MOF Committee of Supply Debate 2018 by Senior Minister of State for Finance Ms Indranee Rajah

A. OPPORTUNITIES FOR OUR BUSINESSES

A1. Mr Chairman, let me address Members’ questions on creating opportunities for businesses, enhancing citizen experience with technology and the Government’s position on corporate governance and tax-related matters.

A2. Ms Cheryl Chan asked how MOF is collaborating with the private sector to co-create solutions for businesses. In line with this Budget’s thrust to build a vibrant and innovative economy, Government agencies, including MOF, continue to partner businesses, trade associations, unions and overseas government regulators to deepen international connectivity and strengthen enterprise capabilities. Let me share three such initiatives.

National Trade Platform

A3. First, is the National Trade Platform, which Ms Cheryl Chan asked about. This is a one-stop platform spearheaded by Singapore Customs, with support from MTI, GovTech and MAS, among others. It incorporates existing TradeNet and TradeXchange systems, synergising B2G (business-to-government) and B2B (business-to-business) processes, while introducing new services.

A4. The National Trade Platform enables trade and logistics businesses to share and re-use data and documents, faster and more securely between partners and the Government. This end-to-end digitisation of trade documents and processes will increase business productivity, improve process efficiency, and strengthen mutual trust across the trade value chain.

A5. The B2B tier of the National Trade Platform went live in December 2017. This first phase involves working with commercial providers to offer value-added services that go beyond customs and logistics. These include service solutions in supply chain financing and trade news.

a. One such example is Nufin Data’s NEMO (New Efficiencies More Options), a cloud-based supply chain financing solution which helps traders boost their cash flows by connecting buyers, suppliers and funders to turn trade receivables and payables faster into free cash flow.

b. More services will be rolled out in the coming months.

A6. We welcome collaboration and will continue to engage the various stakeholders to innovate and keep the services offered vibrant.

a. Together with design thinking consultants and DesignSingapore, we have engaged companies to identify areas where new services could be created to support their trade digitisation journey.

b. We also have a developer sandbox which will release specific Application Programming Interfaces or APIs, and data, to interested developers to tinker and come up with innovative service offerings.

A7. Collaboration does not stop at our borders. We are also working with overseas partners to make cross-border trade cheaper, safer and more efficient. These tie-ups will give businesses access to their regional and global partners.

a. An example is the Global Trade Connectivity Network that will use distributed ledger technology (the technology behind block chains) to build an information highway between the National Trade Platform and the Hong Kong Trade Finance Platform.

SME Cloud Exchange Network Software

A8. Second, the Association of Small and Medium Enterprises (ASME), with support from SPRING, ACRA and IRAS, has developed the SME Cloud Exchange Network software.

a. This partnership aims to increase SMEs’ productivity by offering them accounting and HR solutions to help them file returns to ACRA, IRAS and CPF Board. By adopting such solutions, SMEs can now prepare their financial statements and tax submissions in 1 day, as compared to an average of 4 days previously.

b. The association targets to benefit 300 SMEs by September 2018, and over 1,500 SMEs in the subsequent 12 months.

A9. The Government will continue to work closely with trade associations to accelerate the pace of digital adoption and raise productivity of our SMEs.  

IRAS Application Programming Interface Marketplace

A10. Third, IRAS’ API marketplace allows anyone to develop applications that interface seamlessly with IRAS’ systems. This is a significant move taken by IRAS to open up its interfaces to facilitate business and productivity solutions.

a. JustLogin and Sage Software Asia are two local enterprises that have incorporated IRAS’ Auto-Inclusion Scheme API into their payroll software. This allows employers to submit their employees’ income data directly to IRAS via the vendors’ payroll software. 60 employers have benefitted from this seamless tax filing in 2017. For 2018, IRAS has worked with 45 other payroll software vendors to benefit many more employers. This will raise efficiency and effectiveness across the industry.

A11. Such collaboration allows innovative solutions to be developed by the private sector or the community. We encourage more of such efforts to co-create business solutions with the Government.

B. CITIZEN EXPERIENCE WITH TECHNOLOGY

B1. The Government will continue to harness technology to help save citizens’ time and effort, as well as provide faster responses and payments to them.

