MOF Committee of Supply Debate 2022 by Second Minister for Finance Ms Indranee Rajah02 Mar 2022
A1. Mr Chairman, I thank the Members for their questions and comments for the Ministry of Finance (MOF).
A2. Members’ cuts cover four broad topics:
a. First, accountability and governance in our expenditure;
b. Second, Goods and Services Tax (GST) and other revenue sources;
c. Third, support for businesses to overcome COVID-19 disruptions; and
d. Last, how we will position our business ecosystem for the future.
B. ACCOUNTABILITY AND GOVERNANCE
B1. Mr Liang Eng Hwa and Ms Foo Mee Har asked how we strengthen accountability and governance for our spending.
B2. We have established governance and monitoring structures to ensure proper accountability for the use of public resources and strengthen performance for programmes. The independent, regular, and thorough audits by the Auditor-General’s Office are reported publicly, and complemented by Ministries’ internal audits as well as their programme evaluation efforts to ensure that spending translates into good outcomes.
B3. Ministries are also putting in place Enterprise Risk Management frameworks, which will be reviewed at regular intervals by MOF. Dedicated function offices have also been set up in MOF to strengthen Whole-of-Government processes and capabilities in finance, procurement, and grant management. These offices also coordinate across agencies to achieve greater efficiencies and savings in the respective functions. Members of the public also provided feedback directly to government agencies on how we can get obtain better value from public expenditure.
B4. Key government priorities are monitored regularly and reported in the annual Budget Book and the biennial Singapore Public Sector Outcomes Review (SPOR) report. The SPOR report was revamped in 2020 to go fully digital and improve accessibility for readers. The content is presented in a more citizen- and business-centric manner, with greater emphasis on outcomes. It highlights the impact on citizens and businesses, such as the fact that one can now start a business within 1.5 days.
B5. Two weeks ago, we published an updated assessment on the impact of key COVID-19 measures such as the Jobs Support Scheme (JSS) and the SGUnited Jobs and Skills Package. The findings show how the Singapore economy has largely avoided medium-term scarring from COVID-19 and is poised to continue its recovery.
B6. Ms Foo Mee Har asked about the controls and governance for COVID-related schemes. Indeed, as we rolled out COVID-19 schemes quickly, we struck a balance between keeping processes simple and putting in place controls to prevent abuse or errors.
a. For the JSS, a risk assessment is done, and for cases with higher fraud risk, the Inland Revenue Authority of Singapore (IRAS) requires firms to authenticate their CPF contributions before releasing payouts. IRAS has denied payments to employers who attempt to abuse the scheme, and referred cases to the Police for investigation. As of last week, 14 cases have been referred to the Police.
b. Despite these efforts, given the unprecedented complexity and need for urgent disbursement across-the-board through JSS, there were some mistakes, which are deeply regretted. When such an instance was discovered, we took immediate efforts to rectify them. Out of the $370 million JSS overpayment discovered earlier, we have recovered over 99% and are working on recovering the rest.
B8. Of the projects submitted for approval last year, MOF managed to achieve cost savings of about $600 million (or 4%) of a capital cost of $14.4 billion. But as I have said, we do not just focus on reducing upfront construction costs. By working with agencies on design optimisation and system choices, we seek to reduce total lifecycle costs, which include downstream operating costs. As an example:
a. For the Cross Island Line, the Land Transport Authority is using a different Traction Power Supply System that enables more efficient power transmission. This reduces total energy usage and the number of substations required. This is expected to result in lifecycle cost savings of about $280 million.
B9. MOF also works with development agencies to maintain strong accountability and controls for the management of major infrastructure projects. For instance, to better manage infrastructure project risks, we are consolidating the management of such projects under agencies with stronger expertise. JTC, with its deep experience in construction, has helped 28 agencies manage 50 construction projects worth $9 billion.
