Land Betterment Charge Bill – Speech by Chua Kheng Wee Louis

Delivered in Parliament on 10 May 2021

Before I begin Mr Speaker, I would like to declare my interest as a research analyst covering the real estate sector.

Mr Speaker, for a relatively small island state like ours, land is often said to be a scarce and non-renewable resource. This is notwithstanding of course, that Singapore’s land area stands at around 726 square kilometres as at 2019, about 140 square kilometres or 24% higher than what it was 50 years ago. After all, there is a hard limit to the amount of land reclamation that can be carried out in our waters. It is thus essential that we focus on optimising Singapore’s land use, so as to extract the maximum socioeconomic benefits for all Singaporeans.

Optimising land use has come a long way in Singapore, starting with the amendment of the Land Acquisition Act in 1966, following Singapore’s independence. Back in 1964, then- Prime Minister Mr Lee Kuan Yew shared two broad principles on land acquisition. The first is that no private landowner should benefit from development which had taken place at public expense, and second, prices paid on acquisition for public purposes should not be higher than what the land would have been worth, had the Government not contemplated development generally in the area.

With these principles in mind, the Land Acquisition Act was subsequently amended to strengthen government powers to acquire land, and to limit compensation. At the debate on the land acquisition bill, Mr E.W. Barker, then Minister for Law and National Development concluded that: “There has not been a word of criticism. I have nothing much to add except to say that I am glad that our Back-benchers have realised the importance and the necessity for this piece of socialist legislation.”

The Land Acquisition Act has since been amended given changing circumstances, with the 2007 amendment providing for compensation based on the prevailing market value of the acquired land. But why are all these important?

The effect of legislation has meant that from 1960 to 2007, land owned by the public sector doubled from 44% to over 85%. Effectively, the Government has become the largest land owner and landlord, with the ability to simultaneously control both demand and supply through policy levers. Critically, the Government also has the ability to extract monetary value from land, throughout the course of time, with land having characteristics of a renewable resource and not a finite one.

Firstly, I stand corrected, but it is the policy of this Government that for leasehold land sold, at the end of the land lease tenure, land will revert to the Government for free, and would thus be available for sale once again. Second, stamp duties would provide for taxes to be

collected when sale or rental transactions occur while thirdly, property taxes are collected on an annual basis.

The land betterment charge, would be one additional mechanism, the principles of which I agree with, as it would allow for the collection of a tax on the increase in the value of land, resulting from a chargeable consent given in relation to land. For example, what used to be a low rise carpark and hawker centre in the heart of the CBD, is set to be transformed into a modern, mixed use commercial complex rising to a height of 280m, one of the tallest buildings in Singapore. While the size of the land plot has not changed, the implied land value has soared considerably. The land betterment charge would thus be a logical policy lever to allowing for value capture by the state for the public good.

Specific to the land betterment charge, I note that it is to be collected by the Singapore Land Authority and replaces the taxes known as the development charge and temporary development levy imposed today under the Planning Act, and the collection of differential premium by the SLA. The streamlining of legislation, and easing of administrative burden would thus be much appreciated by private developers and public officers alike. That said, I do have a number of specific clarifications to raise on the land betterment charge.

First on the quantification of land betterment charges. Clause nine sets out the two methods to be used in assessing the amount of land betterment charge. The table of rates method and the valuation by designated valuers method. Today, development charge rates are reviewed on a half-yearly basis in consultation with the Chief Valuer. The table of DC rates are broken down into 118 geographical sectors and nine different use groups. Can the minister clarify how the table of rates would be assessed, and how would it be different from the current DC regime? How much were DC collections on an annual basis in the past, and how would this differ with the switch to a land betterment charge?

Conceptually, almost all developments benefit from existing amenities and infrastructure, so it is also fair that those who benefit financially when planning permission is given should share some of that gain with the community. However, it is also difficult to quantify the land value increment resulting from infrastructure investments. With valuation being a subjective matter, how would, for example, aggrieved landowners seek recourse for any disagreements in land valuation and land betterment charges, whether it is assessed under the table of rates method or valuation method?

Second, with the blurring of lines across use groups and greater creativity in land use optimisation, we are already seeing retail malls of today house co-working offices, while it is increasingly common to have lifestyle and hospitality provisions in Grade A office buildings. How would the SLA ensure that its table of rates is a dynamic one and not based on static, singular interpretations of land uses?

Third, on the powers conferred on the Minister. Clause 12 confers power on the Minister to exempt any person or class of persons from all or any of the provisions of the Bill, either generally or in a particular case and subject to such conditions as the Minister may impose. How is this exercise of legislative power safeguarded, and what would the conditions entail? Have similar exemptions been exercised in the past and what were the circumstances behind it back then?

Fourth, clause 13 empowers the Land Planning Minister to provide for concessionary relief from land betterment charges assuming certain conditions are being made. In practical terms, who would be the land planning minister, and wouldn’t the conditions under sub- section (2)(a), (b) and (c) be desirable, loosely defined conditions that we would expect out of property development in Singapore regardless? To cite from the act, these include, the desirability of the proposed development or subdivision of any land in achieving economic development, or maintaining the cultural, economic, physical and social wellbeing of the people of Singapore and the community in the area concerned.

Fifth, on the liability of lessee or occupiers. Under clause 35, should the taxable person makes default in payment of any land betterment charge, the lessee or occupier will be liable for payment, notwithstanding that any such payments constitutes a valid discharge for rent or payments due. While this would simplify recovery efforts, is such a clause fair to the tenants, and shouldn’t efforts be focused on the defaulting party instead?

Finally, on the management of monies collected from the land betterment charge. Clause 5 sets out admirable causes for imposing a land betterment charges, including among others, ensuring the return to the community of an appropriate proportion of economic benefits from the grant of rights to develop or otherwise use land, and to promote or encourage environmentally sustainable development or use of land. Would the land betterment charges collected from the development be earmarked for the community in question? And how would the SLA enforce the requirement for environmentally sustainable development?

To round up Mr Speaker, I agree with the purpose of the land betterment charge, and recognise it is one of many ways in which land in Singapore can be continuously monetised by the Government to provide for recurring revenue throughout the course of time; although I recognise that at this point in time, this Government does not take into its operating budget, the recurring annual land sales revenue of about $14.5 bn on average. With Singapore’s budget not inclusive of land sales revenue, it is worth considering realigning the focus in the sale of state land from one of revenue maximisation, in that land is awarded to the highest bidder, to one in which the greatest value uplift can be provided, and the greatest socioeconomic good generated, similar to that as encouraged by the land betterment charge.