Stamp Duties (Amendment) Bill

Order for Second Reading read.

4.40 pm

The Second Minister for Finance (Mr Lawrence Wong): Mr Speaker, I beg to move, "That the Bill be now read a Second time".

The Stamp Duties (Amendment) Bill 2018 will give legislative effect to four main categories of changes to the Stamp Duties Act.

First, in line with our Smart Nation efforts, the Stamp Duties Act will be amended to provide for stamp duty to be levied on electronic records that effect a transfer of interest in immovable properties and shares. Currently, such transfers are done via physical records, and stamp duty is levied where applicable. With the pervasive use of digital technology, there is potential for more of such transactions to be effected electronically, bringing greater convenience to citizens and businesses.

Today, the Stamp Duties Act does not expressly provide that an “instrument” has to be a physical instrument to be dutiable. Given its legislative history and the fact that some provisions in the Act operate on the basis of an “instrument” being in a physical form, the amendments will update the provisions and provide for how they are to apply to electronic records. This will ensure that our legislation keeps pace with digitalisation and safeguards Singapore’s revenue where transfers are effected without a physical instrument. We have provided a validation clause to address any potential dispute over past payment and collection of stamp duties that have been made in relation to an electronic record.

The second change is to provide in the Act that the Minister can recover interest from a taxpayer who fails to comply with the remission conditions, in respect of upfront stamp duty remission that had been granted to him. The existing Act does not restrict the conditions that the Minister may impose when granting remissions, and it is an established practice today that remissions are granted on the basis of certain conditions. Failure to fulfil these remission conditions would result in recovery of the stamp duty that had been remitted, with interest.

When applying for upfront stamp duty remissions, taxpayers today sign an undertaking agreeing that interest is recoverable should they fail to comply with the remission conditions. Such cases mainly involve housing developers, who are granted upfront remission of the Additional Buyer’s Stamp Duty for their purchase of land for housing development. The key terms of the remission conditions require the developers to commence, complete and sell the development within a specified timeframe, failing which, the stamp duty earlier remitted will be recovered, together with interest. And that compensates the Government for the opportunity cost of the duties it would have received, had the remission not been granted. While the current arrangements have worked well so far, we are making this amendment to make clear that the Government can recover interest when a taxpayer fails to comply with any of the remission conditions. We have provided a validation clause, to again address any potential dispute over the past payment and recovery of interest for a failure to comply with remission conditions.

Third, we will make amendments to section 15 of the Act, which provides relief from stamp duty for corporate restructuring where there is no substantial change in beneficial interest of the transferred assets. The amendments will align our legislation with changes made to the stamp duty regime in recent years. For example, a firm is currently not able to enjoy relief from share duty, if its conversion to a Limited Liability Partnership attracts the Additional Conveyance Duty. Given that the policy intent remains not to charge duties under such circumstances, we have amended the legislation to provide relief from share duty under such circumstances.

The last category of change pertains to technical amendments arising from the Ministry of Finance’s periodic review to improve tax policy and administration. Today, IRAS has an E-stamping system, which is an online portal for taxpayers to declare and pay stamp duties. Currently, the Act requires IRAS to seek the Minister’s approval for changes to the administration of the system, such as determining the information to be furnished by taxpayers under the E-stamping system. We will amend the relevant provisions of the Act, to give IRAS the flexibility to make these changes without having to seek the Minister’s approval each time. This will enhance IRAS’ flexibility and nimbleness to meet its operational needs. Mr Speaker, I beg to move.

Question proposed.

4.43 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, I stand in support of this Bill. Last year, stamp duty comprised some 7% of all taxes collected. In a time of rising social and healthcare spending, it is important that we secure this revenue base. At the same time, we should also always aspire towards providing more options and greater clarity to liable taxpayers. I am confident that this Bill will help the Government achieve these goals. The Bill provides for the Stamp Duties Act to be applied to electronic records and details specific rules for its application.

This is a significant step towards a regulatory framework built around a digitised economy. The digital world moves quickly, and that creates both opportunity and confusion for Singaporeans.

Sir, I have two points of clarification.

The first point centres on blockchain. Can the Minister clarify the Government’s regulatory stance towards “proptech” start-ups that use blockchain to decentralise the electronic records of property transactions? Can the Minister also share what efforts it has made or will make to educate Singaporeans about the legality of these services?

