Letter published in the Straits Times on 25 Feb, in response to its editorial on Saturday

Below is my letter published in the ST on 25 Feb, in response to its editorial on Saturday:

The editorial "NS Tax would cheapen a solemn duty" (ST 23 February) says all the right things, but avoids the difficult issues.

The editorial agrees with me that distinctions between Singaporeans and foreigners "can be sharpened", but warns against the danger "of going too far". But what is "too far"? The editorial also acknowledges the problem I highlighted of PRs skipping their NS obligations, and states that "measures ... can be tightened". Again, the crucial question is how?

Motherhood statements are fine, but the devil, as always, is in the details.

It is also wrong to label proposals to sharpen the distinction "xenophobic", because that assumes that current policies are already fair and incapable of rational change. We should not resist reviewing and changing existing policies, provided such changes are logical and principled, and in the interests of Singapore.

My proposal of a defence tax is a specific proposal. It does not put a price on NS obligations. NS obligations are important and must be enforced by law and punishment if necessary. But what about those who escape their NS obligations or who have no such obligations? They benefit from others doing NS. They should contribute too.

Taxation is not a unique solution. A Swiss citizen who is liable to perform military service, but is unable or fails to complete his obligation must pay an exemption tax. It is a practical response to a practical problem. It is not seen as cheapening national service. My proposal does not go so far as the Swiss. I do not agree that anyone should be able to avoid NS obligations by making payment.

It is easy to use a loaded word such as "cheapen" when talking about taxes. But it is unfair. If we offer tax breaks for families to have kids, are we "cheapening" children? And did the ST label the $9000 grant to NSmen announced by the Prime Minister as cheapening NS? The fact is that taxation is a legitimate means of distributing benefits and burdens. All I am suggesting is to have foreigners and PRs share the burden that our NSmen already shoulder."

PS: The Budget just delivered by DPM Tharman evidences a significant shift in our taxation policy. Those who are wealthy will pay more in taxes to help those who are less well off. Taxation has long been used as a tool to effect social change, and we are likely to see more of such changes in the future.

National Defence Duty – A Brief Rebuttal

There were two main criticisms of my proposal: it is xenophobic, and it “cheapens” National Service placing a monetary value to its performance. Let me briefly deal with them.

Xenophobia

Some label the proposal xenophobic because it is “populist” and “pandering”, and pits Singaporeans against others. The problem with this argument is that it makes the fundamental assumption that the situation we have now is already equitable and therefore any change can only be for populist reasons.

I think many will disagree with that. Indeed, the responses that have been posted debunk any suggestion of xenophobia – see my post “National Defence Duty – A Consolidation”. Most want a re-balancing, but in a principled way that will enable better integration and that those who come to Singapore simply for economic reasons should acknowledge that they are able to do so because of others who do National Service. I do not see that as being xenophobic.

The question is therefore simple: is the current situation equitable? If yes, we leave things be. If not, how can we make it fairer? And to answer this question, we need to have practical and effective solutions, otherwise the issue will not be resolved.

Money

Having spent 2.5 active and many reservist years in the infantry myself, the last thing I want to do is to “cheapen” National Service.

Taxing foreigners to make up for their ineligibility to serve NS does not equate to putting a value on NS. Neither does giving monetary rewards. But we do that anyway, such as giving reservists a modest tax break every year. We all know it is symbolic and no one argues that it puts a value to, or cheapens, reservist duties.

Indeed, placing an economic value on National Service is not a new concept. As one commenter pointed out, in Switzerland, any person who does not fulfil his military service obligation must pay an exemption tax of 3% on his taxable income each year. It is not about valuing the service or buying your way out. It is about giving recognition to those who do their duty, and tax breaks, benefits and penalties are often used as a tool to facilitate that. We also do it for other causes too, like parent relief for our income tax. No one argues that values or cheapens the obligation of looking after loved ones.

I had in my first post talked about the real and significant economic cost which Singaporean men pay when they perform National Service. Most of us served because we believed in the cause, and we do not begrudge that cost. That is however, a separate issue from getting those who do not perform National Service, but benefit from it, to contribute like the rest of us, albeit in a different way.

As I said in my first post, it is not a perfect solution. But it will be difficult to find a practical and effective solution with universal appeal, as the many different views I have received amply demonstrate.

Thanks for reading.