C. GOODS AND SERVICES TAX (GST) AND OTHER REVENUE SOURCES
C1. Mr Sharael Taha’s cut asked how much revenue the 2%-point increase in GST would raise, and how much goes towards the offset packages. At a GST rate of 9%, we expect to collect an additional 0.7% of GDP per year, currently estimated to be about $3.5 billion. This is less than the projected increase in healthcare spending, which could amount to over 1%-point of GDP by 2030. At the same time, the enhanced permanent GST Voucher scheme will cost about $500 million more per year in FY2023, compared to today. There is a clear social purpose in this way of doing things. The additional $3.5 billion is collected from all, including the rich, foreigners and tourists. The GST Voucher scheme benefits the lower- to middle-income Singaporean households, including most retiree households. This is one of the ways we make our system of taxes and transfers a fair and progressive one. Members would remember the chart shown by the Minister for Finance – when we take into account the GSTV and the GST absorbed by Government, we indeed have tiered GST rates. But we achieve this not by exempting certain goods or services for all consumers but by our uniquely Singaporean way of implementing GST with GSTV.
C2. Ms Yeo Wan Ling asked how we can help private hire car drivers pass on the cost of GST to their commuters. The taxi operators and private hire car platform owners decide on fares. They may choose to raise fares from time to time to cover the increase in operating costs, and all taxi operators have recently done so. The 60% Fixed Expense Deduction Ratio (FEDR) is set at a level to cover most of the common deductible expenses incurred by drivers in earning their income. In setting the FEDR, we need to strike a balance between simplifying tax compliance and ensuring that it is realistic. The current 60% ratio remains sufficient for the vast majority of drivers. For those whose actual deductible expenses exceed the 60% ratio, they continue to have the option to file their tax returns based on the actual expenses incurred. We will continue to monitor the situation.
D. SUPPORTING BUSINESSES AMIDST COVID-19 DISRUPTIONS
D1. Let me now address the questions from Mr Liang Eng Hwa, Mr Edward Chia and Mr Saktiandi Supaat on how the Government can continue to support companies impacted by the pandemic and provide timely and targeted support.
D2. The pandemic continues to disrupt global supply chains and business activities.
a. Ports and airports around the world today remain affected by pandemic-related restrictions and manpower constraints, resulting in delays and higher transport costs for our businesses.D3. We are aware of the pressures on our businesses, and the challenges they face. The Government has therefore continued to provide support to alleviate the impact of the pandemic, and made adjustments with changing circumstances. We will continue to monitor the situation going into 2022 and adjust our measures as necessary.
D4. For example, the JSS was first designed as a broad-based wage support scheme to help employers retain their local employees when we first began our fight against COVID-19 in 2020. Payouts were tiered to broadly reflect the different levels of impact on different sectors. As we went into 2021, some sectors recovered ahead of others. Some of our safe management measures had a greater impact on certain sectors, such as construction, F&B, retail, gyms, and fitness studios. So we targeted the JSS to help the sectors most impacted by COVID-19 measures.
D5. Similarly, we acted fast to change the disbursement mode of rental relief – from requiring landlords to grant rental waivers, to giving direct payouts to tenants under the Rental Support Scheme (RSS).
D6. Beyond providing targeted support, we have invested efforts to enhance the JSS and RSS disbursement process, to make timely payments to employers and eligible tenants and owners.
a. We have disbursed more than $28 billion of JSS to about 180,000 employers expeditiously, with the most recent tranche being disbursed within two months from the announcement of the extended support for businesses most adversely affected by COVID-19 restrictions. This was possible as 90% of these businesses were registered under PayNow Corporate, or had existing GIRO arrangements with IRAS.
b. IRAS combined the data it had across various tax types to auto-disburse the RSS payouts directly to more than 80% of eligible tenants and owner-occupants. More than 110,000 payouts worth almost $1 billion were disbursed automatically within two months from the announcement of the scheme. This was the first time the Government gave direct disbursements to tenants, and we received positive feedback that the disbursements were “fast” and “effortless”.
c. We will continue to invest in capabilities for business grant disbursements so that our assistance can reach businesses promptly.
a. To ease our supplier cashflows, we pay our vendors faster by streamlining the procure-to-pay process, from procurement to goods receipt and payment.
b. As of end-Jan 2022, about 97% of e-invoices below $5,000 were paid within 12 days, ahead of the usual credit term of 30 days. This benefitted nearly 9,000 suppliers, mostly SMEs.
