On 11 May 2015, a Bill was introduced in the Singapore Parliament to amend the Constitution.  Given the overwhelming Parliamentardollary majority of the PAP, the amendment of the Constitution will be reduced to a mere formality.

What is the proposed amendment?  Well, the Finance Minister had already indicated at the time of the Budget debate earlier this year that there will be a Constitutional amendment to facilitate the availability of funds for increased social spending.

“We will increase the Personal Income Tax rates from Year of Assessment 2017 for high-income taxpayers, who form the top 5 percentile of income earners. This will make our tax system more progressive. We are now also ready for our spending rule to be based on the total expected returns of all three investment entities – GIC, MAS and Temasek. Including Temasek in this framework would enable us to spend based on its total expected returns, including realised and unrealised capital gains, and not just actual dividends paid by Temasek to the Government. We target to present a Constitutional Amendment Bill to Parliament later this year.”    – DPM Tharman Shanmugaratnam

The amendment as tabled in Parliament primarily alters the definition of “relevant assets” under Article 142 of the Singapore Constitution.  When amended the provision will read as follows:   (I have indicated in ‘bold’ the new wordings added to the existing provision.)

“relevant assets” means all of the following:

(a) the total net assets managed by the GIC Pte. Ltd. and all its wholly-owned subsidiaries (including those with registered offices outside Singapore) as fund managers for the Government, for any company wholly-owned by the Government and for all the wholly-owned subsidiaries of such a Government company;

(b) such moneys of the Government as the Monetary Authority of Singapore receives from the Government as banker to the Government;

(c) the excess of the assets of the Monetary Authority of Singapore over its liabilities, being assets and liabilities not directly attributable to the Government, and being not already comprised in paragraph (b);

(d) from 1 April 2016, the excess of the assets of Temasek Holdings (Private) Limited over its liabilities.

less the following liabilities:

(i)  the total liabilities of the Government that is attributable to its borrowings under the Government Securities Act (Cap. 121A) and the Local Treasury Bills Act (Cap. 167); and

(ii)  the total liabilities of the Government that is represented by any Government Fund (other than a Government Fund required by written law to be held, managed and administered separately from other Government funds) established by a public Act for special purposes and not already comprised in paragraph (i).

The Constitution of the Republic of Singapore (Amendment) Bill is available here.

The proposed amendment will bring Temasek’s assets within the definition of relevant assets. This has to be seen in the light of the Net Investment Returns (NIR) framework introduced in 2009.  The NIR is used by the state to use the investment returns of our reserves  by spending up to 50% of the long-term expected real returns from the net assets managed by GIC and MAS.  After the amendment, the government can also spend up to 50% of the long-term expected returns from Temasek in addition to GIC and MAS.

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