Over the past few years, Singapore has seen the rise of the fintech industry. What has gone less noticed is the rise of a property tech, or proptech industry. A 2017 media article profiled several Singapore-based proptech firms, each vowing to transform Singapore's real estate sector with new technology.

Several claim to use blockchain, a technology that decentralises control and ownership. One of the start-ups, Averspace, has an app that connects renters and leasers. Its app offers templates for rental contracts that are signed online and stored using blockchain. Two other start-ups, Reidao and FundPlaces, allow users to own properties using blockchain in conjunction with complex currency changes or Special Purpose Vehicles, though their services have yet to extend to properties located in Singapore. Yet, another start-up, InvestaCrowd, is planning to launch a crowdfunding model for Singapore property.

A HSBC report states that 89% of recent homeowners look for properties online. Yet consumers may find themselves unclear on the legalities of these models. In 2017, the MAS said only that it was "closely watching" the space. That same year, Reidao's Chief Executive told the media that it had reached out to the MAS when he started the business. He claimed that MAS did not, I quote, "make any real comments" to him because it "lacked legislation to instruct the process".

Young digital firms have showed that they can bring excitement to Singaporeans but also headaches for regulators, as we have seen with the likes of Grab. Taking a proactive approach, especially where Singaporeans' nest-eggs are concerned, may be worthwhile. As such, clarifications on the legality of blockchain-based property dealers would provide very useful guidance for Singaporeans navigating these digital frontiers.

Secondly, and on the other hand, I would like to clarify how the Government plans to overcome any possible scepticism towards the use of electronic records in property transactions.

A commentary written by Lee Liat Yang, senior partner of Dentons Rodyk, suggested that while electronic contracts might become the norm in lower value rental contracts, people may still shy from them when buying and selling property over safety concerns.

I am heartened that the Stamp Duties Act outlines clear penalties against the falsification of records and that the Bill defines terms such as electronic signatures.

Does the Government have plans to go beyond these measures to promote awareness of and address concerns about the security and reliability of using electronic records to execute real estate transactions? In this and in many other digital areas, consumers are charting new waters, and there is enough importance in housing that the Government should provide a lighthouse, if not a map, for the people.

Notwithstanding these clarifications, Sir, I am in support of this Bill that keeps our property regulatory framework up-to-date with developments on the digital frontier.

Mr Speaker: Minister Lawrence Wong.

4.48 pm

Mr Lawrence Wong: Mr Speaker, I thank Mr Louis Ng for his support for the Bill. He raised two important issues. They are not exactly specific to the amendments that are being proposed but they are, nevertheless, important issues which I will touch on.

First, the Government does recognise the rapid pace of technological developments, including in the emerging proptech sector and the use of blockchains for transactions, be it in financial industry or in the property market.

Businesses and consumers would indeed benefit from greater legal clarity and certainty over such new technologies. And that is why Government agencies are separately studying the legislative framework for electronic transactions in Singapore as well as how best to streamline and digitalise property transaction processes.

In particular, the Electronics Transactions Act (ETA) was first enacted in 1998 to create a legislative framework for electronic transactions in Singapore. Amongst other things, it provides for the legal recognition and usage of electronic signatures and electronic records, giving predictability and certainty to electronic transactions and facilitating e-commerce.

MCI and IMDA are currently reviewing the ETA. The review includes the relevance of the current scope of the ETA and how to improve clarity with respect to emerging technological developments, like the ones Mr Ng talked about, and business models. We will consult and obtain the views of the industry and public before revisions are made to the ETA.

The second issue that Mr Ng raised was about the Government's plan to address concerns on security and reliability of using electronic records to execute real estate transactions. We have a Real Estate Industry Transformation Map (ITM), and under this framework, the various stakeholders from the Government and the private sector have been coming together to discuss how best to streamline and digitalise property transactions processes, and the implementation roadmap to go about doing this work.

The workgroup consists of key Government agencies and industry representatives across the real estate value chain. The aim of the workgroup is to look into the feasibility of enabling property transactions to be conducted electronically from start to finish, but importantly, to do so in a secure and verifiable way.

Given the typical sizes of property transactions which the Member also alluded to, this would require very careful study in consultation with the industry and regulators. We believe that such a collaboration will help ensure that the interests of property buyers and sellers can be adequately protected, and we can then build confidence in digitalised property transactions.

Mr Speaker, I believe I have answered the Member's queries and 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 Lawrence Wong].

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