D9. We are also aware of the challenges faced by Government construction contractors. The pandemic continues to impact the productivity on site, supply chain and manpower availability, leading to delays and cost increases.
D10. The Government has taken a pro-active stance to shoulder part of the cost increases. This aims to soften the impact of productivity loss from requirements such as safe management measures on site, and shortage of foreign manpower due to border controls.
a. When the pandemic first broke out in 2020, we made advance payments worth $665m for over 450 public sector construction contracts to help contractors tide over work stoppages.
b. We also provided support of more than $230 million by co-sharing costs. These include the costs of prolongation, increased manpower costs, and consultancy services.
c. These measures, including support for manpower costs through JSS and foreign worker levy waivers and rebates, have helped our construction suppliers through the crisis.
d. On Mr Edward Chia’s suggestion to assess main contractor’s payment promptness to sub-contractors in our tender evaluation, it is not easy for a service buyer to verify or monitor the private business practices of its contractors. In general, if a contractor does not treat its sub-contractor well, we expect few sub-contractors would be keen to work with it. Where such market forces have not worked so well, the Building and Construction Industry Security of Payment Act provides legal recourse for sub-contractors affected by late or no payment.
D12. When businesses flourish or do exceptionally well, they pay more Corporate Income Tax. Their workers who receive bonuses also pay taxes, including GST. Such additional revenue can then be channelled to fund Government programmes. Some businesses have also taken the initiative to contribute to the community in various ways through their corporate social responsibility activities, which is commendable. For example,
a. DFI Retail Group ramped up efforts to donate food and healthcare essentials to the needy through a food donation drive through the Group’s grocery stores Cold Storage and Giant, while FairPrice pledged in January 2022 to donate $1.2 million to 600 families over three years to help low-income families cope with higher costs of living.D13. Moving from businesses to families, let me address Ms Mariam Jafaar’s question of how we reach out to vulnerable individuals and families without their own homes, when many support measures are tied to the household or housing type. Government assistance is prioritised for families with less means and in greater need of social support. In means-testing for our social schemes, housing type is one of the proxies we use to estimate an individual’s means. We also look at other factors such as income and number of members in the household. A person living in higher value property or larger housing type is in general more likely to have access to resources or support through family. Where there are exceptional circumstances, I encourage our MPs and community leaders to raise these cases to the attention of the relevant agencies so that their circumstances can be holistically assessed. I would like to assure Ms Mariam Jaafar that we will do our best to extend help to the vulnerable and needy who lack other forms of support.
E. POSITIONING OUR BUSINESS ECOSYSTEM FOR THE FUTURE
E1. Let me now address the questions from Mr Liang Eng Hwa, Ms Jessica Tan and Mr Shawn Huang on how MOF is strengthening the business ecosystem, to position it for future shifts. I will elaborate on how we are stepping up our efforts in two areas.
E2. First, we will strengthen Singapore as a trusted, open and effective business hub. We will continue to enhance our corporate governance regime to combat money laundering and terrorism financing, and other threats to the integrity of the international financial system. This includes aligning ourselves with international standards such as those under the inter-government Financial Action Task Force. For example:
a. In January this year, Parliament passed the Corporate Registers (Miscellaneous Amendments) Bill to strengthen Singapore’s regime on the transparency and beneficial ownership of companies and Limited Liability Partnerships.
b. ACRA is pivoting towards more risk-targeted supervision for the Registered Filing Agents sector by using data analytics to identify higher-risk agents. It is also studying proposals to further enhance our anti money laundering regime. We will consult the public on these proposals later in the year.