National Defence Duty – A Consolidation

My suggestion of a national defence duty has sparked a lively debate. I would like to thank you for the many comments and suggestions you have posted. There has certainly been a wide spectrum of views.

Notably, very few have suggested leaving things as they are.

My takeaway so far is that while most believe the system can and should be made more equitable, it is also important that we improve our efforts to integrate Singaporeans (new and old) and non-Singaporeans. As part of that integration, we would like to see new citizens and PRs demonstrate that they do not regard Singapore simply as an economic opportunity to be exploited. That is why National Service touches a raw nerve – it is the clearest marker we have of loyalty and commitment. It therefore rankles when we perceive others as having an easy way out.

It is clear that most want some form of re-balancing. The issue is what form that should take - whether monetary, compulsory service or a combination of both. The sense I get from the responses is that it should be different for different groups: more emphasis on compulsory service for PRs and new citizens, and more emphasis on monetary for foreigners (excluding low wage foreign workers).

There has been confusion of terms – with some equating “foreigners” with “new citizens”, and applying them inter-changeably. By “foreigner”, I mean those who are here temporarily, on an employment pass or work permit etc. I think it is impractical to insist that such a person does some form of compulsory service. They are, by definition, here to exploit economic opportunities. So, any contribution they make should likewise be financial.

There is the question of PRs (or their sons) who are liable for NS, but avoid it by leaving the country before enlistment age. While we would prefer them to stay and do National Service, we cannot stop them from leaving. If we are prepared to accept this, we need not do anything. If we are not, we should have a practical and effective response. That is why I had suggested imposing the duty/tax, as this imposes a significant cost on that decision to leave. Unfortunately, some have misrepresented this as a way to allow PRs to pay off their obligation. The proposal keeps the existing sanctions and imposes additional financial measures so that they and their parents think harder before taking that step. Some have asked “why always talk money?” – but what are the practical alternatives? One is to forfeit the parents' PR status. That is a serious step which requires more consideration.

Finally, there are some who say that if the aim of the proposal is to give more benefits to NSmen, can’t the Government simply do that now? That does not address the issue of equalization. In any event, the point is not inconsistent. Giving more benefits means all of us paying more, which is fine. The question is whether those who do not sacrifice their time should be asked to contribute more financially.

Ultimately, it is for Singaporeans to collectively decide what works best, and it is clear that no single proposal will be immune from criticism or disagreement. I hope to hear more of your thoughts.

I share below a small sample of the responses:

Dil Preet: The suggestion by mr ashok kumar about reducing or eliminating income tax for parents of singaporean males sounds better. Or maybe for NS males who enter the workforce, no income tax for first couple of years of work or reduced fee rates in local unis should they go to uni after ns?

Ed Chan: Here are some suggestions of penalties that would really hurt under current context,

- No access to national universities or to enterprises set up or jointly set up by local national universities, only allow to access private educators. And even then, NSmen get priority.

- Families with children who escape NS should be required by law to take up private property and not be eligible to stay in HDBs, DBSS and ECs even under the private market.

- Families with children who escape NS are ineligible to any tax benefits or business subsidies or future handouts from the government.

- Families with children who escape NS shall pay higher fees for all government procedures and applications

- Companies who employ those who escape NS by paying this NS tax must ensure that all NSmen applicants are hired first or face stiff penalties and potential loss of business license.

Khoo LW: Also cancel long term visit pass for parents/parents inlaws of FT/PR. It should only be for spouse and kids.

Nick Lauw: When someone makes the choice to become a PR here, he should implicitly agree to bear the physical burden of national defence. I think that a form of physical national service should be implemented for new PRs (not just their children). Surely even PRs can contribute for 2 weeks a year while they are below 40 to things like civil defence or acting as volunteer police officers. Prior to doing so, they can undergo a basic course, which can last 1 or 2 months that can form part of their obligations. If that is deemed too onerous, perhaps PRs can spend the 2 weeks helping out at charities or the Peoples Association

Serene Chew: Make them do a compulsory no. of hours of community service instead.

1) This is more meaningful than money. This will let go some of the anger from the locals towards new immigrants.

2) It will also let the new immigrants understand and know more of our local cultures and help in their integration.

3) Also, doing community service is not sexist. By asking PRs to do NS you are targeting only the males. Why should the female PRs get away with it without doing anything to contribute to the country?

