Mr Tan Kin Lian says that he awaits to be POFMAed as he suggests that the Singapore Government’s surplus would be closer to Mr Yeoh Lam Keong’s stated financial surplus if it adopts generally accepted accounting treatments

The former CEO of NTUC Income posted on his Facebook page on Sunday, expressing his opinions on the question of whether Singapore has a surplus of S$2.2 billion or a structural surplus of S$30 billion.

Mr Yeoh, former GIC chief economist, had been earlier issued with a correction direction on Friday (18 Nov) by the POFMA office under the instruction of Mr Lawrence Wong, Deputy Prime Minister and Minister of Finance over one of his Facebook posts in November.

In that post, Mr Yeoh wrote in support of the speech by Workers’ Party Member of Parliament, Associate Professor Jamus Lim made during the debate on the Goods & Service Tax hike who said Singapore “should not be building up excess fiscal surpluses at a time when the economy is still in recovery, and inflation is biting into citizen’s pocketbooks”.

Mr Yeoh said on his Facebook page, “it seems completely unnecessary at the moment as we have a $30 bn structural fiscal surplus that we have not even begun to publicly delineate clear big spending plans for.”

The Ministry of Finance (MOF) in the correction direction, explains that the Government has recorded on average a fiscal balance of $2.2 billion per annum over the last two decades — excluding FY2020, and labelled Mr Yeoh’s claim that the Government has “a $30bn structural fiscal surplus” that is available for spending yearly, as untrue.

Mr Tan, who is a professional actuary and among the first in Singapore, suggests that the value of the surpluses would depend on the accounting treatment.

He also points out that the government adopts two unusual accounting methods; One is to disregard the sale of state land as government revenue and the second, having large transfers taken out from the surplus towards special funds such as Edusave.

 

MOF in the POFMA correction direction, also states that the Singapore Constitution defines clearly the fiscal rules for the Government.

“Any public spending beyond these fiscal rules means that we will be using more from the Past Reserves, and leaving behind less for the next generation.”

It further points out that the Government is not in a position to freely or unilaterally decide to spend any part of the Past Reserves and any drawing of the Past Reserves is subject to the President’s concurrence.

As Mr Tan points out, the sale of land is not taken as revenue of the government but converted into Past Reserves.

Penang Sold Land To Increase State’s Revenue

It was reported in September last year that the Malaysian State, Penang resorted to selling state land transfer some of its dormant lands to its development arm, Penang Development Corporation (PDC) to increase the state’s revenue as it collected less revenue in 2021 due to the COVID-19 pandemic.

Chief minister Chow Kon Yeow told the state legislative assembly that the state collected revenue of RM467.56 million in 2020, which was 90.06 per cent of the estimated revenue for 2020 of RM519.16 million.

“For 2021, as of June 30, the total revenue collected is RM386.9 million which is 76.46 per cent of the estimated revenue for 2021 of RM506.02 million,” he said.

He said the revenue for 2021 could not be collected in full due to exemptions approved by the state in the wake of the Covid-19 pandemic.

Due to this, he said the state has to implement four main strategies to counter the reduction in revenue.

“The first strategy is to sell state land through an open tender process in which the land will be sold to the highest bidder with certain conditions to maximise the returns for the sale and bring the highest profit to the state,” he said.

Over in Singapore, TOC was issued with POFMA correction direction last month for an article headlined “Singapore’s reserves substantially profits from $500m land sales in AMK BTO”.

Minister of National Development says the article had falsely conveyed that the Government’s sale of land to HDB for the AMK BTO project will lead to an increase in Singapore’s reserves.

Mr Desmond Lee in his basis for the Correction Direction wrote:

“State land is part of the Past Reserves. When State land is disposed of at fair market
value, there is no addition to the Past Reserves but a conversion of one type of asset
(land) to another (cash). For the Central Weave Build-to-Order project, HDB will pay
the Government fair market value for the land, estimated to be about $500 million.
This money will be paid into the Past Reserves, but will not result in a net increase
to the Past Reserves.”

The POFMA Office also states that there is an established process to determine the fair market value of land.

It says that the Chief Valuer, a public officer whose appointment requires the President’s concurrence, determines independently the fair market value using well-accepted and established valuation principles and that these are the same valuation principles adopted by professional valuers in the private sector.

“The current fair market value of land is not the same as the historical cost incurred to acquire the land, as the market value of land is influenced by factors such as the current planned land use.”

It emphasises that neither the Government nor the Past Reserves profit from land sales.

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