E4. Second, we will work with businesses to improve the efficiency of processes such as tax filing, payments, and trade.
a. For tax filing, IRAS collaborates with software developers and other government agencies to develop solutions to help businesses meet their tax and other regulatory requirements. Businesses which adopt software listed on IRAS’ new Accounting Software Register Plus can now seamlessly submit their tax returns and transact with their business partners on the InvoiceNow network. Since its launch in October 2021, about 30 software developers have onboarded or expressed interest to onboard the register.
b. For payments, IRAS introduced PayNow for Corporate Income Tax (CIT) refunds last year, so that businesses can enjoy fast, secure and seamless e-refunds. Taxpayers would be updated by their banks when the refunds have been credited into their bank accounts. Today, all businesses that are due to receive CIT refunds from IRAS can choose between GIRO and PayNow to receive their refunds.
c. For trade processes, Singapore Customs has digitalised banker’s guarantees for traders through the Networked Trade Platform (NTP). Traders do not need to physically collect and submit paper guarantees, as participating banks can send e-guarantees data to Customs securely through the NTP. Close to 200 traders lodged e-guarantees with Customs last year, saving 3 hours and $30 for each e-guarantee. Almost 90% of all guarantees issued by the six participating banks last year were e-guarantees.
a. The Government will require eligible suppliers to be accredited with the Progressive Wage Mark from March 2023, to support our lower-wage workers. Today, our suppliers for security, cleaning, lift maintenance and landscaping are already required to pay progressive wages. Along with the expansion of the Progressive Wage Model, the requirement for suppliers to attain the Progressive Wage Mark will be extended to the retail, food services and waste management sectors, and suppliers with in-house cleaners, security officers, landscape workers, administrators, and drivers. The Ministry of Manpower will share more on progressive wages in their COS.
b. We have been incorporating sustainability requirements in our tenders. For example, all new Government buildings and premises undergoing major renovation are required to meet stringent Green Mark standards under the GreenGov.SG initiative. We have also been buying green products, such as printing paper, that are accredited with the Singapore Green Label. The latest demand aggregation tender for vehicle hiring services includes hybrid vehicles as part of the requirements, and incorporates clauses to provide for electric vehicles when they become more prevalent in future. We will continue to expand the list of buys where green requirements are incorporated.
c. We also consider the sustainability credentials of suppliers during the evaluation for government tenders. In construction, the Building and Construction Authority (BCA) requires contractors to adopt environmental management practices before they can be registered to undertake building or civil engineering works. In addition, agencies like LTA and JTC have included environmental sustainability criteria in their construction tenders that gives extra points to suppliers that have adopted green practices or obtained green awards. The consideration of sustainability credentials will be extended to the procurement of more categories of goods and services, and was recently piloted in tenders for public waste collection and accommodation and event venues.
a. This includes schemes such as Enterprise Singapore’s Enterprise Sustainability Programme, the Economic Development Board’s Resource Efficiency Grant for Energy, and the National Environment Agency’s Energy Efficiency Fund.
b. Under the Enterprise Sustainability Programme, the Government shares the risk with banks in lending to businesses to develop innovative green technologies and solutions, such as in clean energy and the circular economy.
c. BCA has also introduced various Green Mark Incentive Schemes to encourage the adoption of environmentally friendly building technologies and building design practices.
F1. Let me turn now to Mr Faisal Manap’s cut. He asked if we can abolish GST on the Water Conservation Tax (WCT). This is not a new suggestion, the Workers’ Party had asked this before and the Government had explained previously.
F2. The WCT is how we have been able to make our water supply more resilient. With the threat of climate change, water resilience is more important than ever. The WCT reflects the fact that water is precious, and encourages every individual and business to play a role in conserving our water resources. The water tariff and WCT together form the final price of water, reflecting the economic cost of producing water from our desalination and NEWater plants. GST is then levied on this final price, inclusive of taxes and duties that are related to the supply of goods or services. This approach is consistent with the practice in other jurisdictions such as the United Kingdom, Australia, and New Zealand. At the future 9% GST, the amount of GST payable for WCT each month is around 90 cents for 3-room and 4-room HDB households on average, and less than 60 cents for 1-room and 2-room HDB households.