Randy Chan: Having a combination of tax & service (1 yr min) for PRs might bring better balance.

Dexter Boo: Sir, I would like to suggest that PR will pay this tax plus they will do a modified term of NS, in terms of weapon handling and range shooting be whether its from SPF/SAF. They must also serve community service like 1) additional watch group for the neighbourhood spp. 2) A quota to be completed by reporting defects in the ward they are staying weekly/monthly (eg - report of lost drainage cover, building defects etc) and areas the TC needs to touch up, may it be in terms of cleaning or landscaping. 3) attend a weekly/forthnightly/monthly meeting organise by cc to be introduced to our singapore culture and a chance for them to show us their culture. Once the participant had completed his terms of duty(2 years or more) the amount of money he paid for this tax will be returned to him, or if he had a son a certain part of money will be retained and this amount of money will be confiscated if his son escaped from NS. If he is not married but had serve the service term, the money will be returned to him but on the birth of his son, the tax will commence.

Peter J Edwards: I think you do not appreciate just how unpredictable and xenophobic proposals like this make Singapore appear to Foreigners, especially those who have been in Singapore a long time. This gradual but ever increasing lack of predictability and hostility to foreigners is one of the reasons I left the Singapore Government service to pursue opportunities in the much less hostile, more predictable and more welcoming country immediately north. New policy changes affecting foreigners every year doesn't make them become citizens , it makes those with the talent and skills to work elsewhere pick up and leave, because such changes can have a critical impact on costs that Singaporean employers fail to appreciate. Suggestions like this only increase foreigners concerns about new tax or restriction will be passed on this year. When will the PAP learn that there is a difference between being pro singaporean and anti foreigner. Immigrants like stability , and choose singapore because of that stability, however with every passing year that stability is being eroded by populist xenophobic policies like this.

Chew Jing Wei: Implement this and Singapore might just lose its status as a tax haven in the eyes of the USA and significantly reduce its attractiveness to expats, investors and overseas students.

I suggest Nair to seriously consider the root cause of such discontentment - widespread xenophobia - rather than simply tackling one of its many symptoms. Treating this fear would be unpopular and choppy, but is essential for Singapore to ride the waves of globalisation a la New York and London. Singapore must not fear stepping out of its comfort zone.

National Defence Duty (2)

Thanks to all who have responded.

I thought it might be useful at this stage to clarify a couple of things.

One is the assertion that my proposal enables rich PRs to avoid NS. It does no such thing. All those who are obligated to do NS must do NS. That would include sons of PRs. The question is what happens if their parents send them away before they reach enlistment age? This does happen. The proposal provides an additional disincentive against them taking that way out. It does not encourage them to do so.

Some have also confused new citizens with foreigners. There is merit in the argument that new citizens should serve some form of National Service, which can be modified depending on circumstances. My proposal however, deals with foreigners, not new citizens. There is no question of foreigners buying their way out of NS, as they are not liable in the first place.

Some have said that it would be wrong to put a price on serving National Service. That misreads the intent and substance of the proposal. I will deal with this in detail at a later date.

What is important is whether we think the current situation is acceptable, and if not, how it can be improved. I accept that some will not like my proposal. If so, I would like your views on what we can do better.

Please keep the comments coming.

Thanks

Time For A National Defence Duty

In my speech in the White Paper debate, I said that one of the things we need to do going forward is to create sharper distinctions between Singaporeans and others who live or do business here. I had not mentioned any specific proposals as I did not want them lost in the wider debate. I offer one now.

The National Defence Duty

I propose levying a National Defence Duty on PRs and foreigners living in Singapore. I should make clear that it is not my intention to add to any xenophobic hysteria. As I will explain, my proposal addresses a current imbalance.

We know the sacrifice all Singaporean males make, spending two years of their lives doing National Service, and doing reservist training for several years after that. It is a sacrifice not just of blood, sweat and tears. There is also a significant economic cost we pay - two years of our lives, at the time when we are about the join the work-force or enter university; perpetually two years behind our female peers in terms of pay, experience and job opportunities; two years behind in the property ladder and therefore having to pay higher prices; less attractive to employers because of reservist commitments. This has more pronounced disadvantages for poorer families. At the time when their sons reach a working age and ready to contribute to the families' finances, they spend two years earning a modest allowance. They cannot even work part-time to supplement the family income.

