Land Betterment Charge Bill
Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill recognises that those who reap economic rewards from the development of land benefit from public infrastructure. As such, it is equitable that such economic benefits are returned to the community.
I have three points of clarification on this Bill.
My first point is on the mechanisms in place to ensure that the planning objectives of the Bill are achieved.
The new section 13 of the Bill provides the Land Planning Minister the power to provide concessionary relief from Land Betterment Charge (LBC) for the purpose of meeting certain planning objectives. These conditions include that the relief will lead to a more optimal use of land, improve the productivity of the construction sector and promote environmentally sustainable development of land. These objectives are wide-ranging and very general in nature. Given how broad these objectives are, can the Minister explain which of these specific planning objectives the concessionary relief granted to a development is intended to achieve? Can the Minister also explain how he envisions the development will achieve the intended planning objectives?
Additionally, given that a fairly long timeframe may be required to determine if some of these objectives are achieved, what measures are in place to track whether concessionary relief granted achieved the intended planning objectives?
My second point is on the scope of Minister's power to grant general exemptions from the Land Betterment Charge under the new section 12. In contrast to the Land Planning Minister's power to provide concessionary relief, the Minister's power to grant a general exemption is not expressly limited by any planning objectives.
Can the Minister provide assurance that the Minister's power will be exercised in line with the purpose of the Act as set out under the new section 5? In other words, will Minister's power to grant general exemptions be consistent with the objectives of urban development, enhance productivity for the construction industry and promote environmentally sustainable development?
My third point is how the Government will recover benefits from any unlawful development. The new section 40(2)(d) provides the Authority the power to direct a person to pay a penalty tax if the Authority considers that restoring the land and other restorative steps is not reasonably practicable or is undesirable.
However, even if an unauthorised activity ceases or the land restored, the developer may still have reaped benefits for the period that the unlawful development lasted.
At present, the Authority's power to either order restoration or impose a penalty tax appears to be mutually exclusive.
Can Minister clarify what powers the Ministry has to require that a developer disgorge the benefits that it has reaped from such unlawful development? Sir, notwithstanding these clarifications, I stand in support of the Bill.
Mr Edwin Tong Chun Fai (The Second Minister for Law): Mr Speaker, I thank the various Members for speaking and expressing support for the Bill. I will go straight into the queries that have been raised and try and address as many of them as I can.
Mr Louis Ng, and I think Mr Louis Chua and Mr Leon Perera, asked about the concessionary relief. Mr Ng, in particular, asked what the planning objectives are that we intend to achieve by the grant of relief in section 13.
The provisions in section 13 enable the continuation of existing concessionary reliefs from Development Charge (DC), currently provided for in the Planning Act. It will also make provision for future concessionary reliefs for developments that promote sustainable development of land and which balances the interest of current and future generations of Singaporeans.
An example of the continued provision for concessionary relief for change of use proposals within conserved buildings to incentivise the restoration of conserved buildings – I think a point that Mr Perera also touched on – and the adaptive reuse of conserved buildings. This is necessary to promote more optimal use of land, whilst at the same time, maintaining Singapore's cultural heritage.
Mr Wee also asked for examples of concessionary relief to encourage construction productivity. Any future relief schemes will be gazetted according to purposes and objectives set out in section 13 of the Bill. Appropriate measures will be considered to ensure that these objectives, as we have set out in this Bill for the new relief schemes will be achieved. MND will share more about this when they are ready.
Mr Wee asked about the use of the LBC collections – I think Mr Chua did as well and so did Mr Ng – and whether LBC collections will reduce the amount of future borrowing needed for long-term national infrastructure projects. Let me first clarify that the LBC is a consolidation of three existing revenue streams. They do not seek to enhance these. As I mentioned at the outset, the existing framework is preserved, it is just put under one collection agency, and the LBC will be the name used for all three converted into LBC.
The consolidation is therefore not expected to result in a marked increase in the amount of revenue. Indeed, the revenue to be collected will, of course, depend on the extent to which developers and landowners make an application for enhancement or intensification which triggers the use of LBC.
Clause 57 in the Bill requires all LBC collections to be paid into the Consolidated Fund. The LBC would thus be a part of the public monies available for this House for appropriate expenditures that benefit Singaporeans as a whole. It would not be earmarked specifically for one purpose or one project, but it will be available generally, in the fund to benefit Singaporeans as a whole. And, these, Mr Speaker, would include the funding of infrastructure, services and public programmes, including projects that benefit the local community, as well as broader national ones, such as the Singapore Green Plan.
For major infrastructure spend that is critical to Singapore's development, we have just talked about the SINGA Bill. This would smoothen hefty costs, which could run into tens of billions of dollars. By doing so, we will no longer need to pay for the costs upfront from our operating revenues. This is part of the Government's differentiated financing strategy for different types of expenditure.
Mr Louis Ng asked whether the Minister's power to grant general exemptions will be exercised in line with the purposes of the Act; Mr Perera, and I think Mr Chua also did. The short answer is yes; that is set out in section 5. Mr Ng may also wish to note that sections 12 and 13 require that every order made to grant an exemption or provide for concessionary relief must be presented in Parliament as soon as possible after publication in the Gazette. Members of this House will be directly informed of the making of these exemptions when these are made. I think Mr Chua also made a point about this.
Mr Ng asked how the Government will recover the benefits accrued by developers from unlawful development of land. The purpose of the LBC Bill is to impose a tax on the increase in the value of land arising from a chargeable consent. It does not provide for a penalty tax to be collected for unlawful developments where no such consent is granted. So, if you have something that is done in breach of the restrictive covenants, for example, then, subsequently when the permission is granted, not only will LBC be collected, there will also be a penalty amount levied on top of that; up to 30%, as I mentioned at the outset.
