Opening Remarks By Minister Richard Hu, at The New Singapore Shares Media Briefing, 16 October 2001, 9.00am

Singapore Government Press Release
Media Division, Ministry of Information and The Arts,
MITA Building, 140 Hill Street, 2^nd Storey, Singapore 179369
Tel: 837-9666

OPENING REMARKS BY THE MINISTER FOR FINANCE, DR RICHARD HU AT THE NEW SINGAPORE SHARES MEDIA BRIEFING AT THE TREASURY, AT 9AM, TUESDAY 16 OCTOBER 2001

The New Singapore Shares Scheme was conceived by PM Goh as a new way of sharing Singapore’s success with our citizens. It will supplement and not replace the CPF Top-Up scheme. It was first revealed by PM Goh at the National Day Rally speech and announced by DPM Lee in Parliament last Friday. This morning, we are releasing the full details of the scheme. Total cost of the scheme is $2.7 billion.

The NSS has two features which distinguishes it from the CPF Top-Up scheme. First, it allows part of the shares to be withdrawn in cash almost immediately. This feature is especially useful for persons who need some cash during this difficult period. The second is that the shares, if saved, will earn interest at a basic 3% and more if the economy does well. The NSS provides investment returns tied to our GDP growth via the dividends declared. There is a guaranteed minimum of 3% per annum, which is higher than fixed deposit rates offered by banks today. This means that NSS holders will benefit most if they hold on to their shares until 2007. On top of that, extra dividends will be declared yearly, equal to the real GDP growth rate (if positive) of the previous calendar year. Both the NSS and dividends are exempt from tax.

Those who qualify will receive a basic package of 200 to 1400 New Singapore Shares, depending on their income for those who are employed, and on their housing type for those who are not employed. The self-employed will receive according to their housing type, unless they qualify for less according to their income level. There are five bands – about 21% will be getting the largest basic amount of 1400 shares, 25% the second largest of 1000 shares, 23% getting 600 shares, 12% getting 400 shares and 19% getting 200 shares. Extra shares are given to those who have served NS – 200 additional NSS for Active NSmen and 100 for Inactive NSmen. Another extra 200 shares are also given to those who have reached the retirement age of 62 years old. All in, qualifying Singaporeans will be allotted 200 to 1700 shares each

Everyone who is already getting the ongoing 2000/2001 CPF Top-up (which will next be paid on 1 December 2001) automatically qualifies for the NSS. Those who do not qualify for the CPF Top-up can still get the NSS if they contribute at least $50 in their CPF Account between 1 January and 31 December this year. Depending on when the $50 contribution is made, the NSS will be credited on 1 November 2001, 1 December 2001, or 15 January 2002. But no matter when the NSS is credited, dividends will be calculated from 1 November 2001, with the first dividend paid on 1 March 2002, and subsequent dividends at one year intervals until the maturity of the scheme on 1 March 2007.

Unlike CPF Top-ups which can be withdrawn only under CPF rules, the NSS can be exchanged for cash at any time. There are no conditions to exchanging the NSS for cash, other than a 50% limit for the first year before 1 November next year, and a minimum withdrawal of $200 each time. After 1 November 2002, NSS holders can exchange 100% of their holdings for cash at any time, although they should do this only if they need the cash, because the dividend rates are very attractive compared to bank deposit rates.

The fastest and most convenient way to get cash from any NSS exchange is to request for direct bank credit through the Internet or CPF PAL Phone. How long it takes to process the application will depend on how large is the number of people applying at the same time. The maximum processing time will be two weeks if the NSS holder gives his bank account number to the CPF Board for direct credit to his bank account. It will be three weeks if the NSS holder does not declare his bank account and a cheque has to be mailed to him. Special arrangements have been made for the first possible payment to be on 2 November 2001, for those in a hurry to exchange their NSS for cash.

The NSS is only one of the measures in the off-budget package designed to particularly help the lower income, who will benefit less from the tax rebates. We have given you typical cases of low, middle and high income households, showing the combined impact of NSS and the other off-budget measures on their finances. We have similarly included typical cases for SMEs and big corporations.

