Budget Speech
PART IV: TAX AND FEE CHANGES
Mr Speaker, Sir
These tax and policy changes are the Government's
response to the main recommendations of the ERC. The report contains
other suggestions, which the Ministries will follow up expeditiously.
Some of the ERC's ideas require more study. The Government will
examine these ideas carefully to find the best ways to implement
them.
In addition to the ERC-related measures, I am
making several other tax and fee changes.
Liquor Duties
To rationalise our liquor taxes, we will adjust selected liquor
duty rates. Excise duties will be raised for some types of liquors,
and reduced for other types in order to rationalise the duties and
bring them in line with our international obligations. The new rates
are at Annex G. The changes will take
effect today and result in a revenue gain of about $9.4 million
every year.
Tobacco Duties
Although the proportion of smokers in Singapore dropped from 18%
in 1992 to 14% in 2001, the percentage of young female smokers aged
18 to 24 increased from 2.8% to 8.2% in the same period. To discourage
smoking, and especially to deter the young from picking up the habit,
the Government will take every opportunity to raise excise duties
on cigarettes and other tobacco products.
Last year, I raised the excise duty on cigarettes
from $180 per kg to $210 per kg. I have decided to further increase
the excise duties on all tobacco products with effect from today.
Excise duty on cigarettes will go up from $210 per kg to $255 per
kg. The new excise duties on other tobacco products are at Annex
H.
The Government has also noticed the emergence of
low-priced cigarettes with slightly lower tobacco content. The low
prices make such cigarettes more accessible to our youths. I have
therefore decided to tax cigarettes by sticks, instead of by weight
so that these cigarettes are subject to the same duty rates as regular
packs of cigarettes. Under this new system of taxation, the excise
duty on each stick of cigarette less than 1g will be 25.5 cents,
and each additional 1g or part thereof will attract a duty of 25.5
cents. To give traders and cigarette companies time to adjust their
systems, this new system of taxation will be implemented from 1
July 2003.
The annual revenue gain from these changes is about
$194 million.
Travellers can currently bring in tobacco products
not exceeding 2 kg without a permit, by paying duty on them. This
is equivalent to 100 twenty-stick packs of cigarettes. Some people
have found that paying duty on cigarettes bought overseas is still
cheaper than buying cigarettes here. I have decided to lower the
limit to 400g, which is equivalent to 20 packs of cigarettes. This
will take effect from 1 April 2003.
Motor Vehicle Taxes
Valuation Method
The Government will change the basis for valuing motor
vehicles. We will change from the Brussels Definition of Value (BDV)
method to the Customs Valuation Code (CVC) method. This new basis
will exclude obligatory expenses such as advertising, promotion,
warranties, showroom and warehousing costs from a vehicle's taxable
value. The effect will be to decrease the ARF and excise duty payable
for most vehicles by 3% to 5%.
This is consistent with our policy of gradually lowering
the costs of owning a car and raising usage costs, in order to strike
a better balance, and enable more Singaporeans to own cars. For
a typical 1,500 cc car with an assessed open market value or OMV
of $15,000 under the existing valuation system, a 5% tax saving
would amount to about $1,100.
This change will take effect from 1 April 2003.
Details about the valuation method can be found in Annex
I.
ARF and Excise Duty Rebates
for Wheelchair Lifts
To help the elderly and disabled meet their transport needs, I have
decided to exclude the cost of wheelchair lifts and other costs
associated with the installation of such lifts from the OMV of a
vehicle when computing the ARF and excise duty payable. This change
will take effect immediately, and will complement other efforts
by National Council of Social Services and voluntary welfare organisations
to provide transport services for this group of needy Singaporeans.
Childcare Benefits
Many parents find it difficult to juggle both work and childcare,
and one parent may have to stop working as a result. Childcare benefits
defray the cost of alternative care arrangements for their children
and encourage them to stay in the workforce. I have therefore decided
to exempt from income tax employer-subsidised childcare benefits
paid to licensed childcare centres with effect from YA 2004. This
is in line with the Government's efforts to promote pro-family practices
in the workplace.
Stamp Duties
Stamp Duty on Leases
Presently, all property leases are levied with
stamp duty. To reduce the tax burden on families living in rental
flats, and the inconvenience to businesses and the general public,
I have decided to exempt from stamp duty leases with annual rents
that do not exceed $1,000. This change will benefit some 3,500 households
that start a new lease or renew the lease of 1- and 2-room HDB rental
flats each year. The exemption will also cover the fixed duty levied
on 99-year leases that some 32,000 households enter into each year
when they purchase flats from HDB. About 30% of all leases will
now be exempted. Households and businesses can expect to save about
$340,000 a year from 1 April 2003 onwards.
Presently, all property leases are levied with
stamp duty. To reduce the tax burden on families living in rental
flats, and the inconvenience to businesses and the general public,
I have decided to exempt from stamp duty leases with annual rents
that do not exceed $1,000. This change will benefit some 3,500 households
that start a new lease or renew the lease of 1- and 2-room HDB rental
flats each year. The exemption will also cover the fixed duty levied
on 99-year leases that some 32,000 households enter into each year
when they purchase flats from HDB. About 30% of all leases will
now be exempted. Households and businesses can expect to save about
$340,000 a year from 1 April 2003 onwards.
Seller's Stamp Duty
The seller's stamp duty on the sale of residential properties within
three years of purchase was introduced in 1996 to curb property
speculation and to stabilise the property market. It was suspended
indefinitely in November 1997 when the property market cooled down.
Since the property market is stable, there is no longer any need
to retain the seller's stamp duty. I have therefore decided to abolish
this duty.
Promoting Philanthropy
Our tax system recognises taxpayers who support charitable causes.
Donation of Land and Buildings
From 1st April 2003 onwards, I will be giving income tax deductions
for donations of buildings and parcels of land made to Institutions
of a Public Character (IPCs). Donors will have the flexibility to
decide if they would rather donate the sales proceeds of the asset,
or the asset itself, as both options will now allow them an equivalent
amount of tax deduction.
Stamp Duty on Donations
At present, IPCs have to pay stamp duties when they receive donations
of immovable properties and shares. To lessen the burden on IPCs
receiving such donations and to encourage bequests and donations
from estates to IPCs, I have decided to exempt all donations to
IPCs from stamp duty. This will take effect immediately.
Donation of Public Sculptures
As we develop our economy, we should not neglect to preserve our
cultural heritage. I am introducing three enhancements to the Public
Sculpture Donation Scheme, with effect from 1 July 2003. The enhanced
scheme will incentivise donors to adopt existing sculptures, commission
and donate sculptures or publicly display sculptures from their
private collections. The National Heritage Board will be releasing
the details of this scheme by 1 July 2003.
Overall FY 2003 Fiscal Position
Mr Speaker, Sir, the tax changes in response to ERC measures, taken
together with the rebates and other tax and fee changes, will cost
the Government $324 million in FY 2003. This will increase the deficit
from the $900 million projected in the FY 2003 Budget to $1.2 billion.
The Government is able to finance this deficit from funds accumulated
in its current term and will not need to draw on past reserves.
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