Speech by Mrs Lim Hwee Hua, Minister of State for Finance, at the Committee of Supply Debate 2005 in Parliament, 2 Mar 2005

1. Let me thank members for comments and questions. There is a Chinese saying, "Yuan Qin Bu Ru Jing Lin" or simply that a neighbour close by is better than a relative living far away. As the family size shrinks, the extended family and the community will play a more crucial role in providing companionship, sharing common interests and offering support to Singaporeans in times of need. The people sector will increasingly be a key pillar in building the Singapore community.

2. Institutions of a Public Character or IPCs are key people sector organisations. They have done much good work - providing a wide range of programmes, from helping the needy to promoting the arts. IPCs have mobilised and energised Singaporeans in a constructive way, enhancing social responsibility towards the larger community. Public support for our IPCs has grown on average by about 15% a year in the last 4 years. In 1999, Singaporeans donated an aggregate amount of $300 million to IPCs, and this amount has increased to over $500 million by 2003.

3. Singaporeans are a generous people. In last Sunday's Lianhe Zaobao, Miss Xie Li Xuan , a reporter from Shin Min Daily News, recounted how she was personally moved by an elderly man who handed her a $100 to help the Yishun siblings who are suffering from a disease which causes their nervous systems to degenerate. The man was in his 70s and lived far away from the media centre, but he asked her for the bus number and insisted on handing her the money personally. He arrived more than an hour later in sweat, handed her two crumpled $50 bills and left. The elderly man declined to be interviewed, refused to have his photograph taken and did not leave his name behind. This is truly a case of . When there is a need, Singaporeans always respond to the call and never hesitate to go out of their way to help. Under the leadership of my Parliamentary colleague Mr Ong Ah Heng, the grassroots and the media, a total of $260,000 was raised for the siblings. Sir, this is but one example of the Singapore community in action.

4. To encourage even greater public support, IPCs need to preserve confidence and assure the public that they subscribe to good governance, accountability, and transparency. This means defining some common standards and best practices. But Sir, to what extent should this be done? I agree with Dr Chong Weng Chiew that we must do this in a sensible way - balancing the benefits of regulation against the costs of compliance. We must adopt a risk-based regulatory approach that targets rules at areas of greatest risk or which give rise to public concern. We must also recognise that IPCs vary significantly in size and expertise. For large IPCs raising substantial amounts of money from the public, rules may be needed to ensure greater accountability. However, the same rules could well be inappropriate for the smaller IPCs.

5. The Council on Governance of IPCs, set up by the Ministry of Finance (MOF), has developed a set of recommendations for suitable standards of governance for IPCs. These are preliminary recommendations. The Council will review them after carefully evaluating the feedback that they have received from the different stakeholders, including IPCs and members of the public. The Government will then consider the Council's final recommendations. Let me assure Dr Chong and members that we will not adopt a one-size-fits-all approach. Our intention is to nurture and groom the people sector to play an even bigger role in our society, and certainly not to stifle its growth with onerous rules. We also believe that IPCs would and should themselves be responsive to the needs of their various stakeholders, and adopt practices that best serve their own individual needs.

6. As mentioned in the Budget Statement, to support the growth of the people sector, the Government will explicitly recognise as charitable purposes several initiatives which we now group under "other purposes beneficial to the community", namely the advancement of health; the advancement of citizenship or community development; the advancement of the arts, heritage or science; the advancement of environmental protection or improvement; the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage; and finally, the advancement of animal welfare. At the same time, we will also recognize the advancement of sport, insofar as the sport advances health, which is itself a charitable purpose. This is because we want to recognise the importance of sports in promoting a healthy lifestyle for all. In 2003, the UK likewise recognized sport as a charitable purpose. Community Amateur Sports Clubs in the UK already qualify for charity status.

7. I would like to thank A/P Chin for his suggestions on how we can draw up the qualifying criteria for the type of sports and sport organisations. We will work out the criteria over the next few months, in consultation with the Ministry of Community Development, Youth and Sports (MCYS), the Singapore Sports Council, the Singapore National Olympics Council and the sports community. Let me assure A/P Chin and members that we will adopt an inclusive rather than an exclusive approach. However, the guiding principle must be sports which promote good health and physical fitness. The consequence could of course be an enhancement of the competitive standards. As regards to the extent to which government funding of expenses should be given between the different sporting associations and the VWOs, I would suggest that the Member raise this under the Head MCYS.

8. To encourage charitable giving among individuals and corporations, the Government will grant double tax deduction, not only for outright donations, but also for donations with naming opportunities. Donors who name an IPC, an IPC facility or an IPC event can thus qualify for double tax deduction. This applies to donations to all IPCs, and not just IPCs which promote sport. It should therefore not skew corporate giving towards sport, which A/P Chin was concerned about. Companies frequently have a well-defined focus for their corporate social responsibility initiatives. What we want to achieve through this change is for more donors to come forward to support sport, the arts, the environment, the needy or any other charitable cause they feel passionate about and to build lasting relationships with the beneficiaries they have lent their names to. Let me reassure A/P Chin that while we now encourage naming donations, we will continue to disallow double tax deduction for outright advertising such as banners.

9. Next, let me thank Dr Ahmad Magad and Miss Olsen for their suggestions on what more the Government can do to help Voluntary Welfare Organisations, or VWOs, especially with their cashflows. Although I understand the members' concern, I am afraid the answer is still no. I do not think that giving VWOs GST refunds is the best way to go. Let me explain why.

10. Sir, we deliberately designed our GST as a simple and broad-based tax. It is applied to all goods and services consumed locally except financial services and the sale and lease of residential properties. This means that, other than GST-registered organisations, all individuals and organisations, including VWOs, cannot claim the GST incurred on their local consumption. This keeps the GST system simple and helps to reduce compliance costs for everyone.

11. Rather than complicate the GST system with separate rules for VWOs, a better way would be for government to provide targeted help for VWOs on their GST expenses. When GST was introduced in 1994, the Government increased its assistance grants to VWOs to include the GST component. This policy remains unchanged at this day. Government grants for VWOs include help to meet GST costs. Such VWOs include the Muhammadiyah Welfare Home, the Movement for the Intel lectually Disabled in Singapore (MINDS), the Lions' Home and the Dover Park Hospice. Government assistance in development costs, where the assistance could be up to 90% of the building cost, includes the GST component as well ; and government grants for operating costs include the GST component as well. Hence there is no need for a separate input GST grant as the earlier grant was transitional in nature.

12. The Government appreciates the good work that VWOs do in providing vital community services. In addition to assistance grants, the Government supports VWOs in other ways. For example, VWOs which qualify for charity status are exempted from income tax if they spend at least 80% of their annual receipts on charitable objects in Singapore within two years. They are also exempted from property tax for those premises used exclusively for charitable purposes.

13. VWOs which qualify for IPC status can allow their donors to claim a double tax deduction on their donation. This will help VWOs attract more donations. VWOs which already have both charity and IPC status include the Asian Women's Welfare Association and the Spastic Children's Association of Singapore.

14. For this Budget, the Government has announced a package of additional incentives to promote community involvement and philanthropy. These incentives demonstrate the Government's desire for the people sector to grow, build up strong community spirit, and encourage engaged citizenship. Sir, charity must be conveyed with a heart and with willing hands, and not delivered impersonally by a faceless bureaucracy. If everything is done by the Government, we will simply be building up an entitlement mentality. Singapore's strength must lie in the willingness of the strong, the able and the successful to care for those who need help.