Better Service Delivery through Digitalisation

B2. Mr Saktiandi Supaat asked for an update and an overview of how MOF is enhancing citizen experience with technology under the Smart Nation Drive. I would like to announce two initiatives that will be launched in the coming year to help companies to meet their regulatory obligations. ACRA’s Simplified Filing of Annual Returns

B3. To ensure greater convenience for companies, ACRA will be simplifying the filing of annual returns for exempt private companies and private dormant relevant companies in 2018. This will potentially benefit 150,000 companies.

a. Under the simplified process, some of the information will be pre-filled and the companies will just need to go through six simple steps to file the annual return, down from the current 24 steps.

b. ACRA will also be providing the simplified filing service on its “ACRA On The Go” mobile app, so that filing by these companies can now be done anytime and anywhere. To make it even more convenient when it is time to file, companies will be prompted by an SMS with a link to the mobile app.

IRAS’ New Company Start-Up Kit

B4. With over 30,000 companies incorporated each year, some new companies may not be familiar with their corporate tax obligations.

a. To help them get it right from the start, IRAS is introducing a new company start-up kit. This interactive kit provides tailored information such as tax-filing timeline and follow-up actions, and automatically sends email notifications with reminders on filing due dates.

b. IRAS will pilot this with around 3,700 start-ups that are due to file their first tax return this year. Enhanced Payment Processes

B5. Mr Saktiandi Supaat also asked how the Government is making better use of technology and improving processes to make timely payments to businesses and individuals. Let me share three areas where MOF has leveraged technology to improve the experience of our citizens, public officers and vendors:

SMS Notifications for GSTV Recipients

B6. First, we have moved towards SMS notifications for the GST Voucher (GSTV). Since 2017, about 790,000 GSTV recipients with mobile numbers registered with SingPass have benefited from timely and accessible updates. We have cut down physical letters, saving $300,000 and 160 trees annually.

PaC@Gov Mobile App

B7. Second, the Accountant-General’s Department, together with the Public Service Division, Ministry of Home Affairs and Ministry of Education, introduced the PaC@Gov mobile app for public officers in 2017. This enables common staff transactions such as leave and claims to be carried out anytime, anywhere. Since the launch, more than 50% of our officers using PaC@Gov have downloaded the mobile app and more than 400,000 transactions have been carried out through the app in the past year. Faster Payments to Businesses

B8. Third, we understand the importance of cash flow to businesses. The Government processes an average of 2 million payments to more than 23,000 companies annually. The late payment rate for the public sector, comprising both Ministries and Statutory Boards, has been reduced by more than half over the past three years and is currently at an average of 6.5%. We target to bring down the late payment rate below 5%, in other words, to achieve at least 95% of timely payment to businesses.

B9. We are working to automate the procurement-to-payment process, which will enable faster payments to businesses.

a. We encourage businesses to issue electronic invoices when providing goods and services to the Government. A paperless and more efficient processing will result in faster payments to vendors.

b. From 2018, all businesses that transact with the Government only need to submit their payment details once.

c. Businesses do not have to submit their payment details every time they transact with a different Government agency. This helps to increase convenience to businesses.

d. They can also use the Vendors@Gov mobile app to track their payment status anytime, anywhere.

C. GOVERNANCE

Role of Temasek and GIC

C1. I move now to the issue of Governance. Mr Leon Perera and Ms Sylvia Lim asked about the roles played by Temasek and GIC in relation to their investee companies. Ms Sylvia Lim also asked what role Temasek can play in promoting ethical behaviour in the entities that Temasek invests in.

C2. Both made a reference to the Santiago Principles. I should mention that GIC was one of the founding participants of the International Forum of Sovereign Wealth Funds that came up with the Santiago principles.

C3. Before I address what GIC and Temasek do, I think it will be helpful if I just restate, once again, the legal position with respect to shareholders and companies, so that we all know the framework that we are talking about.

C4. Under company law, the shareholders of a company have certain powers, which is to appoint and remove boards, and to have a statutory right to the audited financial statements of the company.

a. However, shareholders do not interfere in the business decisions or operations of its portfolio companies. These are the responsibilities of the respective companies’ boards and management.

C5. Temasek and GIC are shareholders of their investee companies.

a. So they hold the boards of their investee companies responsible for conducting their affairs properly and delivering sustainable returns over the long term.

C6. Mr Perera understands that Temasek and GIC do not interfere with the management of the companies, but asked “does that mean that they are truly hands-off”? Well, it depends on what you mean by hands-off.

a. If you are asking, do they interfere or get involved in with the day-to-day management and operations, decisions of the company, then of course no. Because that goes against the general principles of how companies are set up. Shareholders should not be jumping into the day-to-day management, that is left to the Board.

b. But if your question is, do they engage with the investee companies, do they share ideas, do they talk to them generally about broad topics and investments, then the answer is yes. GIC’s investment teams engage the management teams of their portfolio companies to encourage policies and business practices that support sustainable long-term financial performance. Temasek’s role in promoting ethical behaviour

C7. For Temasek, as shareholder, it plays the role of an advocate for good corporate practices. Let me share three areas that Temasek is developing such practices.