My Ministry officers and the CPF Board will now provide you the details on the NSS. Thank you.

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Low-Income Household - The Tan Family

The Tan family lives in a 2-room rental flat. Mr Tan is 45 years old. He’s worried about making ends meet--two months ago, he was retrenched from his job as a production operator which paid him $1000 a month. Mrs Tan works as an office cleaner, which brings in $750 a month for the family.

Their 20-year old son, Ah Dee, is studying engineering at NUS. Though he gets an NUS bursary of $1500 per year which helps the family pay for his tuition fees of $5650, the family is worried about scheduled tuition fee hikes of $150 per year over the next two years. The Tan family also has a daughter studying in a secondary school.

Benefits and savings

NSS shares. As a non-NS man, Mr Tan will get $1400 worth of New Singapore Shares. So will Mrs Tan. They can cash out half of the $2800 straightaway.

S&C rebates. With the new off-budget package, the family will also benefit from monthly service and conservancy (S&C) rebates of $7, and not have to pay S&C charges for 4 months in March, June, September and December in 2002. Under the previous S&CC rebate package announced by the Minister of Finance in the Budget in March, they won’t be paying S&C charges for October and December either. On top of that, they get $7 per month in monthly rebates.

Utilities rebates. With the extension of Utilities Save, a scheme to help HDB households with their utilities bill, they will be getting $350 spread out over ten months, or $35 a month from July 2002, when the current scheme ends.

Rental rebates. Under the rental rebates scheme announced in the Budget this year, the Tan family is already getting $8 per month of rental rebates, and needn’t pay rental charges for December. The family will get another year of rental rebates with the off-budget package--$8 a month each month for another year, and two months of rent-free months even when the current yearlong scheme ends in March.

The above benefits would amount to about $3,511.

	a.	$
	NSS shares for father	1400
	NSS shares for mother	1400
	S&C rebates announced in Budget 2001	162
	Rental rebates announced in Budget 2001	199
	Utilities Save announced in Budget 2001	350
	Total	3511

Further assistance scheme announced in off-budget package

Upgrading. Under the Skills Redevelopment Programme, one may receive a training allowance of 75% of one’s last drawn salary or $1,000 per month, whichever is lower, if one undergoes full-time training under the Surrogate Employer Scheme. If Mr Tan chooses to attend a full-time course to upgrade his skills, he can receive $750 training allowance per month under the Skill Redevelopment Programme as his last drawn salary is $1,000.

Tuition fee freeze. For Ah Dee, he is glad to hear that tuition fees for all polytechnic and undergraduate courses will be frozen for next year, instead of rising by $150 as was initially announced in January.

Economic downturn relief scheme. As Mr Tan has lost his job, he may apply for assistance of up to $200 per month for three months for essential expenses such as school fees, school transport and food.

Rental and Utilities Assistance Scheme (RUAS). The Tan family may also apply for temporary financial aid in the payments for rent, utilities and S&C charges for 6 months.

Medical assistance. If any immediate family member of a retrenched Singaporean (ie. non-working spouse and children) is hospitalised in a restructured institution, he/she will be eligible for additional fee assistance on the medical bill, besides the automatic 10% fee rebate given for all Singaporean class B2/C and subsidised day surgery patients. For example, if Mr Tan’s daughter is hospitalised for 4 days in a class C ward due to, say, acute appendicitis, the bill could come to about $600. There will be a 10% fee rebate of $60 given on the bill. As Mr Tan is retrenched, he can apply for additional help to cover a further 40% of the bill. Total bill payable is then $300 (ie. after a total of 50% reduction in the bill). The Tan family may use their Medisave savings to pay the $300 bill. If, for some reason, despite the fee assistance and they are still in genuine financial hardship, they could approach the Medical Social Worker for further assistance.

