Delivered in Parliament on 27 July 2021
Mr Speaker, it is unfortunate that while Finance Minister Mr Lawrence Wong spoke about making plans for living with endemic COVID-19, and seeing light at the end of the tunnel, we are still grappling with lockdown measures and triple digit daily cases, with the explosion of cases first at the KTV cluster and then the Jurong Fishery Port cluster.
F&B is at the heart of Singaporeans’ lives, and the number one feedback I have been receiving is that relating to the F&B sector. I am concerned that frequent venue closures for faults not of their own doing, and changes in rules pertaining to dining-in, has led to disproportionate hardship for small operators who may already be facing substantial financial pressures. From the multiple permutations of what dine-in arrangements are allowed, which has spawned numerous memes and suggested PSLE questions, to a total ban on dining in, F&B operators and consumers alike are frustrated by the capricious climate we have today. Even as the Multi-Ministry Taskforce shared an optimistic roadmap to re-opening, we are still told that we must be prepared that the new variants can lead to more severe outbreaks, and may well force us to introduce restrictions again from time to time.
Furthermore, all businesses need a level of visibility in order to plan ahead, including adequate lead time to purchase fresh supplies and secure any additional staffing. My colleague and Sengkang MP Ms He Ting Ru has shared more about the importance of consistency in our restrictions. Because to many businesses small or large, local or foreign, F&B or not, the Singapore which was known for business certainty and a stable, predictable regulatory framework is now seen to be supplanted by a capricious regulatory environment when it comes to the management of COVID.
Outside of the FAQs around the F&B and business sector and more generally, to many Singaporeans who have been tirelessly trying their best to cope with the pandemic over the last one and a half years, that light at the end of the tunnel now seems like the headlights of an incoming train. Troubling as that metaphor may be, it is all the more important for us to think hard about how to better support our fellow Singaporeans at the present moment, while making fundamental changes to better prepare ourselves for the future.
My speech today will cover three main areas, supporting our workers, supporting our SMEs and supporting our future economy.
Firstly, on supporting our workers. I have earlier asked a PQ on whether the Government can consider a limited trial of a four-day work week in Singapore.
COVID-19 has pushed companies to rapidly adopt new behaviours that would stick and change the trajectory of what it means to “work”. For instance, companies who are known to be averse to Flexible Work Arrangements (FWA) are now open to the idea of their employees working remotely. A report by McKinsey has shown that 20-25% of the workforce in advanced economies could work from home between three and five days a week. This represents four to five times more remote work than before the pandemic. While this study was conducted on a global level, it is evident that there has been a seismic shift in the workforce culture.
This brings me to my point on what it means to “work”. Over the past year, the idea of a shorter work week has resurfaced. This is not a new concept. Prime Minister Lee had previously shared during the 2004 National Day Rally on the need for a better work life balance. Why is this so important?
I quote, “I am not sure why, but hours have become longer, the pace is more intense. Maybe it’s the Internet, maybe it’s email, maybe it’s globalisation, but whatever it is, you wake up at six o’clock in the morning, you check your email. Eleven o’clock at night, before you go to sleep, you check it again and next morning, you come back, somebody replied at 2.00 am. How to have children?” While not the only reason for our low birth rates, the “five-day work week” has gone beyond its intended definition and consumed our daily lives.
Echoing PM’s speech, the four-day workweek is indeed a pragmatic policy consideration that has already been tried and tested by companies and countries worldwide. Most of us would have heard the case of Microsoft Japan, who had experienced a 40% increase in productivity and an overall 94% employee satisfaction rate. Iceland’s four-day work week trials were also deemed, “an overwhelming success”, with trials in Spain also underway.
That being said, I am conscious of the fact that not every employee has the privilege to complete their tasks in a four-day work week. Those who deal with external parties, especially, are subjected to the whims and fancy of their clients’ schedule.
To institute a shorter work week, it is essential for us as a society to recognize the benefits in the form of not only the elusive productivity gain we have been searching for, but more importantly, focus on allowing people to become “fuller” people outside of their jobs. As what Microsoft had done, they have encouraged employees to use the free time for “self-development and learning… for personal life and family care, social participation and community contribution”.
If we adopt a shorter work week with the right mindset, the benefits of better mental health, productivity, and agency felt on the individual level, will translate to society-wide benefits as well.
Secondly, on supporting our SMEs. The close to 280,000 SMEs represent 99% of enterprises in Singapore, and critically, employ more than 70% of our workers and contributed to 43% of our GDP in 2020 and are critical to the health of our economy.
