inference of the $1,300 take-home pay was what the question was asking. I think that the Workers' Party's position has been consistent and that it was about $1,300 in terms of full-time work.

But this particular question was about take-home pay, in part, because it is about what it means for survival in the case of Singapore. That is why I do not think that I am actually evading the question because I think that an inference of what I was asking in the question was actually attributed to be, whereas I did not make them.

Mr Speaker, I was just checking with the Member again because I just referred to his quote before. There was a $1,300 gross wage and now he is saying $1,300 take-home. I appreciate his questions for this Parliamentary Question and I have given the answer as to why you do not separate your CPF, for example, from your salary. Because your CPF clearly provides for amounts of money that you pay for your mortgage and pay for your homes. Many of our Workfare recipients, many of our low-income workers own their own homes as a result of the CPF.

To some extent, you have got Government subsidies but you also have CPF flow-through that enables many of our low-income workers to own homes. So, that is income too and that is also a recognition by the employer for the ability for workers to earn and that is why we talk about gross wages typically.

Generally, figures are what we pick up from statistics and this is how we do it. It is the benchmark, not just by ILO, but Minimum Wage benchmarks around the world too use a similar definition of using tax and social pensions and social security systems as part of the wage. If we keep to the convention, it is easier to make for good meaningful benchmarks and discussions and debates, in the future.

Could I just confirm once again that the Workers' Party's $1,300 Minimum Wage benchmark is gross income, so that we could settle this and come to an understanding.

Assoc Prof Jamus Lim.

Yes, that is a fair characterisation. [Please refer to Official Report, 3 November 2020, Vol 95, Issue No 12, "Clarification by Member".]

Okay, thank you very much.

Ms Carrie Tan.

Thank you, Speaker. I have a question for Senior Minister of State Zaqy. The question pertains to the age criterion of 35 years old for eligibility for Workfare Income Supplement or WIS. I understand that this policy's aim is mostly to supplement the income of ageing workers who have a lower chance of increasing their salaries due to their age. Also, the Senior Minister of State Zaqy mentioned about the focus on helping breadwinners of families. I would like to ask if it is possible that we can revise or remove the 35-year-old age criterion if the individual is a sole breadwinner in the family, as I have seen many single parents in the community who struggle to bring up their children and they are below 35 years old, and would greatly benefit from this income supplement.

The second question is, Senior Minister of State Zaqy mentioned that the amount WIS that an individual gets within a year, ranges from $1,000-plus to a maximum of about $3,600. Even at the maximum, it translates to about $300 increment on a monthly basis. I would like to ask if it would be possible to consider increasing the quantum of WIS payouts so that instead of a family having to go to multiple and various agencies to receive different kinds of social security benefits, they can get this increased ability in terms of financial resources very directly from WIS, so that they do not have to go through the hassle and the quite undignifying experience of going to multiple aid agencies, which also would translate to more efficiencies from a whole-of-Government perspective.

Mr Speaker, I thank the Member for her questions. Since WIS was first introduced, we have made significant adjustments to the payout quantums across all age bands. With the WIS Enhancement recently done – just made in January this year – the maximum WIS payout would be, for a 45-year-old, for example, about $2,500. This is more than double the payout of such workers in 2007 when we first introduced WIS. From the example here, it does show that we revise and take into account inflation and consider how we can better make Workfare more meaningful for our workers.

I can understand the Member's question, in terms of whether we can lower the age criterion and make payouts to those below 35 years old. But really, the target of WIS and if you look at the profile of those receiving WIS as I had mentioned earlier, more than half are on the older side. This is because the younger workers have got the potential; they are more educated; they have more skills upgrading opportunities. Therefore, there is that potential which we want to help through. But of course, I do understand some are single parents, for example, and some have to take care of family and other issues and have other concerns and challenges in the home. This is where our whole-of-Government efforts come into play – whether it is ComCare for social support, Financial Assistance Schemes in school to help their kids through school too. These are ways in which we help them.

For worker support, this is where Workfare makes a difference especially for the older workers to beef up and pump up. I am glad the Member noted that the maximum amount that we had given before 2020 was about $3,000-plus. That translates to about 30% or one-third of an older worker's salary, which studies have shown, has motivated some of our seniors to go back to work or continue working because they get the extra boost from Workfare to supplement their incomes.

12 Ms Foo Mee Har asked the Minister for Manpower what will be the impact of wage cuts in the next 12 months given the recent announcement by the National Wages Council that employers can consider temporarily cutting workers' basic pay if necessary to stave off retrenchments.

Mr Speaker, the National Wages Council or NWC issued its Supplementary Guidelines on 16 October 2020, encouraging employers and employees to work closely together to minimise retrenchments. The NWC expects wage adjustments in the next 12 months to vary across sectors and firms. Not every employer will need to cut wages to save jobs. Some have seen no reduction in demand and thus have no reason to make wage cuts. Others have already adjusted wage levels or non-wage costs, in line with the Guidelines issued in March.

The NWC also expects that employers will deliberate carefully whether to proceed with a wage cut. A key principle is for management to take the lead in taking wage cuts and to accept steeper cuts than what they ask of their workers. Employers will also be mindful that unwarranted wage cuts will make them less attractive to their workers and they will risk losing talent.

The NWC has also clearly marked out a roadmap for the eventual wage restoration. Employers are to quickly restore wage cuts accepted in good faith by employees when business conditions allow them to do so. In addition, the Supplementary Guidelines recommend that for workers earning below $1,400, employers should, if necessary to avoid retrenchment, freeze wages rather than cut wages.

Mr Speaker, I thank the Minister for Manpower for her response. I appreciate that the companies are impacted in an uneven way during this COVID-19 pandemic. But the National Wages Council Guidelines for employers to implement temporary wage cuts to save jobs is actually too broad and left too much to the discretion of the businesses. There were a lot of concerns on the ground about the signalling effect of the Guidelines, which may result in more widespread pay cuts than necessary because there is this Guideline, and the potential abuse by some opportunistic firms. So, how do we ensure that companies implement wage cuts fairly and reasonably, and restore wages in tandem with business recovery in a timely manner?

I would like to encourage the Minister to consider putting in place a set of transparent indicators to guide wage adjustments, rather than leave it so broad and at the discretion of the businesses. For example, indicators for companies' efforts to reduce non-wage costs before wage adjustment, or company profitability, and market and economic indicators.

I have a second supplementary question to this. For lower wage workers who are impacted by the wage reduction, will the Government consider a Workfare special payment to cushion the pay cut in order to ensure that these families have a basic level of income to sustain their daily living?

Mr Speaker, I appreciate the Member's concerns that the NWC Guidelines could be too broad. At the same time, I think the NWC in its deliberations has also got to consider the flipside, which is that its Guidelines could be too prescriptive and too one-size-fits-all. So, I think between the two, both of which are equally difficult, they have to strike a balance.

To share with the Member, the NWC very carefully deliberated whether they should even go into, for example, sector-specific Guidelines. Meaning to prescribe a certain range of adjustments that could be applicable on a sectoral basis. And after intense deliberation, the NWC came to the conclusion that even sectoral Guidelines would be too one-size-fits-all. That is because within the same sectors, we have companies that have been impacted by the COVID-19 pandemic to different degrees. And so, the Guidelines on a sectoral basis could be too generous for some companies and too tight for some others.

I give you the example of the logistics sector. If the companies are, for example, serving the aviation and the aerospace or hospitality related industries, then, these logistics companies would be impacted to a larger degree. But if they are serving the e-commerce or some aspects of manufacturing, they could still be doing very well, for example, in healthcare and pharmaceutical.

The NWC ultimately decided that the most reasonable way of going about its Guidelines was to set out a certain set of principles. The principles that they clearly articulated were six: firstly, whichever company in whichever sector, should utilise the range of flexibility under the Flexible Wage System. The presence of the Flexible Wage System differs from company to company. Some companies have implemented the Annual Variable Component and on top of that, they also have the Monthly Variable Component. So, those are the components that should be used first. So, that is the first principle.

The second principle is that if an employer has not adopted a Flexible Wage System, then any adjustments that they make to wages should then constitute a new variable component in the employer's pay structure.

The third principle is for the management to take earlier and deeper wage cuts. I think this applies across the board and is well understood.

the fourth principle is that employers who already pay Annual Wage Supplement, should endeavour to continue to do so. That part is quite specific. The NWC was not vague about it at all.

The fifth principle is that in deciding on the reasonable level of wage cuts, employer should take into account a couple of factors. For example, the sector and the company's performance and outlook. It should take into account the level of Government support that it has already received or it is about to receive. It should take into account the cumulative effect of prior wage cuts and other cost-saving measures that have been implemented. It should take into account the impact on the employees' finances and also the employees continue to contribute full or longer working hours. In other words, this particular criterion already has quite a lot of dimensions.

The sixth principle that the NWC articulated is that these wage adjustments should be negotiated and agreed upon if there is a union in the company, and if there is no union, the employer should do so directly with the employees. In other words, to share information, to exchange an understanding of where the company is right now, in coming to an agreement to what the wage adjustments should be.

I think whilst I understand where the Member is coming from, if the NWC were to go beyond this, I suspect that we would say that it has become too prescriptive and not providing sufficient flexibility for different circumstances across firms and across sectors. So, it is a delicate balance and I know that it is not easy for them to strike. Given that all the tripartite partners were involved in this discussion, they came out with a set of Guidelines that I think were reasonable and something that on the part of the union, they also felt that they could operate on this basis.

The Member's second question with regard to Workfare special payment, I appreciate her concern for our lower wage workers. It has been our intention wherever necessary to provide additional top-ups to help these workers tide over this period of difficulty. This year, there was a Workfare Special Payment made, both tranches have already been paid out. In the considerations for next year's Budget, I am very certain that the Ministries of Finance and Manpower will work very closely together to see how best to support our lower-wage workers.

13 Assoc Prof Jamus Jerome Lim asked the Deputy Prime Minister and Minister for Finance whether there are statistics pertaining to the ultimate beneficiaries of the Jobs Support Scheme by (i) income quintile (ii) race (iii) educational status and (iv) gender.

14 Mr Gerald Giam Yean Song asked the Deputy Prime Minister and Minister for Finance to date, what is (i) the total amount of funds disbursed and (ii) the total number of workers benefiting from the Jobs Support Scheme, with a breakdown of both numbers by industry sector.

Mr Speaker, the Jobs Support Scheme or JSS provides wage support to employers to help them retain their local employees during this period of economic uncertainty.

Minister, are you taking both questions together?

Sorry, Mr Speaker, I am taking Question Nos 13 and 14 together, with your permission.

Please proceed.

Thank you. We do not track the detailed breakdown of the profile of JSS beneficiaries as requested by Assoc Prof Lim. But as the JSS is a broad-based scheme to support all local employees across a wide range of businesses, the profile would mirror that of the local workforce in the broader economy.

In terms of industry breakdown, based on the JSS payouts that have been made so far, which cover wages for October 2019 to April 2020, the amount of JSS disbursed to Tier 1 sectors is about $2.2 billion, benefiting 223,000 employees. Tier 1 sectors comprise aviation, aerospace, tourism, hospitality, conventions and exhibitions, and built environment.

For Tier 2 sectors, which comprise arts and culture, marine and offshore, food services, land transport and retail sectors, the total JSS paid out is about $1.9 billion, benefiting 317,000 employees.

For the remaining sectors, the total JSS paid out is about $12.4 billion, benefiting 1.7 million employees.

Mr Gerald Giam. Keep it short.

Thank you, Mr Speaker. Not all sectors were hard-hit by the COVID-19 crisis. Based on MTI's Economics Survey of Singapore, there were some sectors that actually did grow. It means that these companies in these sectors would have received large JSS payouts despite not needing them or asking for them. On the other hand, many of the residents who have come to me to appeal for CSG and SIRS have received rejections because of their income or the annual value of their homes exceeding by a few hundreds or thousands of dollars.

The Government is so exacting about setting the criteria for individual citizens. Can it apply the same level of rigour to means testing companies before it gives out such large amounts of support?

Can we redirect some of these grants that are given to companies, to individuals now who are really in need of support? This especially so because many of these grants come from draws from our past reserves.

