Singapore Tourism (Cess Collection) (Amendment) Bill

Order for Second Reading read.

1.30 pm

The Senior Minister of State for Trade and Industry (Mr Chee Hong Tat) (for the Minister for Trade and Industry): Mr Speaker, on behalf of the Minister for Trade and Industry, I beg to move, “That the Bill be now read a Second time.”

The Singapore Tourism (Cess Collection) Act, or Cess Act, was enacted in 1972 to allow the collection of cess from tourist establishments for the promotion of tourism. When the Cess Act was first enacted, cess was a broad-based tax imposed on sales made and charges levied or collected by tourist hotels, food establishments and public houses.

The Cess Act was amended in 2008 to make cess more targeted by linking it to specific tourism events. These refer to strategic events that entail higher staging costs using public funding and would enhance Singapore’s global branding, while bringing economic benefits to the country. Since then, cess has only been imposed on tourist hotels during the period of the Formula One Singapore Grand Prix.

In this Bill, we propose three categories of amendments. The first is to clarify the scope of cess, and the second is to update the scope of the Cess Act to keep pace with business developments and industry trends. The third is to enhance existing administrative requirements.

Let me start with the provisions that will clarify the requirements under the Cess Act. Our aim is to provide clarity and ensure a consistent basis of taxation for all parties that are liable to pay cess. There is no change to the underlying principle of our cess policy, which is to ensure that business groups likely to benefit commercially from a strategic tourism event play their part in defraying the costs of organising the event.

The new definition of “transaction” under clause 2, as read with clause 4, seeks to clarify what is subject to cess. For example, in the context of cess for tourist hotels during the Singapore Grand Prix, the value of the hotel room will be used to calculate cess, regardless of the mode of payment. Whether the customer pays using credit card, cash or vouchers, the hotel needs to pay cess based on the value of the hotel room. The same rationale applies to rooms which are redeemed using loyalty points under the hotel’s membership programme, or those offered by the hotel as part of wedding or corporate packages. The hotel will need to pay cess based on the value of the hotel room. Given the evolving business practices and variety of room packages that are offered by different hotels, this approach will ensure a consistent basis of taxation.

There can be other commercial entities which benefit from a strategic tourism event, but are not tourist hotels, tourist food establishments and tourist public houses which are the taxable persons in the current Cess Act. Hence, we want to update the Act so that our laws can be applied fairly as business models continue to evolve, and we see the emergence of a greater variety of products and services that serve similar needs in the tourism landscape.

Mr Speaker, the second category of amendments thus seeks to update the scope of the Cess Act to apply to other taxable persons. The changes are proposed under clauses 2 and 4 of the Bill.

We are making these changes to the Act to provide flexibility to deal with future changes in business models and industry trends. There are no current plans to include new tourism events or to impose cess on new categories of tourism event establishments, beyond the Singapore Grand Prix or hotels respectively. The imposition of cess will continue to be targeted and calibrated, based on the current set of policy considerations. The Ministry of Trade and Industry (MTI) will consult the industry and stakeholder groups if there are plans in the future to gazette new tourism events or to impose cess on new categories of tourism event establishments.

We are also proposing a few amendments to enhance existing administrative requirements.

Clauses 5 and 7 will enable the Chief Executive of the Singapore Tourism Board (STB) and other authorised persons to obtain information from any persons for the purpose of providing views to the Minister on the cess policy, and to administer or enforce the Cess Act.

Under clause 6, the records retention period will be increased from two to five years, which is aligned to the requirements under the Goods and Services Tax (GST) Act.

In the process of amending the Cess Act, MTI and STB launched a public consultation exercise in March 2018 and conducted an engagement session with hoteliers. Their feedback and comments were considered and addressed during the consultation. Mr Speaker, I beg to move.

Question proposed.

Mr Speaker: Assoc Prof Daniel Goh.

Assoc Prof Daniel Goh Pei Siong (Non-Constituency Member): Tourism is a major industry that not only has knock-off effects for local businesses, but also for our city branding and international reputation. We have done well in many aspects, especially in urban and heritage conservation, to make Singapore a unique destination with an old-world colonial port city charm. Balancing this, we have also become a global city of choice for meetings, conventions and events with iconic developments, such as Marina Bay, and signature events, such as the Formula One night race.

The Cess Act has been closely tied with Formula One. The Act was last amended in August 2008, just months before the inaugural F1 race. It was changed from a consumption tax to a business tax to be used in a targeted manner to fund strategic tourist events. Cess collection has been limited to hotels benefiting from the F1 race.