F3. If I may understand Mr Faisal Manap’s concern, it is really for the low-income households and the fact they have to pay GST on the WCT. The first point I would make is that the amount is low. But more importantly, with the U-Save rebates and vouchers that have been given, these households will actually be able to cover their utilities bills. So they need not worry, and Mr Faisal Manap should reassure his residents that with the U-Save rebates that are given from the Government, they will be well taken care of by this Government. In fact, when you add the U-Save rebates from the Household Support Package, together with the Assurance Package, it would come up to about 8 to 10 months’ worth of utilities bills. This is not taking into account the permanent GST voucher scheme, which will also have a U-Save component. So I would encourage Mr Faisal Manap to visit the MOF website. The infographics are there, setting out the various archetypes. Please print them and please distribute them freely to your residents, especially to the lower-income households, and reassure them that this Government will take care of them as far as that is concerned, and they need not be worried about the WCT or the GST thereon.
F4. Ms Hazel Poa had a couple of questions. She asked about essential goods. Her question was about the additional costs that would be incurred. Her question was on the premise that if we believe that basic necessities should be exempt, what should be done about this. I just would like to point out to Ms Poa that the underlying premise of her question was if we believe that basic necessities should be exempt. There is a philosophical difference between what PSP believes and what this Government believes. The Government does not believe that basic essentials should be exempt. What we do is we apply GST across the board for everybody, but we ensure that the lower-income are buffered against this, and the middle-income also receives a certain amount of benefits so they get some buffer as well. The Minister for Finance had earlier shown that for every dollar of tax paid, the lower-income get back four dollars to the dollar, and the middle-income get back two dollars to the dollar. I don’t think it will be helpful to go into the details of her questions because it is premised on a different approach to necessities, and we have a fundamental difference there.
G. REVENUE AND EXPENDITURE CLARIFICATIONS
G1. The same would apply to her question on land sales. She had an elaborate example but going into the details or discussing the minutiae or the technical details of that is not really going to take us much further. Fundamentally, our approach is this. Land is a national asset, think of it as an endowment. In its physical form, it is an asset, it has a value. If you sell it, it gets converted into cash, but we put it back into the reserves. Some of it comes back in the form of the NIRC. Selling and stretching the revenue out over 10, 30 or 99 years is still a departure from the principle that we adhere to. All I would say here is that it was comprehensively answered by the Finance Minister earlier, and I don’t think it is necessary for me to elaborate further on this.
G2. Mr Leong Mun Wai had a question on how do we account for large expenses. In the Budget Book, the Government’s expenditure is classified by Ministries and broken down into object classes based on the nature of spending. This is to allow the public to understand the major categories of government spending such as expenditure on manpower, other operating expenditure, grants, and transfers. So if he looks at the Budget Book for examples of COVID-19 spending, at page 55 under the Ministry of Social and Family Development’s operating expenditure, there will be a reference to the extension of the COVID-19 Recovery Grant. If he looks at a different Ministry, let’s say Ministry of Finance, page 95, he will see that under the fifth paragraph there is a reference there for COVID-19. What I’m trying to illustrate is that for accountability purposes, it is set out according to heads of expenditures, which refers to the various Ministries. Within the Ministries, if you are looking for a particular large expenditure like COVID-19, you can look for a reference to COVID-19. That said, we are always open to seeing how things can be presented better or in a way that is more intuitive, and we will take that into account.
G3. He had some other questions on SINGA, but that was extensively debated earlier in the year. Some questions in relation to MAS, that would be publicly available as well. The thing is this, if Mr Leong would like very specific figures or specific data, a better way to do that would be to file a PQ and then we will look for the specific answer that he needs and address his concern.
G4. I think I have covered most of the questions, Mr Chairman.