I believe the majority of us accept this as something we must do for the good of Singapore. And having a strong armed forces, with a significant reserve force, has no doubt contributed to the security and growth of Singapore. The same is true of having strong police and civil defence forces.

The thing is everyone living in Singapore benefits from this sacrifice - including PRs and foreigners. We cannot expect equal treatment as it is unrealistic and unworkable to have foreigners do National Service. And while we can impose National Service obligations on PRs, there is practically little we can do if they leave Singapore before enlistment, never to return.

My proposal is therefore a simple one. All PRs and foreigners must pay additional income and property tax to be called a National Defence Duty. In short, we do duty, they pay a duty.

The rationale is simple - since PRs and foreigners cannot contribute manpower to our SAF and Home Team, they make a financial contribution to the protection and preservation of their lives, families, jobs, investments and properties.

Those who have sons who are liable for NS will be exempted. Those who send their sons away before enlistment will have to pay back- taxes and penalties, over and above the bond which is forfeited. Likewise, those who give up their PR status. This should take care of what I think is a current anomaly. When PR parents send their sons away before enlistment, it is the son who is penalized in terms of not being able to return. I think this is too small a price to pay. More importantly, the decision would have been made by the parents. They should pay a cost for that decision. Paying back-taxes and penalties is a fair solution. The PR parents may of course decide to leave Singapore for good without paying. But such a move would be a real cost to them as well as that would mean ending their careers or businesses here. They are not likely to take that decision lightly.

The National Service Trust

However, the revenue earned should not simply go the general state coffers. There should be a real and direct benefit to National Servicemen.

I therefore propose that the revenue earned be placed in a National Service Trust. The trust funds can be used to supplement the allowance of NSFs from poor families. It should compensate NS men who have been injured in the line of duty. It can even provide an income for a period of time to families of NS men who have been killed. That will never compensate for their loss, but it may make a real and tangible difference to families who have been deprived of their father's or son's contributions. It will also give confidence to our NS men that should anything happen to them in their training, their families will be taken care of. If there are sufficient funds, we can even offer a grant to NS men towards their first homes, and address the inequity I spoke of earlier of NS men entering the market later than their peers.

Will this proposal cause PRs and foreigners to flee our shores? I doubt it. Even with an increase, our tax rates will still be among the lowest of developed countries, and we will still be one of the more attractive places to live and work in.

Taxation is not a fool-proof way of addressing this thorny issue, but at the very least, it ensures that everyone contributes to the defence and security of Singapore. Beside, I believe that if foreigners and PRs see that their financial contributions directly benefit NS men, they will view the duty as less of a penalty, and more of an opportunity to make a meaningful contribution towards the security they enjoy thanks to our NS men. A chance to do their duty, as it were.

I intend to raise this proposal in the coming Budget debates. I would be grateful for your views, and any suggestions you may have to improve it.

Thanks for reading.

A Matter of Trust (2)

Thanks to everyone who posted your views. Not surprisingly, views are divided. It shows that different people are concerned about different issues and have different perspectives. That is only natural as we are dealing with issues concerning our future.

Some have said that I was too aggressive with the Workers’ Party (WP). There is a certain amount of cut and thrust in Parliamentary debates, but anyone viewing it live will know that all speeches (both from ruling and opposition parties) are delivered in a measured way. But views have to be scrutinised, tested and challenged, so that their full implications will be understood. That is what the debate is for.

We now know that the WP’s proposal of freezing foreign worker numbers will in effect create haves and have-nots. If you have a home, good; if you do not, you wait longer to get your house. If you have a job, great (provided your employer does not fold or send his business elsewhere); if you are graduating or joining the work force, you may have to wait or leave Singapore to get one. If you have a maid, hold on to her; if you are new parents, or have elderly parents, and need someone to help you, too bad as no additional maids will be allowed in.

If your business folds, and you have to lay-off your Singaporean employees, tough, but the Government should think of a solution to help you. And we all have to wait much longer for more trains, buses, hospitals and other public services.

If you put aside all the rhetoric, this is really what it amounts to. The WP then glosses over the ill effects of its proposal by arguing that only businesses will be hurt, and Singaporeans will not. Everyone can see how absurd that is. The simple truth is that the WP is advocating a figure of 5.8m, not because there is any logical basis, but because it sounds better.