Mr Speaker, we need to understand the objectives of the different schemes. There are schemes that are provided to assist individuals, whether it is a COVID-19 Support Grant or others; and there are other schemes which are directed towards economic support. In this case, the JSS is really a broad-based wage support scheme. You may not feel the impact of it directly, but I assure you, it is extremely important to have such a scheme to ensure that companies retain their local workforce. Without such a broad-based wage support scheme, I am quite sure unemployment rates today would be far higher than they are. And we would be in a different position altogether.

Having said that, circumstances will change. We are talking about a period when we had circuit breaker, when a lot of companies were impacted and we had to put in place a broad-based support scheme. We have already started to differentiate the JSS by tiers and we will continue to review to see how the JSS can be more targeted and transit also now, to a Jobs Growth Incentive, to encourage companies to create new jobs.

So, these schemes will continue to be reviewed and updated.

Order. End of Question Time. Introduction of Government Bills. Minister for Home Affairs.

[Pursuant to Standing Order No 22(3), Written Answers to Question Nos 16-17, 26-27, 29, 32, 36-38, 41-42, 48-49, 51, 53-55, 57 and 59-63 on the Order Paper are reproduced in the Appendix. Question Nos 15, 18-25, 28, 30-31, 33-35, 39-40, 43-47, 50, 52, 56 and 58 have been postponed to the sitting of Parliament on 4 November 2020.]

[(proc text) "to control the handling of guns, gun accessories, explosives, explosive precursors, weapons and noxious substances, to repeal the Arms and Explosives Act (Chapter 13 of the 2003 Revised Edition), the Dangerous Fireworks Act (Chapter 72 of the 2014 Revised Edition) and the Explosive Substances Act (Chapter 100 of the 2014 Revised Edition), to make related amendments to the Arms Offences Act (Chapter 14 of the 2008 Revised Edition) and the Corrosive and Explosive Substances and Offensive Weapons Act (Chapter 65 of the 2013 Revised Edition) regarding offences and penalties, and to make consequential amendments to certain other Acts", (proc text)]

[(proc text) presented by the Minister of State for Home Affairs (Mr Desmond Tan) on behalf of the Minister for Home Affairs; 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 Revised Edition of the Laws Act (Chapter 275 of the 1995 Revised Edition) in support of a universal revision of Acts and to make related amendments to the Interpretation Act (Chapter 1 of the 2002 Revised Edition), to amend the Interpretation Act in relation to the delegation of Ministerial functions, to amend the Parliament (Privileges, Immunities and Powers) Act (Chapter 217 of the 2000 Revised Edition) in support of sittings of Parliament under continuity arrangements, and to repeal or amend certain other Acts", (proc text)]

[(proc text) presented by the Second Minister for Law (Mr Edwin Tong Chun Fai); 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)]

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

The Income Tax (Amendment) Bill 2020 covers 39 amendments. Of these, 25 arise from the Financial Year or FY 2020 Budgets and the Ministerial Statement by the Deputy Prime Minister and Minister for Finance, Mr Heng Swee Keat, on 17 August 2020. Another 14 amendments arise from the periodic review to refine or clarify Singapore's income tax regime.

We have sought views from the public on the draft Bill earlier this year. MOF has evaluated the feedback received and incorporated them where they are relevant to the Bill. We thank the contributors for their inputs.

Let me start with the key amendments that give effect to the announcements made at the FY2020 Budgets and the Ministerial Statement earlier this year.

First, to help companies with cash flow, a Corporate Income Tax Rebate of 25% of tax payable, capped at $15,000 per company, is granted for Year of Assessment or YA 2020. Clause 56 of the Bill provides for this amendment.

Second, also to help businesses with cash flow, qualifying deductions for YA2020 may be carried back up to three immediate preceding YAs, instead of one immediate preceding YA. This allows businesses to get a refund of up to $17,000 of income tax paid for YA2017 to YA2019. Clauses 29, 34, 35, 36 and 39 of the Bill provide for this amendment.

Third, to continue encouraging our firms to internationalise, the Double Tax Deduction for Internationalisation scheme has been extended until 31 December 2025. The scope of the scheme has also been enhanced to cover more qualifying expenses. Clauses 17, 19 and 20 of the Bill provide for these amendments.

Fourth, to continue encouraging companies to consider mergers and acquisitions or M&A for growth and internationalisation, the M&A scheme has been extended to cover qualifying acquisitions made on or before 31 December 2025. Clause 41 of the Bill provides for this amendment.

Fifth, prescribed payouts received by individuals, businesses and employers under certain schemes announced this year, like the Self-Employed Person Income Relief Scheme, COVID-19 Support Grant and Jobs Support Scheme, will be exempt from income tax. This will allow citizens and business owners to benefit from the full amount of the support measures, without having to pay tax on them. Clauses 16, 22 and 60 of the Bill provide for these exemptions and amendments relating to these exemptions.

Next, as highlighted earlier, MOF regularly reviews and refines the income tax regime. So, let me now touch on several key amendments amongst those arising from this periodic review of the tax regime which are found in the Bill.

First, to further deter tax avoidance arrangements, we will introduce a surcharge equal to 50% of the amount of additional income tax payable as a result of the adjustments by the Comptroller of Income Tax to counteract tax avoidance arrangements.

Currently, the tax avoidance rules only allow the Comptroller's adjustments to restore taxpayers to their initial tax position, as if the tax avoidance arrangement had not been entered into. This is insufficient to deter aggressive taxpayers from taking the risk of later adjustments made by the Comptroller to counteract the tax avoidance arrangement.

As a related amendment, we will also amend the Stamp Duties Act to introduce a surcharge equal to 50% of the amount of additional stamp duties payable as a result of adjustments made to counteract the tax avoidance arrangement.

Clauses 30, 31 and 63 of the Bill provide for these amendments, and a similar amendment is proposed for the Goods and Services Tax (Amendment) Bill which we will discuss later.

Second, to encourage taxpayers to enjoy the convenience of digital services, and to allow them to get refunds faster, MOF will be allowed to prescribe in subsidiary legislation that tax refunds by the Comptroller of Income Tax to companies are to be made via electronic means.

An assessment of the readiness of companies will be made in 2021, and exceptions will be provided where needed.

Clause 5 of the Bill provides for this amendment. And a similar amendment is also being proposed for the GST (Amendment) Bill 2020 for refunds of GST by the Comptroller of GST to GST-registered businesses.

Third, the ITA is amended to clarify the application of the section 37B adjustment factor.

The section 37B adjustment factor should be applied when offsetting any unabsorbed capital allowances, losses and donations in respect of income that is subject to tax at one rate, against income subject to tax at another rate, whether within the same YA or across a different YA.

For example, say there is a $1 million loss arising in respect of income taxed at 10%, the tax savings should be $100,000. Without applying the section 37B adjustment factor, this loss will give rise to $170,000 tax savings if it is offset against income taxed at 17%. But with the section 37B adjustment factor, we ensure that the tax savings from this loss remains at $100,000 regardless of the tax rate of the income it is eventually offset against.

I should clarify there is no change in policy intent or even in practice. But this amendment seeks to ensure that the section 37B adjustment factor applies in all scenarios, and it is consistent with existing practice. We have provided a validation clause to provide certainty that past applications of this adjustment factor were valid, and that unabsorbed capital allowances, losses and donations brought forward from prior years will continue to be preserved at their tax savings value in line with the policy intent.

Clauses 37, 38, 39, 42 and 66 of the Bill provide for these technical amendments. Mr Speaker, I beg to move.

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

Assoc Prof Jamus Lim.

Mr Speaker, with monetary policy severely limited by near-zero interest rates worldwide, many governments have appropriately turn to fiscal policy as the primary mechanism for support for their economies.

Singapore has been fortunate. We have been able to rely on our reserves to supplement traditional fiscal policy during this trying time. Of course, prudence dictates that we not only spend wisely but also carefully examine our revenue streams. This is our fiduciary responsibility to Singaporeans to be sound stewards of our nation's fiscal balances and reserve holdings, both today and tomorrow.

The Income Tax (Amendment) Bill of 2020 implements the tax changes that were previously discussed and debated at this Government's Budget Statement together with a host of supplementary Budgets. I wish to only offer a few brief additional remarks on the general spirit underlying some of the Bill's specificities.

The Bill seeks to further bolster the longstanding stance of minimising tax avoidance. A number of amendments, in particular, the two clauses, clauses 30 and 63 explicitly take on avoidance issues. With Government expenditures heightened as a result of pandemic related spending, assuring the integrity of the revenue side on the balance sheet has become even more imperative. That said, perhaps additional clarity as to estimates of how much leakage currently exists would be helpful.

Given the rising trend in self-employment and entrepreneurship, has avoidance become more pervasive over time? If so, are there mechanisms other than the more punitively oriented surcharges dealt within this Bill to better nip avoidance in the bud? Perhaps the Minister would be willing to share if tools in artificial intelligence designed to identify anomalous patterns in data on individual tax returns vis-a-vis bank account flows or credit card usage are being deployed to better identify such potential arrears?

The Bill also introduces a number of amendments that permit allowances on capital expenditure such as in clauses 15, 27 and 56. Such relief is certainly welcomed, especially by small and medium enterprises who are facing unprecedented challenges in keeping their businesses afloat at this time.

However, it is worth noting some seeming discrepancies in the applicable duration for capital taxes. Clause 40, for instance, indicates that deductions for qualified investments are to have occurred between July 2010 and March 2020. In contrast, allowances in clause 27 are for three years whereas write-offs are for two. Perhaps, most inexplicably, clause 15 affords profit and capital gain exemptions through till the end of 2027.

Mr Speaker, these discrepancies in the timing of corporate tax relief may well be rationalisable. But I would note that a delay in increasing the burden of the major tax faced by workers, which is the Goods and Services Tax, is only fully precluded for 2021, with Minister Heng stating that the GST hike will occur by 2025. This essentially institutionalises differential treatment of capital and labour in the revised tax code. Some justification for this distinction would be very much welcomed.

It is also useful to observe that the Bill offers extremely limited relief for individual employees. Clause 16, for instance, provides exemptions for expenditures on accommodation and other necessities for those who normally are residents outside of Singapore but who have, due to COVID-19, been forced to remain here for a year. But there are precious few other cuts applicable for employees.

To be fair, the Budget has stipulated a host of direct transfers that workers enjoy – either directly via cash grants or indirectly through the Jobs Support Scheme, for example. Academic research also suggests that fiscal policy tends to offer more bang for the buck when effected as spending rather than tax cuts. Moreover, a more universal income tax cut may excessively compromise fiscal balances and thereby run at cross-purposes to the targeted transfers effected by the various Budgets.

Still, given the prevalence of COVID-19-inspired income tax reductions in many countries worldwide, it seems fair to question whether there could be room for explicit income tax relief for specific groups within society. This will apply in particular to workers within Tier 1 and Tier 2 sectors as discussed previously, such as flight crew and hotel staff for the former, and musicians and restaurant personnel in the latter. Given the relatively small size and disproportionately difficult economic circumstances faced by employees in these industries, further tax relief may be especially welcomed.

Notwithstanding these additional points of feedback, I support the Bill.

Mr Louis Ng.

Sir, this Bill covers a broad range of issues, including the implementation of measures announced in the Unity Budget and COVID-19 crisis measures in the later Budgets.

I have spoken up previously on our COVID-19 support measures and I am supportive of the increased financial support that we are providing in these difficult times. In this speech, I will focus instead on another important issue – tax avoidance.

This Bill proposes significant changes to strengthen our tax avoidance regime. I have three points to make on these changes.

My first point is on the test for tax avoidance arrangements.

The Bill proposes to repeal and re-enact section 33, which allows the Comptroller to disregard tax avoidance arrangements. The test for tax avoidance is set out in the case of Comptroller of Income Tax versus AQQ, which sets out a scheme and purpose approach for interpreting section 33. CIT vs AQQ remains the landmark decision for the approach to applying section 33 and has been followed in subsequent cases. The IRAS e-Tax Guide on anti-avoidance provisions also states that the Comptroller adopts an approach based on the principles set out by the Court of Appeal in the CIT vs AQQ case.

Can the Minister clarify if the existing test for tax avoidance in CIT vs AQQ continues to apply to the re-enacted section 33?

My second point is on the principles for determining tax avoidance.