C8. First, Temasek fosters an ethos of integrity, good governance and sustainability.

a. It does not condone improper conduct and malfeasance. Temasek expects companies in its portfolio to abide by sound corporate governance and robust codes of conduct and ethics and to comply with all laws and regulations of jurisdictions in which they have investments or operations.

b. So just last week, Mr Lim Boon Heng, the Chairman of Temasek reiterated his expectation of governance to the Chairs of major Temasek portfolio companies at the annual Temasek Chinese New Year lunch.

c. Mr Lim said, and I quote: “In markets where practices are questionable and compromising integrity is required to win business or contracts, we have to be very clear – there is a bright red line our companies should not cross…. We are also entrusted with the responsibility of being the owners and guardians of the company’s reputation, and we must always live up to that trust”.

C9. Second, Temasek regularly monitors the strategy and performance of its portfolio companies and keeps abreast of industry developments that impact them.

a. This informs how Temasek exchanges and shares views and perspectives with the boards and management of its portfolio companies, so as to better understand their strategies and operating environments.

C10. Third, Temasek conducts regular roundtables or forums on topics of interest to the portfolio companies.

a. Temasek organises or sponsors forums on topical issues. These include topics such as cybersecurity, insider trading, and corporate contributions to community.

b. Some of these forums are also open to other companies in Singapore outside of Temasek’s portfolio, as part of Temasek’s contributions to support good governance and sound stewardship.

c. Changes or new legislation against corruption such the Bribery Act in UK and the laws on corrupt practices in the USA and Singapore are covered.

d. Other topics include corporate and functional aspects such as legal, finance, HR or IT. These would be roundtables or forums for the practitioners.

e. For example, Temasek is organising a roundtable on governance and ethics with its portfolio companies in the coming months, on norms and practices on ethical business operations and expectations.

f. Through these forums, Temasek actively encourages certain key practices such as long term incentives contingent on performance, or the institutionalisation of formal code of conduct or code of ethics.

D. TAX DEDUCTIONS

Private-Hire Car Drivers

D1. I move on now to the topic of tax deductions. Several members asked about tax deduction matters. Let me thank Mr Ang Hin Kee, Executive Advisor to the National Private Hire Vehicles Association, and Mr Muhamad Faisal Abdul Manap for their feedback on tax deductions for private-hire car drivers. Two other MPs have spoken on this issue in recent months. Mr Ang has also made representations to IRAS on behalf of the Association.

D2. Currently, private-hire ride-hailing car drivers are not allowed to claim tax deduction on any car-related expenses. This is in line with our long-standing national car-lite policy, as tax deduction of expenses incurred for a private car is not allowed.

a. Private-hire car drivers can, however, claim tax deduction on non-car-related expenses such as commission paid to third-party operators, administrative charges imposed by third-party operators, and the proportion of expenses for mobile phones used in the course of providing their services.

D3. That said, we note the feedback. We will continue to monitor changes in business models and consumer habits in this area, and will review our policies to ensure they remain relevant and effective.

Donations

D4. Mr Azmoon Ahmad spoke about tax deductions for donations. Extending the 250% tax deduction for donations is one of our efforts to encourage the spirit of giving in our people. a. Total donations by individuals and companies have increased by 52%, from $1.8 billion in 2009 to $2.7 billion in 2015.

D5. Internationally, our 250% tax deduction for qualifying donations is one of the most generous tax deduction schemes today.

a. Tax deduction for both corporate and individual donations in Hong Kong, USA and Australia are at 100%.

b. At 250% tax deduction rate, the Government co-funds 42.5 cents for every dollar donated by companies.

c. In addition, the Government co-funds up to 55 cents for every 1 dollar donated by individuals.

D6. A flat tax deduction rate, rather than a tiered tax deduction system suggested by Mr Azmoon Ahmad, ensures that donors who have the ability to donate more are not accorded exceptional tax treatment. Many donors contribute out of passion and heart for the community, and not just for tax incentives.

E. CONCLUSION

E1. Mr Chairman, allow me to conclude.

E2. The Government continues to ensure fiscal prudence, create opportunities for our businesses and enhance citizen experience with technology.

E3. We have made good progress in these areas, and we will continue to improve. We are committed to work in partnership with our businesses, the community and citizens in this journey.

E4. Thank you.