One thing the Government keeps getting blasted for is that it appears to rule with its head and not its heart. That is a valid point. But that does not mean it should completely swing the other way. I think both head and heart are equally important, and must feature in every policy decision. So while we should formulate policies with the aim of helping Singaporeans (heart), there must be logic to that policy and its implementation so that Singaporeans are in fact helped (head).

The Government has much to do to re-capture the hearts of Singaporeans. The best way to do that is for Singaporeans to feel that the Government’s plans and initiatives have meaningfully improved their lives and give them confidence for the future.

White Paper – A Matter of Trust

Hi all,

I set out below the speech I delivered in Parliament this evening on the White Paper. I look forward to receiving your views.

In the aftermath of the 2008 global financial fiasco, the editor of Newsweek International, observed that the crisis had demonstrated one thing: that democracy has a genetic defect – it emphasises the current, usually at the expense of the future. Intuitively, we all recognise this. So while politicians often speak eloquently about promises of the future, they know that what really matters is that they deliver on the real and tangible problems of the present. Policies are often driven by this reality.

Singapore is not immune to this genetic defect. It would be foolish to think we are different.

However, when we were a young nation, we showed strong resistance to it. When former Prime Minister Mr Lee Kuan Yew said that the Government was going to transform Singapore from a swamp to a gleaming metropolis, not many believed it could be done. The key was that Singaporeans allowed the Government time and space to embark on its vision, to effect medium and long term strategies – on the economy, housing, transport, health. Singaporeans took a leap of faith with the Government, and were rewarded for doing so.

Did some Singaporeans suffer as a result of these policies? Some clearly did. Take land. In order to build housing and hospitals, roads and rail network, industries, the government acquired property from Singaporeans. This included farms and business premises. Some were dislocated, lost their homes, their inheritance, even their livelihoods. I have some residents who still complain bitterly about this difficult time in their lives. We can all understand why they are unhappy. But is there any doubt that these measures were necessary and have benefitted the vast majority of Singaporeans? Few today would argue against it.

Today, we are the beneficiaries of these long term policies, of this long term strategic thinking and of the hard work of the previous generation, many of whom are no longer around to enjoy its fruits. But it is also common for people to view the past with rose-tinted glasses. Despite the current and legitimate unhappiness about over-crowding, high property prices and such, we are today far better off than our parents’ generation. All the objective figures – education, home ownership, employment, wealth and household income, quality of life, health and longevity – prove that.

But today, we are also an older society – less resistant to genetic defects. The current has become as important, if not more so, than the future. The White Paper is very much about the future. But its acceptance by Singaporeans will depend very much on how we deal with today’s problems. That will determine if Singaporeans will give the Government time and space to re-shape the future, like they did before.

So to persuade Singaporeans to come on this journey, we have to do two things:

(a) paint a full picture of the future for Singaporeans, highlighting both the good and the bad;
(b) give Singaporeans confidence that the Government will be able address the challenges of the future.

Chief among these challenges are the questions of over-crowdedness and the advantages of being born a Singaporean.

Some in this House and many outside have questioned the numbers and assumptions in the White Paper. They say that the Government has over-stated the problems of the elderly to working adult ratio, that we have not done enough to boost productivity and birth rates and that the elderly can retire later and work longer.

But we are all crystal ball gazing. No one wants to hit 6.9m. Every member in this House wants a stronger core of Singaporeans. Everyone supports the Government building ahead of demand. We all want the TFR measures to work so that we may have less need for foreigners. Future technology and advances in health care may well help our seniors remain active and productive longer. Other innovations and mechanisation may reduce our dependence on unskilled foreign labour. Technology can change life dramatically in the next 20 years, as it has in the last 20 years. But no one can say with any certainty what will happen.

The issue is therefore not 6.9m, 6.5m or who can assert a more acceptable number. Numbers will change over time as circumstances change, and assumptions are either confirmed or debunked. However, as DPM Teo said, we have reached a turning point, and we have decisions to make today about what we do about our future as we see it today. We have to take the next leap of faith.

The issue is therefore one of trust and confidence.