To determine whether there was tax avoidance, again, CIT vs AQQ requires that the Court look at whether the use of a specific provision in the ITA was within the contemplation of Parliament. However, the bulk of the guidance on what constitutes tax avoidance has been provided by the Comptroller in the IRAS e-Tax Guide or in case law rather than the Parliament's clarification on whether certain uses of the ITA provisions constitute tax avoidance.

Can the Minister clarify if the arrangements listed in the IRAS e-Tax Guide should be understood as arrangements that the Parliament considers as tax avoidance?

My third point is on the comptroller's discretion in pursuing tax avoidance arrangements.

Under the current Act, the Comptroller may disregard tax avoidance arrangements. The new section 33(2) proposed by the Bill replaces "may" with "must". In response to public feedback that the Comptroller should be allowed to retain discretion on whether to take action against tax avoidance arrangements, the Ministry stated that the amendment is consistent with the strong stance taken against tax avoidance in Singapore.

While I agree with the strong approach against tax avoidance, the new section 33A(7) also provides that the Minister may "for good cause, remit wholly or in part any surcharge or interest payable under this section". The surcharge here refers to the 50% surcharge that must be paid if a tax avoidance arrangement is found on top of any penalty. The ability of the Comptroller to remit the surcharge or interest appears to be slightly inconsistent with the strong stance we have taken against tax avoidance. Can the Minister clarify under what circumstances the surcharge or interest may be remitted? What constitutes "good cause"?

Sir, notwithstanding these clarifications, I stand in support of the Bill.

Minister Lawrence Wong.

Mr Speaker, I thank both Assoc Prof Jamus Lim and Mr Louis Ng for their comments and also for their support of the Bill.

Assoc Prof Lim highlighted the different durations in the schemes for the various capital allowances and profits, and I think he also compared it with the time frame for GST.

Mr Speaker, I would like to put it to the Members that there is really no basis for making such comparisons. Every scheme has to be considered on its own merit – the objective of the scheme, the time frame and then the continuous review of the scheme to ensure that it is relevant and serves its objective. That applies for each individual revenue scheme, it applies for each individual tax item and it also applies for our overall revenue base. We have to ensure that at the overall level, we have a revenue position that is sustainable in order to meet expenditures on an on-going basis, and that is what we will continue to do.

On Assoc Prof Lim's comment about tax avoidance, it is an area that we continuously look at – whether or not the leakage exists and has it become more pervasive, it is hard to quantify this but we do know that tax avoidance arrangements are becoming increasingly creative and complicated. That is why IRAS indeed uses a range of analytical tools to try and detect such cases. But we also need to future-proof our anti-avoidance rules to ensure that taxpayers are sufficiently deterred from entering into such arrangements in the first place. Hence, the amendments that are being proposed here.

Let me also now address specific questions by Mr Louis Ng with respect to some of these tax avoidance arrangements.

First, Mr Ng asked if the existing test for ascertaining tax avoidance in the landmark CIT vs AQQ case will continue to apply. The short answer is yes. What constitutes a tax avoidance arrangement does not change under the re-enacted section 33. In other words, the principles set out in the CIT vs AQQ case will continue to apply and will assist the Comptroller of Income Tax in practice.

Second, Mr Ng asked if the examples of arrangements that are provided in IRAS' e-Tax Guide should be understood as arrangements that the Parliament should consider as tax avoidance arrangements.

I should clarify, Mr Speaker, that these tax avoidance arrangements provided in the e-Tax Guide are the Comptroller's guidance to taxpayers on what he considers to be examples of tax avoidance arrangements. These examples are, in part, distilled from cases to date and are not meant to be and cannot be conclusive or exhaustive. Whether an arrangement constitutes tax avoidance will still have to depend on the facts of the case concerned and then it will go back to the provisions in the Act as well as the provisions in section 33. A taxpayer who disagrees with the Comptroller's decision may appeal to the Income Tax Board of Review and thereafter, to the Courts.

Third, Mr Ng asked if the ability to remit the proposed surcharge or interest payable under this new section 33(A) is inconsistent with our stance against tax avoidance and the circumstances in which surcharge or interest may be remitted.

Indeed, the proposed surcharge and other amendments to section 33, which we are proposing in this Bill, underscore our continued strong stance against tax avoidance. But we do provide an avenue in the law for the Comptroller to remit the surcharge or interest on the surcharge. But I would stress that this remission would be rarely and judiciously exercised. We cannot anticipate what the scenarios will be but in the event that something were to happen that is meritorious, then indeed we will have a remission provision that can be exercised. So, whether or not the surcharge or interest on the surcharge will be remitted will depend on the facts of each case, and whether such a remission is sound.

Mr Speaker, let me conclude. I think Members would agree that tax avoidance arrangements are, as I highlighted earlier, becoming increasingly creative and complicated. We need to do more to ensure that our revenue base is protected. We need to future-proof our anti-avoidance rules to ensure that taxpayers are sufficiently deterred from entering into such arrangements in the first place. That is why we are putting in place the amendments in this Bill. Mr Speaker, 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. – [Mr Lawrence Wong]. (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)]

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

The Goods and Services Tax (Amendment) Bill 2020 covers seven sets of amendments. Two relate to the introduction of measures to enhance the Comptroller of GST’s powers to safeguard public monies and investigate tax offences. The other five arise from our periodic review of the GST regime to clarify technical rules and improve on administration.

MOF sought views from the public on the draft Bill earlier this year. We have evaluated the feedback received and incorporated them where they are relevant to the Bill. We thank the contributors for their inputs.

Let me start with the first two sets of amendments, which relate to the implementation of measures to safeguard public monies and investigate tax offences.

First, we introduce three measures to counter Missing Trader Fraud.

In other jurisdictions and in Singapore too, there have been multiple attempts to use Missing Trader Fraud to defraud the tax authorities. For example, in the European Union, Missing Trader Fraud has cost around 60 billion Euros annually. Disrupting the capacity of organised crime groups involved in Missing Trader Fraud is one of the EU’s priority crime areas.

How does Missing Trader Fraud work? Basically, all GST-registered businesses are required to charge GST when they sell goods or services. This is known as output GST. These businesses are supposed to pay the output GST to IRAS.

GST-registered businesses who incur GST on their purchases of goods and services may claim a refund of this GST from IRAS. This is known as input GST claim.

Missing Trader Fraud is a fraud scheme used by syndicates, where a party who has collected output GST and is supposed to pay it to IRAS absconds. This party is, therefore, known as the Missing Trader.

Meanwhile, parties downstream of the chain continue to make input GST claims to IRAS, on purchases that they had made.

Syndicates make the detection of Missing Trader Fraud difficult, by interposing many businesses along the chain to deter IRAS from tracing back to the Missing Trader.

Currently, businesses which IRAS have found to be involved in Missing Trader Fraud will have their input GST claims denied, as they have not fulfilled the conditions for claiming input GST. The purchases that such businesses made and are seeking input GST claims on were not genuine business transactions.

Beyond this, it is also important that we stop Missing Trader Fraud from being attempted across the value chain in the first instance. It is critical that all GST-registered businesses undertake adequate and appropriate due diligence checks, as well as precautions, to avoid being in a fraudulent arrangement. Doing so is also in the interest of all businesses, as part of good corporate governance. Bona fide businesses generally already conduct due diligence checks on their transactions.

The first set of amendments will allow us to put in place three measures to deter Missing Trader Fraud.

The first measure allows the Comptroller of GST to deny a GST-registered business’ input GST claim, if the business knew or should have known that his purchase was part of a fraudulent arrangement.

The burden of proving that the business knew or should have known of the fraudulent arrangement lies on the Comptroller, with the standard of proof being the balance of probabilities.

And I should note that this measure is similar to the approach taken in the United Kingdom and the EU to safeguard tax revenue.

The second measure introduces a surcharge of 10% to be applied on the amount of input GST denied for a GST-registered business which should have known that its purchase was part of a fraudulent arrangement. Again, this surcharge serves as a deterrent effect and we will review the surcharge quantum periodically. Other jurisdictions do likewise with a surcharge to serve as a deterrence.

The third measure allows the Comptroller to impose conditions on a business which is required to register for GST. It also allows the Comptroller to deny a GST registration, or cancel GST registration if any of the conditions imposed is breached.

The three measures under the first amendment can be found in clauses 4, 6, 7, 10 to 13, 20 and 22 of the Bill.

The second amendment enhances IRAS’s powers to seize goods for investigation of tax offences.

This amendment empowers specially authorised IRAS officers to seize or prohibit the disposal of or dealing in, any goods suspected or intended to be used to commit an offence under the GST Act. The seizure powers also include goods which may aid in the investigation or prosecution of such an offence. This prevents syndicates from using the goods to perpetuate fraud, and it is an important measure in disrupting the operations of fraud schemes.

Clauses 2, 5, 13, 14 to 17 and 25 in the Bill provide for this change.

Beyond these two sets of amendments, MOF regularly reviews the GST regime to clarify technical rules and to improve GST administration. Let me now touch on the remaining five amendments in the Bill arising from this periodic review.

The first two amendments arising from this periodic review relate to enhancing our GST rules to counteract tax avoidance arrangements.

Under the first amendment, we will remove the discretion for the Comptroller of GST to disregard or vary arrangements that are carried out with tax avoidance as one of their main purposes, and not for bona fide commercial reasons. This seeks to maintain a certain level of consistency across the Comptroller's treatment of GST tax avoidance arrangements.

The amendment also expands the tax avoidance rules to include GST avoidance arrangements that result in an earlier entitlement to input tax claims or to unjustified bad debt relief claims.

Under the amendment, tax adjustments by the Comptroller to counteract tax avoidance arrangements must be made within five years from the end of the relevant GST accounting period. The taxpayer will also be required to pay the additional GST arising from the Comptroller’s tax adjustments within one month.

These changes to our GST rules to counteract tax avoidance arrangements are found in clauses 8 and 12 of the Bill.

The second amendment further deters tax avoidance arrangements, by introducing a surcharge equal to 50% of the amount of additional GST payable as a result of the adjustments made by the Comptroller to counteract tax avoidance arrangements. That is similar to what we had just discussed and passed earlier in the Income Tax (Amendment) Bill.

Currently, there is no such surcharge – instead, the Comptroller’s adjustments under the anti-avoidance rules only restore taxpayers to their initial tax position, as if the arrangement had not been entered into. This is insufficient to deter aggressive taxpayers from taking the risk of later adjustments made by the Comptroller to counteract the tax avoidance arrangement.

Clauses 9 and 12 in the Bill provides for these changes.

The third amendment arising from our periodic review seeks to provide certainty to taxpayers, by clarifying the treatment of claims relating to overpaid or erroneously paid GST.

For instance, the GST Act currently allows a person to claim a refund of money that has been overpaid or paid erroneously as GST, such as GST that was wrongly charged on non-taxable transactions.

The amendments clarify that such claims relating to overpaid or erroneously paid GST must be made to IRAS within five years from the end of the relevant GST accounting period or the date on which the GST was paid; and that such claims are also applicable to overpaid or erroneously paid GST on imported goods.

These changes are found in clause 19 in the Bill.

The fourth set of amendments seek to encourage taxpayers to benefit from the convenience of digital services and allow them to get refunds faster. MOF will be allowed to prescribe in subsidiary legislation that refunds of GST are to be made by the Comptroller of GST to GST-registered businesses via electronic means.

And just as I mentioned for the Income Tax (Amendment) Bill, in this case an assessment of the readiness of GST-registered businesses will be made next year, and exceptions will be provided where necessary.

Clause 18 of the Bill provides for this amendment.

Finally, the fifth amendment seeks to enable IRAS to effectively carry out its official duties in administering public schemes, such as the Jobs Support Scheme. The amendment allows the Comptroller of GST to disclose information to the CEO of IRAS, or officers authorised by the CEO of IRAS for that purpose and allow these officers to access any records or documents where necessary for the purpose of these duties. This amendment is found in clauses 3, 21 and 24 in the Bill. A similar amendment was proposed for the Income Tax (Amendment) Bill just now. Mr Speaker, I beg to move.

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

Mr Speaker: Mr Louis Chua.

Mr Speaker, it has been said that in this world, nothing can be said to be certain except for death and taxes and of all the forms of taxation in the market, the Goods and Services Tax being a broad-based consumption tax is perhaps one that is most inescapable to the everyday person.

