Singapore won’t pay tax on its Johor waterworks: Shanmugam

Singapore is not obliged to pay tax on PUB's Johor waterworks under the 1962 Water Agreement, which is valid till 2061 and is guaranteed by the governments of Singapore and Malaysia.
Singapore is not obliged to pay tax on PUB's Johor waterworks under the 1962 Water Agreement, which is valid till 2061 and is guaranteed by the governments of Singapore and Malaysia.ST FILE PHOTO

Singapore will not pay the raised land assessment tax on its Johor waterworks as a matter of principle, said Minister for Foreign Affairs and Law K. Shanmugam yesterday.

The authorities of Kota Tinggi district had sought late last year to double the tax on the Johor River Waterworks, which is owned by national water agency PUB.

The revised rate was more than double that of the next highest rate in the entire Kota Tinggi district, and this new rate was applied to a tax category created solely for the PUB.

At a dialogue yesterday, Mr Shanmugam explained why he chose to lay out Singapore's stance on the issue in Parliament last week, a decision he had thought hard about.

 
 
 

"The water agreement doesn't allow for these sorts of treatments. If I keep quiet about doubling it, tomorrow they might quadruple it," he told media professionals at the event organised by the Singapore Press Club.

In Parliament, he had said PUB is not obliged to pay the tax under the 1962 Water Agreement, which governs the PUB's operations in Johor.The agreement gives Singapore the right to draw water from Johor River up to 250 million gallons daily, or 1.14 million cubic m a day, with Johor entitled to a daily supply of treated water in return.

Underscoring the gravity of the issue, Mr Shanmugam said: "They've issued us further notice saying we are late in payment. If one is bloody-minded about it, I suppose they can seek to levy execution on our waterworks, and then things will get really interesting."

He said: "In a normal legal case, if you don't pay tax, somebody goes and attaches and tries to take over the property. We'll have to see whether they want to treat this as a normal case of non-payment and then we'll have to say what our response will be."

The agreement is valid till 2061 and is guaranteed by the governments of Singapore and Malaysia in the 1965 Separation Agreement.

On Sunday, Prime Minister Lee Hsien Loong highlighted how vulnerable newly independent Singapore had been, with nearly all its water coming from Johor back then.

Mr Lee said at the National Day Rally: "Every now and again, when an issue arose with Malaysia, some crazy politicians would threaten to turn off the tap, to get us in line."

In fact, said Mr Shanmugam, Malaysian opposition Parti Keadilan Rakyat's deputy chairman in Johor, Mr Jimmy Puah, had criticised the water agreement just last week.

Mr Puah had said Singapore continues to draw 250 million gallons of raw water a day from Johor despite water rationing in the state, Mr Shanmugam said.

"The implication of his statement is obvious... It's powerful rhetoric. They don't care whether we suffer," he added.

The PUB said in a statement last week that it has been supplying an extra five to six million gallons of potable water a day to Johor during its dry spell, since Aug 14.

But should Mr Puah's rhetoric and criticism of the Malaysian government take hold, Mr Shanmugam said, "then you will expect the Barisan Nasional government to have to react to it". "How will they react? We don't know."

He reiterated Singapore's position that both countries have to comply with the treaty, but added: "Treaties are only useful to the extent that you can make them work."

A version of this article appeared in the print edition of The Straits Times on August 28, 2015, with the headline 'Republic won't pay tax on its Johor waterworks'. Print Edition | Subscribe