The Government has done the right thing to talk about the future, and show its vision of it. It has stuck its head up and is prepared to take the blows. As DPM Teo said, it would be far more politically convenient to do or say nothing. There are many who have written that the Government is politically naïve for doing this. But would Singaporeans be better off if the Government had kept silent? Would you trust a party that ducks difficult questions?

No one can predict the future, and as Minister Lui said, it is very difficult to visualize how the future will look. So we do what comes naturally – we project what we see today as a basis of what will happen in the future. The problem is that many Singaporeans do not quite like what they see today.

The White Paper plans for a “good quality of life”. But that means different things to different people. To most Singaporeans, day to day issues weigh most in their minds. How will the building of new MRT lines and housing make our lives better if we are, at the same time, growing the population? Will the added capacity only be sufficient to cater to the increased population? In basic terms, will Singaporeans have to wait longer, shorter or the same for their flat or the next train? Or are we, as in Alice in Wonderland, running as fast as things move, just to stay on the same spot?

The distinctions between Singaporeans and foreigners must also be carefully reviewed, as that is a matter which will have growing significance as the Singaporean core diminishes. How do we deal with the issue of PRs not doing National Service? How are we going to ensure that jobs which Singaporeans are ready, able and willing to do are not given to foreigners? How do we help our children secure places in good schools and universities? How do we ensure that foreigners do not speculate and drive up property prices, and put it beyond the reach of Singaporeans? Essentially, how do we ensure that those with no skin in the game do not walk away with all the prizes?

We need to address these and other difficult questions now. If we do not, few will trust the Government to get it right in 2020 or 2030. That is why I support the amendments proposed by the Hon. Member Mr Liang Eng Wah, as it puts the issue in better perspective, better context.

Just as important, we should not mislead Singaporeans by simply telling them what they want to hear. It is easy to discount projected population figures by a million or so, and then say that the work force shortfall will somehow be made up by foreign brides and productivity, that we can simply decide how many % of GDP we want (as if there is some magic machine to input numbers) and that we can all live happily ever after with lower growth. There is a difference between a vision and a fairy tale. We have to compare something with something. This debate will not be served by comparing the Singapore envisioned in this White Paper to one which exists in utopia.

Singaporeans are best served by details, not posturing. And I do not mean simply throwing numbers around. Let's deal with the real effects on real Singaporeans. For example, what will low growth mean to employment opportunities for young Singaporeans? All around the world today, youth unemployment is increasing at alarming rates. The ILO 2012 report puts Youth Unemployment for Developed Economies and the European Union at 18% for 2011 and projected to be the same for 2012. As at July 2012, Spain and Italy had youth unemployment rates of 52% and 35% respectively. This is because businesses are not investing or growing, and cannot absorb the young who are graduating from schools each year. Why do some assume Singapore will be different? Businesses in Singapore will not invest and expand if labour is tight and growth is low. To say that we can have the same growth as other mature economies is no answer as it ignores the problems these other countries already have.

So, this is not about having good GDP numbers. Having a job makes a world of difference to a person and his family. If you have no job, no prospects, no hope, everything else is pretty much moot.

What about other effects? Will we have to pay more taxes? What will it mean to our retirement age? Willl we have enough workers in essential services, such as domestic, health and geriatric care, and construction to meet the additional infrastructure and health care services we need? These are important to the daily lives of Singaporeans.

Under the Workers' Party plan, there will not be, and it is a pipe dream to believe that Singaporeans alone will make up the difference. These and other questions have to be answered if there is to be a credible alternative or at least, a meaningful debate. It is not enough to simply say that there has to be "structural changes". It is clearly not enough to say you empathize with local SMEs which will be killed off by your plan, and then say your solution is for the Government to solve the problem. It is also not intellectually honest to suggest that shareholders will suffer and Singaporeans will not, when we are dealing with Singaporean businesses, Singaporean owners, Singaporean employees, Singaporean shareholders, all supporting Singaporean children and families.

Ultimately, we are engaged in this debate because we want all Singaporeans to have a better life and future, and to help Singaporeans understand and deal with the realities on the ground. We should not be disacted by numbers, nor should we use numbers to distract.

I hope the Government will deal with the issues of today and give confidence that it will be able to solve those of tommorrow. New plans, programs and initiatives, like those announced by MND and MOT are good. But Singaporeans need to see them work and feel their lives improve. That I believe is the only way to ensure that Singaporeans will take the next leap together with the Government.