In the context of Singapore, the GST is now one of the largest contributors to our operating revenues at $11.2 billion in FY 2019, behind corporate income tax at $16.8 billion and personal income tax at $12.2 billion respectively. While GST revenues were initially estimated at $11.27 in FY 2020, this has since been revised to $9.69 billion or a 14% reduction given the impact of the current economic slowdown.

Particularly against this backdrop, I agree in principle that strengthening measures to enhance the Comptroller of GST's powers to safeguard public monies and minimise the loss of public revenues is of utmost importance. The introduction of measures to counter Missing Trader Fraud and counteract tax avoidance arrangement in the GST (Amendment) Bill is thus timely.

In the EU, it is estimated that the losses from VAT fraud amounts to 60 billion Euros annually, as Second Minister Lawrence Wong has mentioned in his speech.

To this end, I would like to ask what is the Ministry's assessment of the estimated annual losses in Singapore due to Missing Trader Fraud. In addition, I am also concerned about the potential impact of the amendments to SMEs who are already facing resource constraints.

Section 20, subsection (2)(d) to (f) specify the conditions to reach a taxable person should have known that the supply made to the taxable person was part of an arrangement to cause loss of public revenues. These include whether the circumstances are such that there was a reasonable risk of the supply being part of the fraudulent arrangement and, hence, whether or not taxable person took reasonable steps to ascertain these.

However, even if the taxable person had taken reasonable steps and arrived at the wrong conclusion, it does not spare the taxable person from being taken that he should have known that the arrangement was fraudulent. This would this be potentially onerous on companies, especially SMEs who may not have the same capabilities to conduct extensive due diligence, as compared to larger companies with greater economies of scale.

Codification of what the reasonable person or reasonable steps mean would thus be critical for SMEs to not fall foul of new requirements.

Yet while we are looking to address the loss of public revenues via Missing Trader Fraud with this amendment, I would also like to take the opportunity to ask the Ministry what has been the progress of the Government's study on an e-commerce tax?

In Budget 2018, I note the Deputy Prime Minister and Finance Minister Heng Swee Keat's announcement that the Government will introduce GST on imported services with effect from 1 January 2020 or what we commonly call a “Netflix tax”. This is to make sure that our tax system remains fair and resilient in the digital economy.

For the import of goods, I noted Minister Heng Swee Keat then remarks and, I quote, "For the import of goods, there are international discussions on how GST can apply. We will review this before deciding on the measure to take."

The OECD has since endorsed new rules and frameworks for the collection of taxes on online sale of goods in March 2019. Meanwhile, COVID-19 has resulted in the dual impact to the retail sector in Singapore: first, an acceleration in the already rapid growth of the e-commerce market where online sales represented 10.9% of the latest retail sales value in August, having reached a high of 24.5% in May this year; secondly, the continued struggle of bricks-and-mortar retailers amid an uneven playing field.

As we look to support SME retailers with the Rental Relief Framework while providing support to employment via the JSS, it is perhaps now timely to look into addressing a growing source of tax leakage due to overseas online retailers and correct the key imbalance faced by tax-paying retailers in Singapore. More broadly, the liquidation of Robinson's after more than 162 years of operation here in Singapore is perhaps a grim reminder of the state of the retail landscape in Singapore today and how more needs to be done to address the various costs of doing business.

Mr Speaker, to conclude, I support the Bill and believe we are rightly concerned about the loss of public revenues as a result of missing trader fraud and tax avoidance arrangements. But the changing economic and retail landscape is perhaps a timely reminder of our need to continue addressing other forms of GST leakage and exploring other forms of revenue sources before looking to an eventual GST hike to raise tax revenues.

Sir, this Bill will strengthen safeguards of public monies and Singapore’s national interests.

It is more crucial now than ever in the existing financial climate to ensure that tax revenue is protected from fraud or loopholes. In doing so, this Bill draws lessons and references from similar provisions in other jurisdictions, such as the UK and Australia.

I support this Bill, which will improve GST administration and enhance the Comptroller’s powers to safeguard public monies, investigate tax offences and counter GST fraud. That said, I have four points of clarification on this Bill.

First, I would like to clarify how we are supporting SMEs’ compliance with due diligence requirements. The amendments to section 20 require businesses to undertake due diligence checks to avoid being involved in a fraud that they “should have known”. I understand the need for businesses to step up and take reasonable steps against fraud. However, big businesses and small businesses have different resources and capacity to conduct checks. What is a reasonable step for a big business and a small business may not be the same. Can Minister clarify how it will ensure that such requirements do not constitute an onerous burden to our SMEs? I am aware that the Minister plans to provide guidance for businesses on what constitutes “reasonable steps” in section 20. Beyond that, can the Ministry share whether it will offer training and industry-specific resources to ensure small businesses can still effectively conduct their due diligence checks?

My second point of clarification is on the Comptroller’s review process when investigating fraudulent arrangements. A company involved in fraudulent arrangements could face the severe penalty of deregistration. Can the Minister clarify the key considerations the Comptroller will take into account when evaluating a company’s involvement in fraud? For example, in the UK, adequate and timely checks by the company to ensure the integrity of its supply chain will be viewed favourably.

Providing these key considerations will be useful in guiding honest businesses in their due diligence checks so as to mitigate risks of an unwitting involvement in fraud. Because the level of checks expected for business sectors that are commercially risky or vulnerable to fraud and other criminality is higher, can I propose that the Minister identifies these sectors so businesses know to step up their due diligence checks and also share a separate set of key considerations businesses in these sectors can align to?

Given that we also expect more intensive checks for industries more susceptible to fraud and criminal activities, can the Minister identify such industries and share additional guidelines specific to these industries? After all, if we are going to ask more of certain businesses, it will help if we can also provide more support for their compliance. Can I also request the Minister to then share and incorporate these guidelines in the IRAS e-Tax Guide so businesses are able to access this information easily?

My third point of clarification is on the documentation businesses are expected to maintain as part of their due diligence checks. Can the Minister clarify in regulations or codes the methods and level of detail of documentation businesses are expected to maintain to be deemed to have taken “reasonable steps to ascertain whether the supply was part of a fraudulent arrangement”?

Can the Minister also clarify for how long businesses are expected to retain these documentations, given that the timeframe for the Comptroller to determine if a supply is part of a Missing Trader Fraud is open-ended? We want to avoid the situation where honest businesses do their due diligence checks but cannot back it up because they discarded or deleted supporting documents after a period of time. We also want to avoid the situation where fraudulent businesses can realistically claim to have discarded supporting documents even when no such checks were done.

My final point is a proposal for an anonymous reporting channel for whistleblowers. The Association of Certified Fraud Examiners 2018 report revealed that tips are consistently and, by far, the most common detection method for fraud. Fifty percent of the cases are detected through tips. Businesses or individuals may, in the course of their due diligence checks, come across potentially fraudulent suppliers or entities. We must make sure businesses or individuals feel safe coming forward.

Currently, it is unclear the parties who will be privy to the tip beyond the generic email provided at ifd@iras.gov.sg on IRAS' “Report Tax Evasion” website. This should be made clear to whistleblowers. And if these parties are the very target of the tip, there should be an alternate reporting channel whistleblowers can turn to. Can the Minister clarify the parties that are privy to the tips sent to the IRAS email address mentioned and whether there are alternate reporting channels for whistleblowers to report suspicious or fraudulent arrangements that are potentially related to these very officers? Can Minister confirm that this information will be reflected on IRAS’ “Report Tax Evasion” website so whistleblowers are aware of their options?

Sir, notwithstanding these clarifications, I stand in support of this Bill.

Minister Wong.

Mr Speaker, let me thank Mr Louis Chua and Mr Louis Ng who have spoken in support of the Bill and the need to safeguard our GST base. Let me respond to some of their comments and suggestions.

Mr Louis Chua asked about the extent of missing trader fraud in Singapore. As at 31 December 2019, more than 300 GST-registered businesses audited have been suspected to be involved in missing trader fraud in Singapore. The total GST involved is about $450 million. Now, of these 300 GST-registered businesses, IRAS has completed its audit and investigation for about 70 businesses and the GST involved amongst these businesses is about $90 million in GST. So, those have been completed. The remaining businesses are still under investigation. So, the GST at risk of loss for this category is the remaining, that is, $450 million minus $90 million, so, it is $360 million. That is where we stand today. It is not at the same scale as the EU, but we see the trends internationally. We are concerned and that is why we are putting in place these measures and I am very happy that Mr Louis Chua also supports them.

Second, Mr Louis Chua also mentioned the possibility of doing an e-commerce tax and I am very happy that he supports this, too, because we will certainly look for ways to raise more revenues. We have already moved on GST for imported services and we will be looking at the GST for imported goods, too. So, that is something on our minds. This is something that is quite complex because the way to go about doing this, obviously, is to tax at source, right? When you buy something from an e-commerce platform, impose the GST at source and then you can ensure that GST applies even for e-commerce transactions. But if countries do not all impose such a tax, it is quite easy to circumvent. You can imagine shipments being sent to different countries in order to bypass. So, there are some complexities around this but we are studying this very carefully with a view towards putting in place a proper regime to ensure that the e-commerce transactions are also subject to GST. We will be updating the House in due course when we are ready with this.

Next, Mr Louis Chua and Mr Louis Ng both highlighted concerns about the compliance burden that would be imposed on SMEs and we are equally concerned. So, let me share some of the ways in which we are intending to deal with this.

With regard to, for example, guidance to SMEs on the due diligence checks that they have to make, how can we provide more clarity? Today, IRAS already provides and makes available such guidance, and it will continue to educate taxpayers on the kinds of due diligence checks that are necessary. Besides providing ready information on its website and through the media, IRAS has been engaging industry associations and tax intermediaries to raise industry awareness. Newly GST-registered businesses can also access e-learning and other resources on IRAS' website, so that all these will help them to understand and better comply with the GST obligations.

As is the case with previous legislative updates, IRAS will publish an e-tax guide soon after the Bill comes into force and this will provide businesses with the latest guidance. The e-tax guide will highlight examples of risk indicators that a business ought to take notice of in relation to a supply that might be part of a missing trader fraud arrangement. So, hopefully, SMEs will start to be more aware of what they should be looking out for and we will also provide some illustrations of the due diligence checks that businesses should take in response to the risk identified. And the Comptroller of GST will take into account all the facts and circumstances of each case, including the firm's circumstances as an SME, where relevant, in considering what is reasonable.

IRAS will also work with interested industry associations to conduct dedicated outreach sessions and businesses may contact IRAS if they require further information.

Mr Louis Ng sought clarification on how the Comptroller of GST will assess whether a GST-registered business knew or should have known that its purchase was part of a fraudulent arrangement. The Comptroller's assessment depends on the facts and circumstances of each case and will include taking into account all the relevant considerations, like whether due diligence and risk assessment checks were performed by the business, what were the results of these checks, to what extent were the checks appropriate, adequate and timely to address the risks identified and whether the taxable person took appropriate action in response to the results of these checks.

Under the proposed arrangement, the burden of proving that the GST-registered business knew or should have known of the fraudulent arrangement lies on the Comptroller, based on the balance of probabilities. And businesses that disagree with the Comptroller's decision may apply for review and revision of the decision under section 49 of the GST Act. And if businesses disagree with the Comptroller's review and revision of the decision, they then may appeal further to the GST Board of Review. And, again, if they are dissatisfied with the decision of the Board, they can appeal to the High Court.

Mr Louis Ng asked for the level of detail and duration that GST-registered businesses must maintain the documents or the records of reasonable steps that they have taken to determine whether a supply made to them was part of a fraudulent arrangement. So, on record-keeping of documents, what constitutes reasonable steps?

As advised on IRAS' website, businesses today must already keep proper records and accounts of business transactions. This includes retaining the source documents, accounting records and schedules, bank statements and any other records of transactions connected with the business. Business should, generally, maintain records of the steps taken to ascertain whether the supply made to or by the business was likely to be a part of a fraudulent arrangement and this includes documents detailing the risks assessed, the due diligence checks that were performed and the actions and precautions taken in response to the results surfacing from these checks. This information should be made available upon request by IRAS to ensure there is proper accountability for decisions made. Again, IRAS will make all this information available in its e-tax guide.

On the duration of how long the record should be maintained, under the GST Act, GST-registered businesses are required to keep the records for a period of five years from the end of their prescribed accounting periods.

