Rationalising Indirect Taxes

I have decided to implement other tax changes to rationalise our indirect tax regime.

Abolishing Cess

First, I will remove the current broad-based Cess that applies to F&B outlets. If you did not already know, this is the second of the ‘pluses’ in the +++ on your meal tab. This will cost the Government about $30 million a year. Cess has played a role in helping to fund the promotion of tourism. The Government will study more targeted ways to use Cess in future, where necessary, to fund specific tourism events.

Reducing Road Tax

I will reduce road tax by 8% for passenger cars and motorcycles. This is part of our move to shift progressively towards taxing on the basis of vehicle usage rather than ownership. Someone who owns a 2.0 litre car (e.g. a Toyota Picnic) and who currently pays $1,550 in annual road tax will get about $124 in savings. Details will be announced by the Ministry of Transport.

Reducing the Foreign Domestic Worker Levy

I will reduce the monthly Foreign Domestic Worker Levy by $30 from 1 July 2007. This will benefit one in every six households in Singapore, which currently employs a foreign maid. It will be particularly helpful for families which need a maid to help take care of dependents.

I have also decided to extend the Foreign Domestic Worker Levy Concession which currently only applies to those with young children and elderly parents, to employers with disabled family members, or who are themselves disabled and need additional care-giving support. This will take effect from 1 November 2007. The Foreign Domestic Worker Levy changes will cost the Government $75 million a year. More details on the qualifying criteria will be announced by the Minister for Community, Development Youth and Sports.

Reducing the Foreign Worker Levy

To help companies save costs, I will lower the second tier foreign worker levy for the manufacturing and services sectors from $310 to $280 with effect from April 2007. This will cost the Government about $1 million a year. The Minister for Manpower will also be announcing other measures to facilitate access to manpower in the construction sector and certain other industries which are growing very rapidly.

Extending Tax Relief for Cash Top-ups to CPF Accounts by Siblings

Currently, a person can claim up to $7,000 in tax relief each year for making cash top-ups to his, his parents', his grandparents' or his spouse's CPF Retirement Accounts, provided the beneficiary is aged 55 and above. To encourage greater support from close family members and not just children, we will extend this tax relief for cash top-ups to siblings who are 55 and above, and who earn $2,000 or less in the year preceding the top-up. This will take effect from YA2008.

Extending Stamp Duty Relief

Today, only limited liability companies and registered business trusts qualify for stamp duty relief on intra-group transfers of assets. I have decided to extend this relief to unlimited companies, Limited Liability Partnerships (LLPs) where all the partners are companies, and Statutory Boards. This will take effect from today.

Rationalising Liquor Duties

At present, some liquors are taxed on the basis of alcoholic content while others are taxed by volume. We will progressively move towards taxing liquors on the basis of alcoholic content. From 1 January 2008, I will tax beer and stout on this new basis. This is a rationalisation of duties and is not aimed at generating additional revenues. In addition, we will harmonise the Customs and Excise duty rates for beer and stout. The new rates are set out in Annex D.

Reviewing Asset Taxes

We mentioned in 2006 that we will review our asset taxes including estate duty. I have decided to postpone a verdict on this. There have been many calls to rationalise the structure of estate duty on residential properties and other assets respectively. I prefer to take this together with the decision on whether we will retain estate duty.