For unlawful developments involving a breach of planning control, URA under the Planning Act today may issue an enforcement notice. The notice may require the removal of any unlawful structures and reinstatement of the land to its former site.
Mr Don Wee asked whether SLA will continue to review the Table of Rates every six months with IRAS. Mr Perera also touched upon this. Mr Chua as well raised this point. Yes, it will be reviewed to ensure that it continues to be updated and the circumstances under which the assessment of LBC by valuation is required.
That is similar to what is done for the DC Table of Rates today. So, as I said, the framework does not differ. To Mr Perera's question, as to whether there will be a wholly new system, the answer, I think, is quite clear from what I said at the outset, and also my last statement that no, it would not be a wholly new system. It will be similar to the existing framework. In fact, it is a consolidation of the existing framework, which is why we felt that no public consultation was necessary in this case.
Valuations are required in specific circumstances, where the Table of Rates might not be applicable in circumstances, which I outlined earlier, such as, for unique developments, like for example, golf courses, theme parks, where there might not be a suitable or comparable use group or sufficiently rich source of data available. Taxable persons might also opt to use LBC by valuation in lieu of the Table of Rates.
Mr Perera might wish to know that this system of having a valuer as an option, apart from the Chief Valuer, currently is already available. And there has not been any specific difficulty associated with that.
Mr Murali asked if the DP system will continue outside the lifting of restrictive covenants. And I think, specifically Mr Murali cited the example of remnant land parcels, odd pieces of land, which could be put together and developed upon. Mr Murali's point is that these odd pieces by themselves are not capable of independent development, but with amalgamation, they may have the potential to bring about enhancement.
Landowners who wish to purchase remnant state land will continue to have to pay a land premium as consideration to SLA for the remnant land parcel, and the LBC applicable for any chargeable consent thereafter granted on their private land parcel as a result of the amalgamation.
So, I think to answer Mr Murali's point, if you decide to put together the parcels and you need a chargeable consent to be given in respect of say, a restrictive covenant to be lifted, then an LBC will be levied.
Mr Murali also asked for the Government's position on the applicability of the LBC in relation to Court decisions, citing examples such as the lifting of easements or restrictions, dominant/servient, tenement, for example, which may result in land value.
A Court's decision to vary an easement or restriction would not in itself constitute a chargeable consent. So, in itself, it is not a chargeable consent, under the LBC Act. So, if you have a piece of land and you are subject to a Court decision – where the Court rules one way or another on the construction of the easement, for example, that itself will not amount to a chargeable consent. What the Court does is make a pronouncement as to the proper construction of the easement already existing as to what it should entail. But having said that, it can certainly affect the value of the land and I think that is Mr Murali's point. And this will certainly be taken on board in a valuation, should chargeable consent by the state be granted subsequently with respect to this piece of land with the Court's decision taken into account.
So, the Court decision per se on itself, it would not be a chargeable consent, but if subsequently, in the context of the decision taken by the Court to vary or lift or otherwise construe a restriction in a positive manner, that will be taken into account as an enhancement in the land value. And I hope that clarifies Mr Murali's point.
I should clarify to this House that the LBC is not a tax to cream-off any transaction that leads to an appreciation land value. In other words, if you develop ways not related to the land, the LBC is not designed to cream-off those appreciations.
The liability to pay LBC arises only when the state grants a chargeable consent by allowing a landowner to develop the land further or varying a restrictive covenant in the state title, so that you can do something, which you previously could not do under the title.
In keeping with the principle in clause 5, that those who benefit financially when permission to develop the land is given should share some of that gain with the community. And I think that is also a point raised by almost all the Members who spoke on this point.
Mr Perera raised several specific questions and I will just address them here very quickly. On the question of an IPC, I think Mr Perera's point is some might not be registered as a charity. So, it might be a society with an IPC status. The regulations will consider this and will take this into account, even if you are not registered as a charity but have IPC status.
Stamp duty is not leviable on the LBC, as the LBC is a tax, as Mr Perera had pointed out. In relation to the renewal of leases, leasehold interest for state leases, a lease renewal premium is paid, not the LBC.
In terms of the LBC between the landlord and tenant, I think both Mr Chua and Mr Perera raised this, yes, it is collectible from the parties who have a material interest and that includes, in the context of a landlord and tenant, the tenant itself. The tenant may have recourse to the landlord for any portion that the landlord ought to bear, but the provisions here set out the mechanism by which the state is able to levy the LBC as against any persons with an interest in the land. And as Members would know, that includes the tenant.
To Mr Chua's point, if there is a dispute as to the valuation or disputes as to the way in which the Table of Rates is used, that dispute is taken to the Minister whose decision would be final.
On Mr Perera's question, as to whether there can be a deferment if one cannot pay the LBC. Well, in the context of most cases, LBC is levied in a situation where there is an enhancement in the value of land. So, typically, a landowner or developer who obviously would have done his sums would come, make a proposal want to develop a piece of land, and obviously the intention behind that development is enhancement of land value.
Such a situation would not often arise, but should it arise, that is something that can be taken into account, as a matter of discretion. And you look at the entire context of the situation in considering the appropriate deferment, if any.
As to timing of the payment raised by Mr Perera, both the LBC and the DP are generally payable after PP, but before the Written Permission.
Sir, I think I have covered as many of the points which I think are salient. With that Sir, I beg to move.
Source: Hansard