Finally, there was a suggestion from Mr Ng about an alternate anonymous channel for whistleblowers, particularly if they wish to report IRAS officers themselves who are involved in a fraudulent arrangement. As Mr Ng highlighted, IRAS' Investigation and Forensics Division maintains a mailbox that businesses or individuals may utilise to notify IRAS of any possible case of tax evasion or tax avoidance. This information including examples of signs of tax evasion and information that may be useful to IRAS is published on IRAS's website. IRAS takes every report of tax evasion seriously, and if the whistleblowing relates to an IRAS officer or a staff of IRAS' vendors, the whistleblower can write directly to the Director of IRAS' internal audit branch. We wish to assure Mr Ng that the whistleblower's identity and all information and documents provided would be kept confidential and subject to an independent evaluation within IRAS. Alternatively, if the whistleblower suspects that an IRAS officer is involved in a corrupt act, the whistleblower may lodge a complaint with the CPIB.

Mr Speaker, to conclude, the proposed amendments to counter Missing Trader Fraud are necessary to safeguard public monies. It is critical that all GST-registered businesses undertake adequate and appropriate due diligence checks as well as precautions to avoid being involved in a fraudulent arrangement. These are critical steps that we will need to safeguard and preserve our revenue base. Mr Speaker, 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. – [Mr Lawrence Wong]. (proc text)]

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

Mr Speaker, may I seek your consent and the general assent of Members present to move that the proceedings on the item under discussion be exempted from the provisions of Standing Order No 48(8) to remove the time limit in respect of Minister Edwin Tong's speech?

I give my consent. Does the Deputy Leader of the House have the general assent of the hon Members present to so move?

[(proc text) Hon Members indicated assent. (proc text)]

[(proc text) With the consent of Mr Speaker and the general assent of Members present, question put, and agreed to. (proc text)]

[(proc text) Resolved, that the proceedings on the item under discussion be exempted from the provisions of Standing Order 48(8) in respect of Minister Edwin Tong's speech. – [Mr Zaqy Mohamad.] (proc text)]

Second Minister for Law.

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

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

With your permission, Sir, I have asked the Clerks to place handouts on Members' seats, explaining the details of the new framework introduced in this Bill.

Mr Speaker, this Bill is also linked to the next Bill on our Order Paper, the Insolvency, Restructuring and Dissolution (Amendment) Bill, or IRDA Bill, for short. May I, Sir, propose, with your permission, that the substantive debate on both these Bills takes place now. Members will be welcome to raise questions or express their views on both Bills during the debate. We will still have the formal Second Reading of the IRDA Bill to ensure that procedural requirements are met.

Please proceed.

Thank you, Sir. Sir, I will first speak on the new Part 10 introduced by this Bill and subsequently on the IRDA Bill. Minister Desmond Lee will speak on the relief for the construction and property sectors, found in the new Parts 11 to 13 introduced by this Bill. Finally, Minister Lawrence Wong will speak on the amendments relating to the property tax rebate and rental relief.

Mr Speaker, over the past year, since the pandemic began, several major temporary measures have been passed by Parliament to provide relief for businesses and also to protect our economy and fundamentally, jobs. Today, new temporary measures have been tabled before this House. Before I take the House through the key features, allow me first to explain why there is a need for these further measures and the broad architecture of the proposed amendments as they are tabled in the Bill.

Sir, after almost a year, the COVID-19 pandemic continues to rage on around the world. The global toll stands today, at about 45 million infections and over 1.1 million deaths, across over 160 countries. 21 October – less than two weeks ago – saw the highest total infections reported in a single day across the world. A second wave of COVID-19 is surging across Europe. France, Germany and most recently, the UK, are now in lockdown. Infections in the US are trending toward a third peak, and just last week, saw a record for the highest number of cases in a single day.

COVID-19 is staggering in scale and unprecedented in the way, it has affected almost every aspect of our daily lives. The way we work, the way we go to school, the way we transact business and even the way we greet each other – we no longer shake hands!

When we pause to reflect and compare our lives and our daily routines now, compared to where it was eight to nine months ago, we see what a drastically different world we live in today.

We have managed to do quite well in terms of treating the sick and keeping the number of deaths low. However, as an international trade hub, we cannot escape the global economic disruption caused by COVID-19 restrictions and border restrictions around the world. And indeed, for Singapore, we are in our worst recession since Independence. Our GDP is forecast to shrink by 5% to 7% this year. MAS predicts that Singapore's recovery will be more protracted than in previous crises and uneven across different sectors.

In a corresponding manner, unprecedented Government relief has been provided, to help businesses weather the storm and also to protect jobs. Around S$100 billion has been committed in support measures to deal with COVID-19 or assist people in the face of the impact of COVID-19. This amounts to about 20% of our GDP.

Just last month, in Parliament, Deputy Prime Minister Heng observed that the relief measures have helped avert a 5.6% loss in real GDP this year and they would have helped save an average of 155,000 jobs each year, in 2020 and 2021. That shows the extent of the measures that the Government has so far introduced.

Measures were also enacted, to deal with the contractual aspect, as Members would know. Let me just briefly recap them. In April this year, my Ministry enacted a temporary legal circuit breaker. We called that "COVID 1". We did that practically on the eve of the circuit breaker in April this year. "COVID 1" provided for a moratorium on legal and enforcement actions, for prescribed contracts. Over 8,000 Notifications for Relief were filed and they were filed to invoke the moratorium from April this year.

"COVID 1" also raised the debt thresholds for bankruptcy and insolvency to help people avert those consequences as far as possible. Bankruptcy and insolvency applications have consequently dropped significantly, to half or less compared to the first quarter of 2020, since the measure was introduced. June saw the introduction of "COVID 2" to give SME tenants immediate rental relief.

The relief has worked as intended and in September I updated Parliament on the impact of these measures. They have been a crucial lifeline for many businesses. One beneficiary of the Act likened it to a parachute, stopping the free fall, helping affected businesses land safely – so still dropping, but with some measure of resistance. This has softened the impact of the pandemic on the economy as a whole and prevented a precipitous increase in defaults on contracts, insolvencies, litigation and consequently, loss of jobs.

However, we cannot allow or afford for these relief measures to continue, indefinitely. We will risk sustaining businesses that are no longer viable. It would trap, and lock away, precious economic capacity, such as workers or property and assets. This, in the longer term would be damaging for our economy.

Deputy Prime Minister Heng said as well in October, that for the economy to recover, support must evolve and it must go from resuscitate, to rejuvenate. That is the key principle behind why this Bill has been proposed. The existing Government support will eventually have to taper off.

The "COVID 1" moratorium should also not be prolonged. The moratorium holds enforcement actions at bay, as Members know, but it does not stop debts from being incurred as businesses continue and as they continue to perform on contracts entered into. As announced on 12 October, we have extended the moratorium for a short period of time. Save for construction and supply contracts, options and sale and purchase agreements with developers and event and tourism-related contracts, which will be extended for longer periods, the moratorium for the other types of contracts are extended only for a month and will expire on 19 November. The extension for these contracts was for one month, in anticipation of the present Bill being introduced at this sitting.

Sir, with Government measures tapering off, where are businesses today? Businesses have been feeling the impact of COVID-19 since February and in some cases, possibly before that. In April and May, the circuit breaker was implemented. This was necessary to break the chain of COVID-19 infections and transmissions and to flatten the curve. But this was an especially painful period for businesses. Many lost two months of revenue and the impact continues to be felt even some time after the end of circuit breaker.

Due to the impact on their cash-flow, many businesses started accumulating arrears. Through the Phase Two re-opening, the Government has been carefully monitoring the evolving situation, to see if further relief is needed. Members would know that there has been a modest recovery – uneven and modest. However, COVID-19 restrictions cannot be completely lifted as we move cautiously into Phase Three, as announced by the Multi-Ministry Task Force about two weeks ago. This would continue to significantly impact some businesses.

First, travel restrictions are still stringent. This affects roughly over 20,000 businesses in the tourism, hospitality, conventions, exhibitions sectors – in those sectors alone, 20,000. This will also affect the F&B and retail stores and transportation workers that rely on tourist spending.

Second, foot traffic remains reduced, especially in the CBD areas where many still continue to work from home.

Third, retail and F&B outlets must comply with mandatory safe management measures. This has reduced their operating capacities.

Fourth, some businesses are not even permitted to operate at all and this may continue for quite a while. Take for example many of the 1,300 nightlife establishments, which employ around 20,000 workers. Those have not been able to operate even now. Many businesses will be forced to operate in unfavourable conditions in the COVID scenario and in fact, including the immediate post-COVID period for an extended period of time.

In a survey by the Singapore Chinese Chamber of Commerce and Industry or SCCCI from mid-June to early August this year, they found that half of the respondents said that COVID-19 had a major impact on their business models. Respondents had experienced a substantial average decline in revenue compared to 2019, without a proportionate decline in business costs. Over 80% of them do not expect business to recover to pre-COVID-19 levels in the next year. And 58% indicated that they were worried that they will not be able to generate sufficient revenues to even cover their costs.

Nightlife businesses especially, are in a difficult situation. According to a poll by the Singapore Nightlife Business Association, over 90% of respondents said there was at least a 50% chance of them wholly shutting down, if they did not reopen soon. And close to 40% said they would definitely, permanently shut down

That is why the Government has rolled out specific, targeted support for the worst hit areas. For nightlife businesses, MTI will be providing an assistance package for them to transit out and pivot to new areas should they choose, and will be announcing more details soon.

For the tourism, aviation, arts and sports sectors, the relevant Ministries have, to-date, announced specific support packages for them as well, including grants to help with them with the immediate cash flow difficulties.

Sir, our broad objective in this Bill is this: as we move from resuscitate to rejuvenate, a key priority is to ensure that businesses can look ahead and focus on recovery. They should be reallocating resources to more productive uses, rather than being stuck in a prolonged, painful and unproductive struggle, when circumstances, business assumptions have clearly changed.

However, some businesses, particularly the smaller ones, face obstacles in doing so. And let me just share an example to illustrate the point with Members.

A tenant wrote to MinLaw that his tenant's lease was for a period ending in October 2021. The rent was approximately $9,000 per month, something that he entered into before COVID-19. Safe management barriers have been erected near his shops. As a result, footfall has dropped drastically. The tenant's earnings dropped to only $3,000 and even after the Phase Two reopening, the pick-up in footfall has been slow, and clearly, unlikely to return to pre-COVID levels. He clearly cannot continue at this rate until October 2021.

And I think this is a story which many of the Members in this House would find some resonance with. The tenant approached the landlord, hoping to negotiate a temporary reduction until the situation improves. If he could only get a rent reduction for a period of time, he could also free up some resources to transform his business or do what was needed to survive. However, in this particular case, the landlord refused to entertain discussions.

On the other hand, if the tenant chooses to terminate the contract before his lease ends next year, over a 12-month period, he will have to pay substantial damages for termination. And that is calculated on the unexpired portion of the lease period. He is therefore stuck in this position and continues to bleed. If nothing changes, it is likely that he will breach the tenancy. If the arrears or compensation for termination is not paid, parties could then end up litigation and the tenant might then end up insolvent.

Sir, this case is not unique and we receive feedback from many businesses asking for assistance in a similar fashion.

That said, we are at the same time also aware of many enlightened landlords. Many of them have proactively approached the tenants to offer relief or vary the terms of the tenancy. They have renegotiated them, on new terms to help the tenants at least tide over this period of time.

However, for the many businesses suffering from the lasting economic effects of COVID-19, it really is a simple question in some ways. Will their counterparties work with them to help them adapt to their business models, restructure the arrangements, possibly downscale or pivot to a different area? If they cannot get the counterparties to work with them and they are looking at meeting pre-COVID-19 obligations in a COVID-19 economy, then they are heading inevitably for at least a significantly curtailed cashflow, possibly insolvency, and very likely, litigation.

This latter scenario is not in the interest of parties nor indeed in the interest of the greater overall good of our economy. If these businesses close down, they will likely be under a mountain of debt. That is not good for the counterparty either because it is unlikely to be able to recover the full debt. Jobs will be lost, while businesses and creditors tussle over in insolvency or litigation proceedings in Court. The fallout is likely to be substantial. The number of SMEs who have experienced a significant revenue fall on a rough estimate is about five times what it was in 2019.

And we can expect the number of insolvency proceedings to substantially increase correspondingly.