I have asked a series of questions on Singapore’s corporate income tax rates and the impact from the global tax reforms endorsed by the G7, G20 and more than 130 countries globally, including Singapore. First of all, I am comforted to hear from Minister Lawrence Wong that Singapore will preserve our sovereign tax rights and our rights to taxation.
However, while Minister Wong shared in his response that our effective corporate tax rate is low, not just for MNCs, for all companies, especially for SMEs in Singapore. I note from the data provided for the latest year of assessment 2019, that our effective corporate income tax rates are at a mere 3% compared to statutory tax rates of 17%. For non-SMEs, their total profits before tax were S$459 billion for YA 2019 with the total corporate income tax paid of S$11.5 billion. For SMEs however, and this includes companies with turnover of up to S$100 million, their total profits before tax were S$44 billion for YA 2019 with the total corporate income tax paid of S$4.8 billion.
In other words, while SMEs accounted for a mere 9% of total profits before tax in YA2019, SMEs contributed to 29% of corporate income tax paid. Put in another way, for every hundred dollars of profit, SMEs paid $11 to the government in taxes vs. non-SMEs who only paid $2.50 in corporate taxes.
Could we not shift the incidence of taxation away from our local SMEs who need all the support we can give, towards larger MNCs who are better positioned financially and are currently paying a disproportionately lower share of corporate income taxes?
Rather than view global tax reforms as a threat, I see it as a clear opportunity for Singapore, given our global competitiveness and solid non-tax factors that make Singapore attractive to global MNCs. The key here is that global MNCs are not worse off if Singapore exercises our rights to taxation vis-à-vis the global minimum tax rates, but instead, given where effective tax rates in Singapore are today, Singaporeans will be able to benefit tremendously from the sizable additional revenue headroom that could be generated from corporate income tax revenues should these reforms be enacted globally come 2023. Perhaps by then, it would be timely for us to revisit the issue of raising GST from 7% to 9%!
Another point on the support of SMEs relate to the Jobs Support Scheme or JSS. I recognise that the extension of JSS support that the MOF has provided will go some way towards providing affected sectors some cost relief. After all, every dollar counts in this tight business environment. I also recognise that some sectors have been more affected by COVID-19, hence the differentiated JSS support.
However, as I have shared in my speech on the debate on ministerial statement in October last year, it would be more effective to direct a higher proportion of JSS payouts from the scheme towards SMEs, who make up a bigger proportion of jobs saved in comparison to larger MNCs, which tend to have more resources on hand to tide them through the crisis. A global fast food chain with more than US$20 billion of revenues could certainly weather the crisis much better than our neighbourhood coffeeshop uncle selling wanton mee.
Further, based on data from Singstat, we observe that employment of SMEs declined from 2.52 million in 2019 to 2.36 million in 2020, or about a 160,000 decline in the number of workers. This is a staggering eight times more than the 20,000 YoY decline in employment numbers for non-SMEs. If the role of the JSS is to allow companies to better retain their local employees, then the results do leave much to be desired on this front.
This brings me to my third point about supporting our future economy.
While the current relief measures are no doubt useful, and could be funded via a reallocation of resources, ultimately, we may need to think of implementing automatic stabilisers instead of discretionary ad-hoc schemes, as I have mentioned in my maiden speech.
In a policy brief published in January 2021 by the Peterson Institute for International Economics, Peter Orszag, Robert Rubin and Joseph Stiglitz called for the idea of a semi-autonomous discretionary fiscal architecture based on automatic stabilisers. They propose a new approach in which “fiscal discretion is retained but exercised after making the budget adjust more automatically and rapidly in areas where there is broad consensus that doing so is consistent with achieving broader societal goals.”
Using an example in the local context, direct assistance to companies, such as the Jobs Support Scheme, could arguably provide indirect support to employment. Yet, many have still lost their jobs, even as the companies they work for receive JSS subsidies. Rather than providing blanket wage subsidies across companies, it is perhaps the workers themselves that are most in need of direct support and financial buffers in the event of unemployment.
The Workers’ Party has been calling for an unemployment insurance scheme for years, and I am glad that others in this house such as the honourable Mr Patrick Tay also recognised earlier this year that it is timely for us to consider introducing some form of unemployment insurance. I look forward to hearing more about progress in this area.
To conclude Mr Speaker, I am heartened by Finance Minister Lawrence Wong’s assurance that the government will not hesitate to use the full measure of our fiscal firepower to protect the lives and livelihoods of Singaporeans. I hope the Government will follow through on its assurance, and give due consideration to the pointers I have brought out today, to support our workers, our companies and our future.