Middle-Income Household - The Ahmad Family

The Ahmad family lives in a 4-room HDB flat. Mr Ahmad is an active Nsman and earns $2550 per month as an assistant mechanical engineer while Mrs Ahmad earns $1100 per month as a library attendant. They have 2 school going children who are below 12 years old.

NSS shares. As an active NSman, Mr Ahmad will get $800 worth of New Singapore Shares while Mrs Ahmad will receive $1400 worth of New Singapore Shares . They can cash out half of the $2200 straightaway.

S&C rebates. With the new off-budget package, the family will not have to pay S&C charges for 3 months in March, June and December in 2002. Under the previous S&CC rebate package announced by the Minister of Finance in the Budget in Feb 2001, they won’t be paying S&C charges for December 2001 either.

Utilities rebates. With the extension of Utilities Save, a scheme to help HDB households with their utilities bill, they will be getting $300 spread out over ten months, or $30 a month from July 2002, when the current scheme ends.

Tax Rebates. With the new off-budget package, taxpayers will enjoy an additional 5% tax rebate, on top of the 10% rebate announced in 2001 Budget Statement. Mrs Ahmad’s annual income, assuming a 13^th month bonus, is $14,300. She is not taxable even without the 15% tax rebate as a result of the $500 rebate. However Mr Ahmad pays tax. His annual income, assuming a 13^th month bonus, is $33,150. As a result of the 15% tax rebate, he saves $90. His net tax payable is $11 in 2001. Mr Ahmad will enjoy a 10% tax rebate in 2002, as announced in the off-budget package.

The Ahmad family will enjoy $2,334 of benefits from the NSS shares, S&C rebates, Utilities Save and the 15% income tax rebate.

Computation

	Mrs Ahmad’s tax calculation	$
1	Annual income	14300
	Less Personal relief	3000
	Earned income relief	1000
	CPF relief- 20% of income	2860
	Enhanced child relief for first child-5% income	715
	Enhanced child relief for second child-15% income	2145
	Relief for wife of NSman	500
2	Total reliefs	(10220)
3	Total chargeable income	4080
4	Tax payable	81
5	Less $500 rebate	(500)
6	Net tax payable	Nil

	Mr Ahmad’s tax calculation	$
1	Annual income	33150
	Less Personal relief	3000
	Earned income relief	1000
	CPF relief- 20% of income	6630
	Child reliefs for 2 children	4000
	Nsman relief	2000
2	Total reliefs	(16630)
3	Total chargeable income	16520
4	Tax payable	601
5	Less 15% rebate	(90)
6	Less $500 rebate	(500)
7	Net tax payable	11

	Total Benefits	$
	NSS shares for father	800
	NSS shares for mother	1400
	S&C rebates	144
	Utilities Save	300
	15% income tax rebate for father	90
	Total	2734

High-Income Household - The Ravi Family

The Ravi family lives in a private condominium. Mr Ravi is an active Nsman and earns $8,000 per month as a corporate planning manager while Mrs Ravi earns $4,500 per month as an editor of a periodical. They have 2 school going children who are below 12 years old. The Ravi family owns a car.

NSS shares. As an active NSman, Mr Ravi will get $400 worth of New Singapore Shares while Mrs Ravi will receive $200 worth of New Singapore Shares. They can cash out half of the $600 straightaway.

Tax Rebates. With the new off-budget package, taxpayers will enjoy an additional 5% tax rebate, on top of the 10% rebate announced in 2001 Budget Statement. The annual income of Mr Ravi and Mrs Ravi are $104,000 and $58,500 respectively, assuming a 13^th month bonus. As a result of the 15% tax rebate, Mr Ravi and Mrs Ravi will save $1256 and $243 respectively. Mr Ravi’s net tax payable is $6,619 while Mrs Ravi’s net tax payable is $880. If Mr Ravi and Mrs Ravi have already paid their tax, they will receive a refund, equivalent to a 5% tax rebate, of $419 and $81 respectively. The Ravi family will enjoy a 10% rebate in 2002.