Hence, Sir, we have a two-pronged solution. First, to ensure that these businesses do not get stuck in a limbo in a situation where they can neither find it feasible to continue in the present trajectory on the current cash flow and assumptions, nor to terminate and then bear the brunt of the financial impact of that termination.

So, that is the first prong.

The second is to have a situation where resources are instead quickly unlocked for more productive ventures in the new operating environment. That is the broad objective of these two Bills.

In this respect, Part 10 of the Bill puts in place a realignment framework or we call it the Re-Align Framework for parties to have new alignment. It will help businesses to realign the contractual obligations to the new business reality. Second, the IRDA Bill will put in place amendments to introduce a Simplified Insolvency Programme, SIP. This will make it easier for small businesses to restructure their debts, liquidate, and also distribute their assets in an orderly, effective and efficient manner. The two measures are separate but complementary, as Members will see. I will take the House first through the Re-Align Framework and subsequently the Simplified Insolvency Programme.

Sir, first, let me briefly explain the need for intervention. I wish to emphasise that this is not a step that has been taken lightly and we have very carefully considered both the implications as well as the scope of this framework.

The nub of the problem for the mall tenant that I took the Members through is that he has entered into a contract pre-COVID-19. The business environment and assumptions that he had then is very different today. Now, when all these assumptions are different, he is bound to a set of obligations that were designed at a very different time. And while business is not stagnant, no one could have predicted that the environment would have changed so dramatically, drastically and fundamentally in such a short period of time.

For the businesses that are not permitted to resume operations, which I have sketched out earlier, the situation would be even more dire.

Just to give one example of many, I will share an appeal we received from a nightclub owner. He had been prohibited from operating since March this year, as is the case for the nightlife industry as a whole. Its lease continues to run due to expire only in March 2021. Pivoting to another business model like F&B is possible, but will be difficult. The premises themselves have no kitchen and the nightclub's workers have returned to their home countries. Its manager cannot today enter Singapore to come back to work.

The owner is fearful of terminating the lease due to the termination penalties that I sketched out earlier, but with each passing month, the dilemma I think is clear to see.

For suppliers of goods and services, their costs may have skyrocketed and the price that they are contractually bound to pay for the goods and services no longer covers their cost.

Sir, in the free market and with freedom to contract, there will be risk and the risk will not be different from what I have outlined earlier; change in market conditions, higher prices, drop in supply – all of which would affect the ability to deliver services at the contracted price.

But the impact of COVID-19 has also been sudden, widespread and deep. And whilst some large businesses might be able to absorb the shocks like this, for many businesses, it will be unsustainable. Our first prong, the Re-Align Framework, therefore deals with contracts entered into when the world was a very different place. The problem, Sir, that needs to be addressed would be as follows.

In relation to businesses trying to meet obligations in a very different circumstances, the contracts in this scenario will need to be realigned. It will not happen on its own for a number of reasons.

First, counterparties may refuse to renegotiate the terms of the contracts. This is now a familiar story and I have outlined some examples. This also commonly arises with the smaller businesses, with less leverage and negotiating power. So, you take the examples that I have highlighted earlier. It is going to be very difficult for a small business – one of maybe several that the counterparty is dealing with, to go back and seek a renegotiation of terms.

Here, I think it would be useful to reiterate what Minister Shanmugam had said when this Act was first enacted in April; in these critical times, everyone should take a collective approach. This is not the time to be circling the wagons, taking all that a business can give until they go bust, in the name of exacting contractual rights.

Sir, second – a business who is unable to renegotiate a contract, may then want to terminate it. But they are often deterred by the risk of having to pay substantial damages for terminating the contracts early. Again, in the manner which I have outlined earlier.

Third, the existing recourse that may be available in such situations, may be out of reach and difficult for these struggling businesses to access. Depending on the facts of the case, some businesses may already have recourse to the doctrine of frustration in Singapore law to discharge their contracts. Under this doctrine, parties are discharged from further performance of their contractual obligations where it can be shown that there is an unforeseeable, supervening event that occurs after the contract was entered into. The event is not the fault of either party and it renders the performance of the obligations fundamentally different from what the parties had envisaged.

COVID-19 is clearly an unforeseeable event. However, as I am sure Members here will know, if there is a dispute, businesses will end up spending precious resources: time, effort, money in Court. The outcome could also be uncertain and maybe also uneven in the context of different businesses, depending on the facts of each case.

COVID-19 is unprecedented. So, it is also difficult to predict how the Courts may rule in one case to another.

For a business already bleeding, the prospect of going to Court to argue these points can be daunting and it is also unproductive for parties to spend the resources in this fashion. It is worth noting that these problems with relying on the law of frustration, were highlighted in an op-ed by former Justice VK Rajah and Dean of SMU Law School, Goh Yihan, published in May. In the op-ed, the authors recognised the need for new COVID-19 legislation to overcome these problems. They suggested borrowing aspects of contract law from civil law jurisdictions, which allow adjustment of contractual obligations where there is a supervening event.

What the above makes clear, Sir, is that if left to the market alone, the necessary realignment of contracts on the new paradigm, in many cases, will probably not happen. That is why we have considered intervening. My Ministry has received requests from businesses seeking fairly substantial and substantive interventions. For example, they have asked the Government to consider requiring the mandatory reduction in arrears. That means you go back to the arrears and you just forgive the arrears. Or second, just having a different way to calculate future rent.

We have studied these proposals carefully. What we think would work best is a more measured approach, which I will now go into.

The Re-Align Framework seeks to help small businesses substantially impacted by COVID-19 restrictions. These are businesses that have been faring badly, little leverage and so on. It provides a framework to renegotiate, failing which the contract may be terminated on a no-fault basis in a manner that gives a fair and just outcome.

In redesigning the Framework, I would like to outline to the House three key objectives that we have kept to, in designing this framework. The first is to sort out the imbalance to give parties the best chance to come together to renegotiate for themselves what is just and fair in their own context.

And we believe that contractual issues between two parties are best sorted out between the parties themselves as far as possible. They know their contract best. They know their operating assumptions and their cost positions and they know what innovations could be made to their specific contract, to help them get over this period.

The Framework therefore seeks to solve this issue by giving the affected business the right to demand renegotiation from the counterparty, as a start. And second, unless agreement is reached, an eligible business will have the right to terminate the contract on a no-fault basis without having to pay substantial damages in penalties for compensation in the manner that I had outlined earlier – for example, in relation to the unexpired balance period of the tenancy.

The first aspect is adapted from concepts found in some major civil law countries. In these civil law jurisdictions, the right of renegotiation is built into the law. For example, in France, in Germany and in Japan, parties significantly affected by an intervening event can invoke the right to renegotiate the contract. And if it is not successful, they can then apply to court to vary the contract.

The second aspect, the "no fault" termination is drawn from principles of frustration. It extinguishes all prospective obligations but the parties remain liable for all accrued obligations. These consequences in respect of the accrued obligations also apply as a default in this Framework.

This right to terminate will shift the calculus for the party on the other side – to give it a nudge, to see if a re-negotiated contract would be a better alternative to either termination or litigation.

Often, termination is not the answer for both parties. For a tenant, for example, terminating the lease will come with costs, disruption, the impact of relocation and the risk of losing customers. For the landlord, insisting on strict contract rights in some cases might mean a tenant in serious unrecoverable debt, or a vacant unit or, very often, both. It may be better to temporarily accept slightly reduced rent or find some other mutually workable formula to help the tenant survive and stay on in the tenancy rather than to leave the premises vacant and to incur the cost of finding a new tenant.

There are a myriad ways to work things out, including shifting to a Gross Turnover or GTO model, for example, for rent or taking a lower rent in the initial period and then extending the term of the lease with a higher rent built in at the tail end – a number of different options that parties can look into. But ultimately, both sides must work out an arrangement that works well for them.

The second objective is to keep this relief narrow and limited so as not to unduly trample upon the sanctity of contracts. That is a key and fundamental principle that undergirds our legal system. In line with the Government's policy of respecting the sanctity of contracts, this Framework will therefore be limited in scope in terms of who it helps and what it will do. I will elaborate on that in a moment.

The third objective is to ensure that the Framework is accessible, efficient and it has to be relatively simple to invoke and to use. We want to minimise uncertainty and to help parties realign their contracts efficiently, fairly and, also importantly, quickly. The sooner we are able to do this, the more we are able to deal with uncertainty in the market.

The Framework will therefore set out clearly who it applies to, what contracts it covers and what contracts it does not cover, what the default consequences of termination would be if parties were unable to reach an agreement after re-negotiation. So, it sets out a framework and a fairly clear formula as to what would be considered, should termination take place.

Part 4 of the Second Schedule of the Bill spells out the default consequences that will apply to a contract covered by this Framework.

The Framework is designed to encourage and give the tools to the parties to work out a negotiated resolution for termination on their own as much as possible. That is the fourth objective – for parties to work together as far as possible.

I will now go into the key features of the Framework to explain to Members how this is designed to work.

First, let me focus on whom this Framework would help.

The first limb of Part 3 of the Second Schedule of the Bill states that the first criteria will be by revenue. As I have mentioned earlier, our primary objective is to help the smaller and the micro businesses – give them a bit of a leverage to find some basis to re-negotiate. They have less negotiating power and are most in need of this assistance. We aim to extend help to the spectrum of businesses that fall within the criteria.

We will set a revenue threshold which will exclude the larger enterprises that ought to have the sophistication and wherewithal to engage in negotiations with their own counterparties even without the assistance of this Framework. We also intend to cover individuals who enter into contracts for a business or trade purposes, such as freelancers or private hire car drivers and also non-profit organisations.

Second, how do we identify those businesses that have been impacted by COVID-19?

Sir, as Members know, even in a non-recession year, a proportion of our businesses will suffer a fall in business revenue. That is just the vicissitudes of business. This Framework is not intended to help those businesses who might see a cyclical drop or who maybe, in a scenario where the economy has been doing well, they see a drop in their revenue. That is not the target audience of this Bill.

It will be, however, onerous and impractical to expect a struggling business – especially the very small ones, including the micro businesses – to have to go through a detailed analysis of its own business performance and pull out the factors that would justify its qualification for this relief. The effects of COVID-19 have been wide ranging, affecting businesses in many direct ways but also in many indirect ways, including disrupting supply chains, weakening consumer demand. Some may experience one or more of these and it may be uneven as well.

It will not be feasible to show all the various factors that have led to the revenue fall and further, to prove that these are caused by COVID-19. Even if it were possible, it would be difficult and it would be a protracted, long-drawn forensic investigation into each measure and then we get into an argument over whether this factor has got how much proportion and what weightage and whether there has been mitigation.

By the time that process is complete, it will likely be that the business will be in deeper trouble and might well be beyond saving at that juncture.

Indeed, Sir, it should not be difficult to identify a business that has been badly affected by COVID-19 and that is what we have done – to set an objective financial threshold. So, in the second limb of Part 3 of the Second Schedule of the Bill, eligibility will be determined by the fall in revenue it has suffered over a prescribed period compared to a relevant comparable period prior to the pandemic. The fall in revenue criteria will be suitably substantial and pegged to a level such that a business that needs it will clearly have been significantly and adversely affected by the pandemic.

This, in our view, will strike an appropriate balance between sufficiently showing that there has been substantial impact due to COVID-19 and helping businesses that need an efficient and accessible remedy. We have been and we remain in consultation with the industry on the precise criteria and we will announce the criteria once it is finalised. This will be set out in subsidiary legislation.

Next, which contracts would this apply to?

First, the contract that can benefit from this Framework must meet the following criteria. First, it must be governed by Singapore law and at least one of the parties must have a place of business in Singapore. Second, it must have been entered into before 25 March 2020.

The reason for this date is consistent with, and also explained when, we passed "COVID 1". It is the day immediately after MOH significantly stepped up COVID-19 related restrictions and if parties entered into contracts on or after 25 March with knowledge of the changed circumstances, then these circumstances are no longer unforeseeable, which is really the raison d'etre behind these amendments.

Next, the Framework will only cover the prescribed contracts. These are commercial contracts that tend to have substantial prospective obligations, which attract substantial damages or penalties. As such, these are the types of contracts that a business will likely want to re-negotiate and restructure.

So, the legislation covers four main types of contracts for now. Section 78 of the Bill empowers the Minister to amend the Schedule of Specified Contracts. This power is needed so that there is flexibility, if necessary, to respond to evolving situations.