With this amendment Bill, it looks like the last 10 years of taxing hotels to fund the F1 race was a successful experiment to see whether such a tax was viable to fund a tourist event and would not hamper the growth of tourism. Could the Government give greater details of the results of the experiment? How much cess was collected in the last 10 years compared to the expenditure of co-funding the F1? What has been the principle involved in identifying which hotels pay cess for F1? Why has cess collection not been extended to tourist food establishments and public houses?

At this point, I would like to sound a caution on over-expansion of cess collection, though the Government has allayed fears by saying that there are no immediate plans to do so. Even with F1, expanding cess collection beyond hotels will have to be done in a judicious manner so as not to inadvertently hurt local businesses. It may be trickier, for example, to identify using geographical markers tourist food establishments that are benefiting specially from F1, especially when many establishments actually make losses during the event due to road closures.

The other question I have for this amendment Bill is, where does the collected cess go? Since the cess collection is very targeted and the specified aim for cess collection is to fund strategic tourist events, there is a case for ringfencing the collected cess to further the national interest of tourist development. I would like to suggest that the collected cess be directly deposited into the Tourism Development Fund.

Some quarters among the public have been critical of F1 as an exclusive event enjoyed by the global and local elites. In order to allay this perception, we need to show more tangible benefits arising from the event, spread the proceeds from the event to the sector as a whole. Having the collected cess go directly into the Tourism Development Fund may be just symbolic in the end, since I suspect Government funding of the event exceeded the proceeds, but it sends an important signal to the public.

More than it being symbolic, we could also do something for retail businesses affected by the road closures and traffic redirection linked to F1 and, in the future, other tourist mega-events. We could have a special innovation and marketing scheme under the Tourism Development Fund that targets affected retail businesses to see how they can reinvent themselves for the tourist visitors and market themselves during this special event.

Mr Speaker, Sir, with major strategic tourist events, such as F1, that involve high costs and extraordinary traffic control measures, there will be winners and losers, and critics who fail to see any tangible benefits. The role of the Government would be to make sure the winnings are more equitably distributed. And tourism cess collection is a good instrument in this respect. I support the amendments in this Bill. But we need to address perceptions and mitigate the inadvertent losses suffered by the losers. To this end, tying the cess collection more directly to the Tourism Development Fund could kill many birds with one stone.

Mr Speaker: Senior Minister of State Chee Hong Tat.

1.40 pm

Mr Chee Hong Tat: Mr Speaker, I thank Assoc Prof Daniel Goh for his suggestions and giving his support for the Bill. Last September, we renewed the Formula One Singapore Grand Prix for another four years from 2018 to 2021. The decision was made after careful consideration of the projected costs and benefits from a national perspective. The direct cost of organising the race is around $135 million per year, with the Government’s share at 60%. We assessed the overall benefits to outweigh the costs, including indirect costs, such as inconveniences due to road closures during the race period. Over the last 10 years of hosting the race, we have attracted more than 450,000 international visitors, contributing about $1.4 billion in incremental tourism receipts. As Assoc Prof Daniel Goh pointed out, there are also indirect benefits through the international media coverage and high global viewership, which boost Singapore’s image as a vibrant and dynamic city.

After MTI amended the Act in 2008, only gazetted tourist hotels needed to pay cess during the period of the Singapore F1 race. These are hotels which cater mainly to tourists. We have not extended cess collection to food establishments and public houses. In making the assessment, we are guided by the principle of our cess policy, which is to ensure that business groups which are likely to benefit commercially from a strategic tourism event would play their part in defraying the costs of organising these events. I agree with Assoc Prof Daniel Goh that any expansion in cess collection has to be done in a judicious manner.

The amount of cess collected from gazetted tourist hotels varies each year, depending on the industry’s performance that year. Historically, the F1 hotel cess collected has averaged about $13 million each year. The cess collected goes to STB and supplements the Tourism Development Fund to support the costs of the F1 project.

Over the years, Government agencies have worked closely with the race promoter and affected stakeholders to improve the race execution. For instance, we have halved the number of days for road closures from 12 days when we first started in 2008 to six days in 2017. The opening of the Circle Line and Downtown Line stations also increased accessibility to the race vicinity during the F1 period.

To help tourism stakeholders, including retailers and food and beverage (F&B) outlets, capitalise on the buzz created by the F1 race each year, STB works closely with them to launch the Grand Prix Season Singapore (GPSS). This is a season of lifestyle events complementing the race experience. Businesses have also used GPSS as an opportunity to innovate and testbed new commercial concepts.

Beyond F1, we started the Kickstart Fund, with a budget of $10 million, to encourage more ground-up initiatives from the industry to try out innovative event concepts. For instance, the Fund has helped to launch new events, such as the Spartan Race and Singapore Cocktail Festival. We hope to collaborate with the industry to support more events in the coming years. Mr Speaker, Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Chee Hong Tat.]

Bill considered in Committee; reported without amendment; read a Third time and passed.