Road tax rebates and reduction in petrol duties. With the off-budget package, the Ravi family will receive a $100 road tax rebate and save $180 from the reduction in petrol duties.

The Ravi family will enjoy $2,379 of benefits from the NSS shares, 15% income tax rebate, road tax rebate and reduction in petrol duties.

Computation

	Mrs Ravi’s tax calculation	$
1	Annual income	58500
	Less Personal relief	3000
	Earned income relief	1000
	CPF relief- 20% of income	11700
	Enhanced child relief for first child-5% income	2925
	Enhanced child relief for second child-15% income	8775
	Relief for wife of NSman	500
2	Total reliefs	(27900)
3	Total chargeable income	30600
4	Tax payable	1623
5	Less 15% rebate	(243)
6	Less $500 rebate	(500)
7	Net tax payable	880

	Mr Ravi ’s tax calculation	$
1	Annual income	104000
	Less Personal relief	3000
	Earned income relief	1000
	CPF relief- 20% of first $6000 wage	16000
	Child reliefs for 2 children	4000
	Nsman relief	2000
2	Total reliefs	(26000)
3	Total chargeable income	78000
4	Tax payable	8375
5	Less 15% rebate	(1256)
6	Less $500 rebate	(500)
7	Net tax payable	6619

	Total Benefits	$
	NSS shares for father	400
	NSS shares for mother	200
	15% income tax rebate for father	1256
4	15% income tax rebate for mother	243
5	Road tax rebate and reduction in petrol duty	280
	Total	2379

Small and Medium Enterprise

ABC is a realty company with an office at Henderson Road. For YA 2001 and 2002, the company makes taxable profit of $50,000 per year. The annual value of the property for the years 2001 and 2002 is $75,000.

Income tax. Before the introduction of the off-Budget package on 12 Oct 2001, ABC has to pay income tax of$12,750 in YA 2001 and $5,512.50 in YA 2002. With the corporate tax rebate, ABC’s corporate tax payable is reduced to $6,375 in YA 2001 and $5,236.87 in YA 2002.

Property tax. Before the introduction of the off-Budget package on 12 Oct 2001, ABC has to pay property tax of $7,125 in 2001 and $7,500 in 2002. With the property tax rebate, ABC’s property tax payable is reduced to $3,375 in 2001 and nil in 2002.

Petrol Duty and Vehicle Rebate. In addition, the reduction in petrol excise duty from 40% to 35% and the provision for a one-time rebate for cars, taxis, goods vehicles, etc will help ABC keep the transportation costs down.

LEFS. Furthermore, the Government will enhance the Local Enterprise Finance Scheme to allow local enterprises like SMEs (such as ABC) to have easier access to funds.

ABC will enjoy total corporate tax savings of $6,650.63 and total property tax savings of $11,250.00. The rebates will result in total tax savings of $17,900.63, a 54.4% reduction in the total corporate and property taxes that ABC is required to pay.

Computation

Before the introduction of the corporate tax rebate and property tax rebate announced in the off-Budget package on 12 Oct 2001, ABC has to pay income tax and property tax computed as:

For the Year 2001		For the Year 2002		Total

Income Tax for YA 2001		Income Tax for YA 2002

Chargeable Income	$50,000	Taxable income	$50,000
		Less : Exemption	$27,500
		Chargeable Income	$22,500
Tax @ 25.5%	$12,750.0	Tax @ 24.5%	$5,512.50	$18,262.50

Property Tax for 2001		Property Tax for 2002

Annual Value	$75,000	Annual Value	$75,000
Property Tax @ 10%	$8,250.00	Property Tax @ 10%	$7,500.00
Less: PT Rebate	$1,125.00	Less: PT Rebate	$0.00
Tax Payable	$7,125.00	Tax Payable	$7,500.00	$14,625.00

With the corporate tax rebate and property tax rebate, the total corporate and property tax payable for the years 2001 and 2002 is calculated as follows:

For the Year 2001		For the Year 2002		Total

Income Tax for YA 2001		Income Tax for YA 2002

Chargeable Income	$50,000	Taxable income	$50,000
		Less : Exemption	$27,500
		Chargeable Income	$22,500
Tax @ 25.5%	$12,750.00	Tax @ 24.5%	$5,512.50
Less : CT Rebate	$6,375.00	Less : CT Rebate	$275.63
Tax Payable	$6,375.00	Tax Payable	$5,236.87	$11,611.87

Property Tax for 2001		Property Tax for 2002

Annual Value	$75,000	Annual Value	$75,000
Property Tax @ 10%	$8,250.00	Property Tax @ 10%	$7,500.00
Less: PT Rebate	$4,875.00	Less : PT Rebate	$7,500.00
Tax Payable	$3,375.00	Tax Payable	$0.00	$3,375.00

Big Corporations

GHI is a large manufacturing company with an industrial factory in Jalan Besar. For YA 2001 and 2002, the company makes taxable profit of $2,000,000 per year. The annual value of the property for the years 2001 and 2002 is $100,000.

Income tax. Before the introduction of the off-Budget package on 12 Oct 2001, GHI has to pay income tax of $510,000 in YA 2001 and $477,137.50 in YA 2002. With the corporate tax rebate, GHI’s corporate tax payable is reduced by $36,975 in YA 2001 and $23,856.87 in YA 2002.

Property tax. Before the introduction of the off-Budget package on 12 Oct 2001, GHI has to pay property tax of $9,500 in 2001 and $10,000 in 2002. With the property tax rebate, GHI’s property tax payable is reduced to $5,200 in 2001 and $1,400 in 2002.

Petrol Duty and Vehicle Rebate. In addition, the reduction in petrol excise duty from 40% to 35% and the provision for a one-time rebate for cars, taxis, goods vehicles, etc will help GHI keep the transportation costs down.

GHI will enjoy total corporate tax savings of $60,831.87 and total property tax savings of $12,900. The rebates will result in total tax savings of $73,731.87, a 7.32% reduction in the total corporate and property taxes that GHI is required to pay.

Computation

Before the introduction of the corporate tax rebate and property tax rebate announced in the off-Budget package on 12^th Oct 2001, GHI has to pay income tax and property tax computed as:

For the Year 2001		For the Year 2002		Total

Income Tax for YA 2001		Income Tax for YA 2002

Chargeable Income	$2,000,000	Taxable income	$2,000,000
		Less : Exemption	$52,500
		Chargeable Income	$1,947,500
Tax @ 25.5%	$510,000.00	Tax @ 24.5%	$477,137.50	$987,137.50

Property Tax for 2001		Property Tax for 2002

Annual Value	$100,000	Annual Value	$100,000
Property Tax @ 10%	$11,000.00	Property Tax @ 10%	$10,000.00
Less: PT Rebate	$1,500.00	Less: PT Rebate	$0.00
Tax Payable	$9,500.00	Tax Payable	$10,000.00	$19,500.00

With the corporate tax rebate and property tax rebate, the total corporate and property tax payable for the years 2001 and 2002 is calculated as follows:

For the Year 2001		For the Year 2002		Total

Income Tax for YA 2001		Income Tax for YA 2002

Chargeable Income	$2,000,000	Taxable income	$2,000,000
		Less : Exemption	$52,500
		Chargeable Income	$1,947,500
Tax @ 25.5%	$510,000.00	Tax @ 24.5%	$477,137.50
Less : CT Rebate	$36,975.00	Less : CT Rebate	$23,856.88
Tax Payable	$473,025.00	Tax Payable	$453,280.63	$926,305.63

Property Tax for 2001		Property Tax for 2002

Annual Value	$100,000	Annual Value	$100,000
Property Tax @ 10%	$11,000.00	Property Tax @ 10%	$10,000.00
Less : PT Rebate	$5,800.00	Less : PT Rebate	$8,600.00
Tax Payable	$5,200.00	Tax Payable	$1,400.00	$6,600.00