Sir, the four types of contracts are specified in Part 1 of the Bill and Members may refer to Handout 1, which I have left on your seats and which sets up a summary of the different categories of contracts to which it applies. [Please refer to Annex 2.] I will just very quickly take Members through them.

The first type of specific contract are leases or licences for non-residential property in Singapore that have terms not exceeding five years. In general, for these contracts, these are significant cost component for many businesses and the SCCCI's survey, which I cited earlier, found that the topmost need amongst respondents was a reduction or a waiver of rent. So, that is the first type.

The second relates to contracts for the supply of goods or services and these contracts are often at the centre of a business' operations.

The third category of Specified Contracts comprises hire purchase and conditional sale agreements for commercial equipment, including commercial vehicles.

As with "COVID 1", we have excluded from this category, hire purchase agreements entered into with MAS-regulated banks or finance companies. That is because MAS has worked with the financial industry to provide corresponding substantive relief. They will extend credit relief measures beyond 2020 to support individuals and SMEs who need more time to resume full loan repayments. These measures include partial deferments of principal repayments until March or June 2021, depending on the sector that the SME is in.

In addition, borrowers that require additional help can approach the banks or finance company for more customised restructuring arrangements. In that respect, banks and finance companies have recently developed a protocol to facilitate restructuring of loans across different lenders to reduce the need for borrowers to go to the Courts for resolution.

The fourth category comprises rental agreements for commercial equipment, including commercial vehicles such as taxis and private hire cars. For the avoidance of doubt, a business may invoke this Framework in respect of a contract even if the Government is a party to the contract as long as the contract is a Specified Contract.

Certain contracts will be excluded from the Specified Contracts for various reasons. We have set them out in paragraph 2 of Part 1 of the Second Schedule. Again, Members can look at Handout 1 for a summary of these exclusions.

For example, contracts with consumers and employees are excluded. These groups deserve greater protection. Construction and supply contracts will be excluded. They are dealt with under a customised set of measures for the construction industry. Minister Desmond Lee will be speaking on this later. Also excluded are contracts that are uniquely interconnected with other contracts, where the termination may have unforeseen knock-on effects. Finally, contracts that are governed by specific international conventions or regimes will also be excluded.

Paragraph 1 of Part 1 of the Second Schedule defines a Specified Contract to include contracts that are substantially in the nature of a specified contract. Let me explain this.

Not all contracts are neatly defined into one category or another necessarily and there are often contracts that are mixed or multi-faceted. For example, a contract for the supply of goods, which is in the whitelist, may well have an element of carriage of goods, which is in the blacklist. If it is substantially in the nature of the contract for the supply of goods in the whitelist, it will still be covered by the Framework.

A contract of national interest is defined in section 41(1) of the Bill. The contract must be certified as a contract of national interests by the relevant Portfolio Minister. It must be one where termination is likely to affect the provision of essential service or the ability of a public body to carry out its function – that is the definition. A list of specified essential services is set out in Part 2 of the Second Schedule and includes water supply services, security emergency services, broadband Internet services and so on – I think Members understand.

Special considerations therefore apply to contracts of national interest. An abrupt termination of these contracts can adversely affect national interest. Hence, a special regime will apply. This is set out in Division 6 of Part 10 of the Bill.

In this context, for these contracts, there will be no right to terminate contracts of national interest. Instead, there will be a right to re-negotiate the pricing under the contract. If no solution can be found by that negotiation, the party seeking relief can apply to a Specialist Assessor to adjust the price of the contract. Specialist Assessors will comprise judges and senior judicial officers appointed to the panel by the Chief Justice. This is needed because of the potential complexity, seriousness and, of course, sensitivity of the disputes, which may relate to contracts of national interest.

Sir, I now come to how the process will work. If Members refer to Handout 2, I have diagrammatically summarised the process, but I will take Members through key aspects. [Please refer to Annex 3.]

First, this relief will be available for a period of six weeks from the commencement date of this Bill if it is passed. As I explained earlier, we do not intervene lightly and when we do so, it will be in a limited way. The relief is therefore for a short window to prevent a wider disruption. This is in line with the desired outcome, also, of a quick resolution to the matter. Parties really ought not drag it out and there should not be uncertainty for a prolonged period as to whether a counterparty might end up wanting to terminate the contract or not.

Thus, to invoke this relief, the business which is defined as Party A in the Bill must serve a Notice of Negotiation on Party B, the counterparty, within a six-week window. Once the notice is served, there will be a moratorium on legal and enforcement actions for any non-performance of obligations arising after the date of service of the notice.

Second, after the Notice of Negotiation is served, there will be a mandatory four-week period for the parties to negotiate, during which no application can be made to the assessor. We hope that parties will use this four-week period productively and – I would say – openly and constructively to engage with each other in good faith to work out suitable and mutually acceptable arrangements for the longer term, for the balance period of a contract. If the parties are able to successfully re-negotiate that position, then the matter ends there.

Third, however, if the re-negotiation is unsuccessful, the contract will be terminated but with the default consequences set out in Part 4 of the Second Schedule of the Bill. These default consequences generally hold the terminating party to all accrued obligations. Generally, all prospective obligations are discharged. Members can refer to my Handouts 3A to 3D which will illustrate the default consequences that would generally apply for each type of Specified Contract. [Please refer to Annex 4.]

Fourth, either Party can apply for an Assessor's determination if there is any disagreement on the application of the Framework. So, if after you have terminated or you are trying to work out the terms and you are unable to settle on the consequences of termination, for instance, then the parties may apply to an Assessor and the Assessor's determination in those cases will be final, binding and non-appealable.

If there is subsequently a dispute over the performance of any obligations that a party may remain liable for after the termination, that dispute can be resolved in the Courts.

Sir, I now come to two specific regimes catered for under the Framework.

The first relates to an exception for small landlords who might face hardship. To invoke this exception, the landlord must meet certain eligibility criteria, which will also be prescribed.

The landlords that we have in mind for this are those who have invested their small property and rely on the rental for a good proportion of their annual income. And if the tenant were to terminate the lease in this case, the landlords may be put into a situation of hardship.

Division 3 of Part 10 of the Bill therefore provides that such landlords are entitled to additional compensation if the lease is terminated. The compensation amount will be determined by an Assessor in accordance with the criteria that is set out in the prescribed subsidiary legislation. To clarify, this is not an assessment of damages. It will not be done as an assessment of damages in the usual sense. And the small landlord might not be awarded the full damages that he might have had had he taken the matter to Court. But he would have to establish that on a different property value.

However, given that a tenant who qualifies to invoke this framework is likely to be suffering badly because of COVID-19, there is a chance that the landlord could not have recovered the full amount of damages from the tenant anyway. So, bear that in mind in the context of what I have also outlined in the preamble earlier.

Sir, the second specific regime relates to hire-purchase and conditional sale agreements, and leases, for commercial equipment.

As an alternative option to termination, the Bill also provides a Statutory Repayment Scheme or SRS specifically for these types of contracts. This is set out in Division 4 of Part 10 of the Bill. Let me explain why this specific regime is necessary.

My Ministry received petitions from several hirers. Once was a business that hire-purchased mini vans to ferry tourists and corporate clients. Its usual business had ground to a halt. It is now using the vans to do deliveries. The revenue earned is still not enough for it to fully pay its hire-purchase instalments. At the same time, the finance companies are threatening to re-possess the vans. And without the vans, obviously, even the new delivery business will fall. The livelihoods of these hirers depend on the equipment and the vehicles that they hire-purchase. Their situation is precarious. They are often the sole breadwinners with families who do depend on them to survive and termination in these cases is not really an option for such businesses. They cannot just, say, give up the vehicle and go back to where it was because that is the tools of their trade.

These businesses will benefit from the SRS which will allow them to pay outstanding arrears from a specified period in equal instalments every month for up to 18 months. Interest will remain payable on the outstanding arrears, capped at 5% per annum. And if a party fails to pay any instalment as required by the Schedule, or terminates or repudiates the contract during the period of the repayment period, otherwise they are still offsetting the instalments due, then all outstanding arrears will become immediately repayable.

Sir, this Framework will not affect contracts terminated prior to 2 November 2020, yesterday, when the Bill was read for the first time.

However, to ensure the smooth implementation and delivery of the relief to the intended beneficiaries, the relief under the Framework applies to contracts that are terminated from 2 November 2020 when the Bill was introduced. This will prevent a rush of terminations, leading to uncertainty in the market.

This Framework, Sir, is an exceptional, targeted intervention, for extraordinary times. The Rule of Law, which includes respecting the sanctity of contracts, is a foundational value for Singapore. We worked with legal experts, considered it carefully, and consulted industry stakeholders such as Singapore Business Federation, the Singapore Nightlife Business Association and other businesses and trade associations, landlords, tenants and banks. This was not a step that was taken lightly. Ultimately, this Framework protects our economy in the longer term by helping businesses overcome barriers to choosing the more economically productive route. It helps the market to correct and operate as it should. It is also not a concept alien to both the common and civil law traditions where we see that there is a recognition of fairness and that a fundamental unforeseeable change in circumstances that impacts the performance of a contract can justify a change in the contractual environment.

This Framework therefore adheres to the principles for intervention by the state in contracts, as set out by Minister Shanmugam in Parliament, when this Act was first introduced in April. First, that the freedom of contract has never been absolute, and even today, there are mandatory laws that can invalidate or override terms of a contract. The law of frustration being one example.

Second, a state may intervene in contracts, to fulfill its duty to safeguard vital interests of its people, where a significant part of the economy is at stake, and strict enforcement of a particular contractual rights could lead to damage to the whole economy.

In these circumstances, a state may intervene, with reasonable steps of limited duration, to safeguard the economic structure for the common good.

Let me also call on Members to bear in mind the impact of COVID-19 and the impact it has had on fellow Singaporeans and our business community. We have never before seen such deep and significant impact in any of our past crises, whether it is the Asian Financial Crisis, the Global Financial Crisis, or SARS. Often in those cases, we did not intervene to this extent. I therefore emphasise again that this is an extraordinary measure that the Government has taken carefully as a reaction to a once in a lifetime event of unprecedented proportions.

Mr Speaker, Sir, the Framework will serve as a necessary complement to support the measures that have already been put out. It would ensure that the cash infusions are not drained away because businesses are stuck in their contracts. It will help substantially impacted businesses avoid protracted disputes, re-strategise and, in Deputy Prime Minister's words, to rejuvenate.

I understand there may be concerns about knock-on terminations, chain reactions and so on. But let me ask Members to consider the facts.

The businesses that we have scoped this to cover are those that had been substantially impacted. Even without this relief, they face a likelihood of being insolvent, at the minimum, substantial litigation. The contract may not survive anyway. The nature of the consequences, even if one qualifies, will be calibrated and modelled on established legal principles as I have outlined, and outstanding debts will remain payable. The duration of this relief is limited and in consequences following the termination, carefully scoped, to ensure as far as possible, fairness for both parties.

There are fears the Framework could be used by parties as a convenient escape route to terminate the contracts that some parties might set unreasonable or unacceptable re-negotiation terms to force a termination. But Members ought to note that, first, this is designed to allow parties to be as flexible as possible in the context of their own contractual environment. And I would urge the parties to work together to look this productivey.

And second, whilst we cannot say for everyone and over-generalise, we believe that the vast majority of people and businesses affected by this will act commercially and rationally. No rational tenant will choose to exit a tenancy unnecessarily because there is a cost to moving, there is a relocation cost, and moving away from its existing pool of customers. Those who choose to exit will probably generally believe that they have no choice given their business and operating assumptions, and the cost.

But even in those cases, the landlords can engage in discussions to try and understand their difficulties and find a solution, again, using one of the different options that I have outlined earlier.

In the situation where there might be a number of parties who seek to attempt to misuse this system, the Assessor system is a check and safeguard against this. The Assessor's responsibility is primarily to ensure a fair and just outcome. If the facts show, for example, that a tenant is, in reality doing well, the Assessor can take that into account, make the appropriate directions, including additional compensation that can be paid on termination. Sir, if we are dogmatic and overly cautious in our approach, we will see our businesses continue to struggle and flounder.

