Mr Speaker, Sir

Let me now turn to the fiscal position and the proposed tax changes.

Revenue collection is projected to fall from $27.2 billion in FY98 to $24.1 billion in FY99, a $3.1 billion or 11.4 per cent decline. As a percentage of GDP, revenue collection will decline from 18.9 per cent in FY98 to 16.9 per cent in FY99. As operating and development expenditures in FY99 are budgeted at $29.2 billion or 20.5 per cent of GDP, an operating deficit of $5.1 billion or 3.5 per cent of GDP is projected for FY99.

The fall in operating revenue is attributable to slower economic growth expected in FY99 and the revenue impact of the various off-budget measures announced by the Government to stimulate the economy. In particular, the $10.5 billion cost-cutting package announced in November last year to reduce business cost will have a negative impact of about $1.8 billion on the FY99 budget balance.

The budget deficit will be funded entirely from surpluses accumulated by the Government in its current term of office. As I have noted earlier, our fiscal policy is to live within our means and aim for a balanced budget in normal years, accumulating surpluses in good years of strong economic growth and drawing against reserves in years of economic downturn.

We should now allow the effects of the packages of stimulus and cost-cutting measures already announced to work through the system before we decide whether further measures are necessary. But even as we adopt short-term measures to deal with current difficulties, we have to keep our eyes on the future, develop the infrastructure necessary for our future growth, enhance our capabilities and put in place a conducive framework for businesses and individuals in Singapore to thrive. Only then will we be well placed when the region recovers from the economic crisis.

I will therefore be introducing changes to some tax incentives to promote the development of certain high value-added sectors of our economy. At the same time, Government is mindful of the difficulties faced by individuals and households in the current economic downturn. The cost- cutting package announced in November 1998 was focused mainly on reducing business costs. I will therefore be announcing several measures to help individuals later in my speech.

Let me now deal with tax changes for companies.