Second Reading Speech By Mrs Lim Hwee Hua, Minister in Prime Minister's Office, Second Minister for Finance and Transport, on the Private Lotteries Bill 201114 Feb 2011
1. Mr Speaker, Sir, I beg to move, "That the Bill be now read a second time".
2. Fruit machines in private clubs have hitherto been taxed at 30% of deemed turnover. The deemed turnover is determined by the number of coins in the cash collection boxes of the fruit machines. This taxation basis dates back to the 1950s when it was not possible to accurately measure actual turnover of fruit machines.
3. In his 2006 Budget Statement, the Minister for Finance announced a change in the taxation basis and tax rate for fruit machines. Specifically, he announced a private lottery duty at 12% of actual gross turnover of fruit machines. The technology of fruit machines has evolved, and thus we are able to make this shift in taxation basis from deemed turnover to actual gross turnover. The 12% rate was set so as to be revenue-neutral to Government. However, the implementation of this new tax treatment was subsequently deferred as further review was needed given feedback from the clubs.
4. Since the opening of the casinos in the integrated resorts, the gaming landscape has changed and clubs have seen a decrease in fruit machine revenue. The clubs have asked that the Government reduce their tax burden including taxing them based on gross gaming revenue just like for the casinos. Unlike gross turnover, gross gaming revenue refers to the earnings net of winnings which the clubs pay out to patrons of their fruit machines. Such a basis would allow the clubs greater flexibility to adjust the payout ratios.
5. The casinos are taxed on their gross gaming revenue, which is the basis of taxation adopted for casinos by major jurisdictions. Given that the IR casinos are targeted mainly at overseas visitors, the taxation basis and rates were set to ensure that they can be internationally competitive.
6. In contrast, most other gaming activities in Singapore such as 4D and Toto are taxed based on actual gross turnover. This is so as not to unwittingly incentivise operators to raise payouts and consequently increase overall gaming demand. International competitiveness is not a consideration for fruit machines operated by the clubs. The playing of fruit machines in the clubs is primarily a recreational activity for its members. We will tax the fruit machines in clubs based on actual gross turnover.
7. Having said that, we will lower the private lottery duty for fruit machines to 9.5% of actual gross turnover instead of the 12% planned earlier. This reduced tax rate of 9.5% takes into account the data and feedback from all the clubs and the change in Singapore's gaming landscape. This will cause the Government to forego $25 million or about 8% of the private lotteries tax collection. The majority of the clubs will pay less tax than what they are currently paying. However, I should state here that it is not the role of the Government to offset the loss of market share that they may face with the opening of the casinos. The clubs will need to adapt to the change in the gaming landscape and devise appropriate strategies to generate future revenues.
8. This Bill repeals the Private Lotteries Act and enacts a new Private Lotteries Act to provide for the control and levy of tax on private lotteries.
Main Provisions in the Bill
9. Sir, let me now highlight the main features of the Bill.
10. First, the change in tax basis and rate for fruit machines in the clubs. Clause 15(1) of the Bill provides for the private lottery duty for these fruit machines to be 9.5% of actual gross turnover. There is no change to other private lottery duties. Clause 15(2) allows the Minister for Finance to vary the rates of private lottery duty by way of subsidiary legislation.
11. Second, this Bill formalises the transfer of the regulation of private lotteries from Inland Revenue Authority of Singapore to Ministry of Home Affairs (MHA). With this transfer, MHA will oversee the regulation of all gambling activities. Clause 4(1) allows the Minister for Home Affairs to appoint a Permit Officer to regulate private lotteries. Clauses 8 and 9 set out the powers of the Permit Officer. Clause 32(2) provides that the Minister for Home Affairs may make regulations for the manner in which private lotteries are to be conducted. MHA will work closely with MCYS for the regulations and conditions which relate to social safeguards.
12. Third, we will increase penalties commensurate with the offences and allow the composition of offences. Clauses 20 and 21 provide for an increase in penalties for non-compliance and submission of incorrect accounts to the Commissioner of Betting Duties, as well as promoting a private lottery without a valid permit. Clause 29 provides for the composition of offences, similar to that applicable under the Income Tax Act.
13. The other salient provisions in the Bill serve to improve tax administration or provide clarifications to the law.
14. Mr. Speaker, Sir, I beg to move.