In unforeseeable circumstances that are no fault of their own, many businesses will be worried about cutting costs, making ends meet, dealing with impending litigation or maybe insolvency. And this is a time when we would much rather help those businesses to adapt, to find a new paradigm, find a new operating assumption, to recover, get their businesses back on track and save jobs.

Sir, I will now move on to deal with the IRDA Bill, and the Simplified Insolvency Programme, that it introduces.

In order to fully appreciate how this Bill will help financially distressed companies, assist in saving jobs and strengthen the macro environment for businesses, let me first explain why an effective insolvency framework is important. for the economy.

A successful restructuring allows a company to continue as a going concern. This results in a better outcome for employees, creditors and investors as a whole, by saving jobs and the businesses and giving a lifeline.

Where the business of a company, on the other hand, is no longer viable, then an effective liquidation process realises the company's remaining assets in an orderly fashion and distributes the proceeds to creditors and stakeholders through an effective and transparent collective enforcement mechanism. This enables the reallocation of resources to other more productive business activities. It also reduces the number of zombie companies that might exist, those that are unable to generate enough profits to cover their debt-servicing costs and other obligations while the value of their assets dissipates over time. An efficient liquidation process will reduce the costs of liquidation, and maximise returns to the company's stakeholders.

It is therefore critical that the distressed companies are provided with the necessary statutory framework to either restructure, or to wind down their operations in an effective and orderly manner. An efficient and streamlined framework will reduce the complexity and hence the cost and time of doing so for debtors and stakeholders alike. The purpose of this Bill is to create such a framework, tailored for the micro and small companies.

We already have in place, Sir, a progressive and modern insolvency framework in the Insolvency, Restructuring and Dissolution Act or IRDA. This is the fruit of a multi-phase process that has taken about five years to put in place to strengthen our insolvency framework and enhance our position as an international centre for debt restructuring.

In 2015, the then-Bankruptcy Act was amended. This introduced a new differentiated discharge framework that promotes a more rehabilitative regime by giving bankrupts clear targets to work towards so that they can become eligible for discharge. It puts in place also, a requirement for institutional creditors to appoint private trustees in bankruptcy when making a bankruptcy application. This encouraged greater engagement by such creditors and also drives creditors to exercise greater financial prudence when granting credit.

In 2017, we introduced ground-breaking amendments to the Companies Act to strengthen the framework even further, introducing super-priority for rescue financing, encouraging fresh funds to assist the debtor through the restructuring proceedings. We enhanced moratoriums to provide breathing room for distressed companies and also put in place pre-packaged schemes of arrangement to fast-track pre-negotiated, pre-agreed restructuring plans.

On 30 July 2020, just a few months ago, the IRDA was commenced and incorporates the relevant provisions from the Bankruptcy Act and the Companies Act, into a single new statute. The Act also builds on the earlier phases of amendments that I have outlined.

Our legislation provides the best features of the world's leading regime. It also seeks to strike a balance between the different competing stakeholders' interest, enabling companies to restructure successfully whilst at the same time, protecting creditors' rights. The touch stone of any Singapore restructuring remains the support of its creditors. In any insolvency, it is the creditors who own the company.

A recent restructuring example that I would like to highlight to Members is Swee Hong Limited, a civil engineering contracting firm.

In February 2020, the High Court granted Swee Hong an order to give super-priority status to over US$2 million worth of rescue financing. This allowed them to continue the business whilst it attempted to restructure.

Seven months later, the proposed scheme of arrangement was approved by more than 90% in number of creditors, representing more than 80% in value, higher than the requisite statutory threshold, and if sanctioned by the Court, the restructuring would allow Swee Hong which was insolvent to continue as a going concern and avert a winding up. This in turn helps to save the business, keeps jobs not only for Swee Hong but also for many of its counterparties and subcontractors.

Whilst the IRDA has facilitated positive results such as Swee Hong, it was not designed with the effects of a global pandemic like COVID-19 in mind.

As a result of the COVID-19 pandemic, researchers have forecasted global business insolvencies to increase by 35% in 2021.

In Singapore, in 2018, there were over 250,000 micro and small enterprises. These are enterprises with annual revenues of less than $1 million and $10 million respectively. So, micro is $1 million, and "small" would be $10 million.

Together they form about 95% of Singapore's enterprise framework. Thus, it is likely that a significant number of financially distressed companies, as a result of the COVID-19 pandemic, are likely to be micro and small companies.

We have received feedback that these companies, in particular, may still find it financially challenging to apply the provisions under IRDA. Applying tailored processes to these micro and small companies however could help these companies get back on their feet in the same way as Swee Hong, which has benefited from IRDA.

This Bill, Sir, therefore, introduces a Simplified Insolvency Programme comprising two bespoke temporary processes to better suit the needs of micro and small companies:

First, to restructure the debts of viable companies to rehabilitate their businesses. For example, where there is a ready investor prepared to come into the business, or alternatively, where the company is in a position to renegotiate with its creditors.

Second, to wind up the company, where the business has ceased to be viable but in a quick, efficient and low-cost manner.

The proposed amendments seek to provide temporary processes that fit these purposes and benefit stakeholders of the company such as employees and, of course, also the trading counter-parties, creditors and shareholders by reducing the time it would take to either do a restructuring or a liquidation and maximising potential recoveries.

The new processes were developed in consultation with public agencies and stakeholders from the private sector. This ensures that the framework is able to meet the needs of small and micro businesses.

Separately, the Bill also has one miscellaneous amendment which I will cover at the end, in relation to the licensing framework.

Sir, let me take the Members now, very briefly, through the key features of the Bill.

The Simplified Insolvency Programme comprises the restructuring programme and the liquidation programme. In some ways the process and the formulae for determining who qualifies for both have similarities so I will cover them very briefly.

In relation to the application processes for both programmes, the new sections 72B and 250B of the IRDA Bill, the programmes will open for application by eligible companies for a “prescribed period”. Subject to further consultation and review, we intend for this at first instance to be six months. This may be shortened or extended for a period to be determined by the Minister. Overall, this window for application will be shorter than the overall lifespan of the proposed provisions, which is three years after its commencement.

Where any company applies to the Official Receiver under the new sections 72E or 250D under the relevant “prescribed period”, and the Official Receiver assesses the eligibility requirements and are satisfied on the face of the application, then the Official Receiver under the new sections 72G or 250G, will send a notice of the application to the applicant company and all creditors named in the application and, in the case of section 250G, which is for liquidation, also to every contributory or officer named in the application, and publish the notice on the designated website.

The requirements are intended to ensure that only cases that are suitable for this simplified process are accepted. These requirements include a limit on the total liabilities of the company, not exceeding $2 million; limits on the number of creditors and employees, not exceeding 30 employees and 50 creditors respectively; the amount realisable in the winding up, not exceeding $50,000 and the company is not in the midst of any other debt restructuring or, otherwise, some other form of insolvency process.

To provide flexibility, the figures that I have mentioned to Members may be substituted by the Minister abd prescribed by way of an Order in the Gazette.

Where there is any objection to the acceptance of the applicant into the relevant programme, the Official Receiver must consider the objection and decide whether or not that particular company qualifies. If not, to exclude; if so, then to allow the company to avail itself of the process.

The applicant company has to pay a fee and a deposit and this will be used in a way which would defray the costs of the Official Receiver.

In order to provide flexibility to address companies that merit assistance under the programme even if they might miss out on the eligibility requirements, the Minister may direct the Official Receiver, under the new sections 72H or 250H, to send and publish the notice of application and then to accept the applicant into the programme.

Part 5A of the IRDA Bill establishes the simplified restructuring programme and I will just quickly take Members through the most salient provisions.

This, as Members might appreciate, is modelled on the existing pre-packaged scheme in section 71 of the existing IRDA. Under the pre-packaged scheme process, a proposed compromise or arrangement is worked out among the company and its creditors but done out of Court, without having to invoke the Court process. You come to an arrangement with your creditors, which is then subsequently submitted to the High Court for approval. Instead of two applications to the Court required in a typical scheme of arrangement, the pre-package only requires one application.

Upon the acceptance of a company into the simplified debt restructuring programme and before the company is discharged, the company enjoys a statutory moratorium under the new section 72K(1), and amongst others, it restrains the commencement or continuation of any proceedings against the company.

The company is also restrained from disposing of its property under the new 72K(3), unless it is done in good faith and in the ordinary course of its business. This is to ensure that the assets are not dissipated whilst there is a moratorium in place.

Creditors are also prohibited from exercising certain contractual rights under an ipso facto clause under the new section 72T, which applies section 440 which is the ipso facto clause of IRDA. This is done with modifications, as appropriate, for smaller companies.

This framework balances the interests of the various stakeholders by providing, on the one hand, breathing room via the moratorium to the company but, at the same time, preserving the rights of creditors to have access to the company that has not wrongly and unfairly dissipated its assets.

Sir, there will be a Restructuring Advisor appointed for the company to assist the company to formulate a proposed compromise or arrangement. This Restructuring Advisor will be available to advise the company to prepare its papers and generally to guide the company through this process.

The company may make an application under the new section 72M(1) for approval of the proposed compromise or arrangement an,d the Court may only approve the compromise or arrangement if there is an agreement of a majority of two-thirds in value of creditors. So, two-thirds in the value of the debts that are owed by the company must approve this scheme.

There is no specific number of creditors required to assent to the scheme, unlike a traditional scheme of arrangement. So, the thresholds are slightly more relaxed than in the usual scheme of arrangement under 210 of the Act.

Sir, it is worth noting that this reduced threshold takes into account feedback that we received that it will typically be too onerous as a condition to be fulfilled by micro and small companies especially in this current business environment.

In looking at whether the threshold is met, the Court must disregard the agreement or disagreement of any related party of the company. So, you cannot have a company which has several creditors who are related to officers of the company come together and decide on an outcome and use that consensus or agreement to bind the other creditors. There will be three classes in the scheme: secured creditors, preferential unsecured creditors and unsecured ordinary creditors.

This is intended to provide certainty to the company on the default approach towards classification of creditors, given the simpler nature of the debt structure of these micro and small companies and, of course, to avoid potential litigation which sometimes happens in relation to the way in which the company classifies its creditors.

Nevertheless, the Court retains overriding discretion under the new section 72M(5) to take into account the agreement or disagreement of any related party, and if the circumstances so require and the result of doing so would be fair and equitable to all creditors. So, the Court still retains an overriding discretion to do so.

The Court may, under the new section 72M(6), without hearing all arguments, grant or dismiss an application, as the case may be; and instead of having the company required to engage counsel, a duly authorised officer of the company may represent the company in the relevant court proceedings without the leave of court. This is provided for under the new section 72N.

Section 72Q provides that the programme will have a shelf life in the first instance of 90 days. This is not uncommon in many other jurisdictions around the world even for the usual restructuring process. This keeps the process on an even keel and if more time is needed, an application for extension can be sought. But in the first instance 90 days is being given to enter into the arrangements, and also the limited timeframe is designed not to unfairly prejudice creditors because during that period of time, whilst this is being looked into, there is a moratorium.

Under the general framework, Sir, typically at least three applications are required. First, for the moratorium itself; second, for leave to convene a meeting; and third, for the sanction of the proposed compromise or arrangement and then oftentimes, a financial adviser will also be required. This simplified process brings it into one single application and, if accepted, the company will enjoy the benefits of the moratorium early on and really only one application would be needed.

Sir, let me now quickly touch on the simplified winding up. Part 10A of the IRDA Bill establishes a simplified winding up programme, which a company may resolve to be wound up voluntarily under. Under this voluntary winding up, a company is wound up without the need for a Court application to place the company into winding up. This is modelled on the existing creditors’ voluntary winding up process that is already found in the Act.

Before making an application, the company must pass a special resolution, authorising the making of the application and so on. And upon acceptance of a company into the simplified winding up programme, the voluntary winding up of the company commences at that stage. The Official Receiver is the liquidator of the company under the new section 250K(3). The Official Receiver may also appoint a qualified person to act as a special manager under section 250M.

The winding up is treated as if it were a creditors’ voluntary winding up, as I mentioned earlier, under section 250K(2). The provisions that therefore apply to the creditors' voluntary winding up will also apply in relation to the company, unless they are modified under section 250L and the conditions are set out in section 250L.

A company is discharged from the simplified winding up programme under section 250N – when the company is dissolved; or an order is made by the Court to wind up the company, stay the proceedings or terminate the winding up.