Consequences of land tax on PUB's Johor Waterworks could be 'quite serious': K Shanmugam

The consequences of a demand that Singapore’s PUB pay a land assessment tax imposed by Johor’s Kota Tinggi District Council could be “quite serious”, said Singapore’s Foreign Affairs Minister K Shanmugam on Thursday (Aug 27).

The tax is being levied on the PUB-owned Johor River Waterworks, which draws and treats water from the Johor River. But Singapore’s stand is that under the 1962 Water Agreement, the PUB is not required to pay the land assessment tax.

“They have created a special (tax) category for PUB, and they’ve issued us further notice saying we are late in payment,” said Mr Shanmugam, speaking at a forum organised by the Singapore Press Club.

“You can work out what the consequences are. In a normal legal case, if you don’t pay tax, somebody goes 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. It’s quite serious.”

Mr Shanmugam had first touched on the issue in Parliament on Aug 18. In late-2014, the Kota Tinggi District Council sought to double the rate of land assessment tax for the PUB’s waterworks, and the revised rate was more than double that of the next highest rate in the entire district. The assessed property value was also increased.

Said Mr Shanmugam on Thursday: “Of course, we objected. I spoke with the Malaysian Foreign Minister twice, PM spoke with PM Najib. The water agreement doesn’t allow for these sorts of treatments. If I keep quiet about doubling it, tomorrow they might quadruple it.”

He also referred to recent “powerful rhetoric” from an opposition Johor assemblyman over the fact that Singapore continued to draw raw water from Johor while water rationing was going on in Johor. The state has been severely affected by dry weather.

If such rhetoric takes hold, said Mr Shanmugam: “Then you will expect the Barisan Nasional government to have to react to it. How will they react? We don’t know.”

But Singapore's position is that both countries have to comply with the 1962 water agreement, which was guaranteed by the Malaysian Federal Government in the Separation Agreement of 1965.

The 1962 agreement gave Singapore the right to draw water from the Johor River up to a maximum of 250 million gallons per day, and in return, Johor was entitled to a daily supply of treated water from Singapore up to 2 per cent of the raw water it supplied.

Nevertheless, since Aug 14, the PUB has been supplying additional potable water to Johor - up to a total of 22 million gallons per day. This was in response to a request for assistance from Johor’s water regulatory body, Singapore’s national water body had said earlier.  

ISLAMISATION TREND ‘PAST THE TIPPING POINT’

Turning to more fundamental changes in Malaysian society, Mr Shanmugam said the growing trend of Islamisation had “gone past the tipping point now”. And his could “percolate up eventually into policy”.

“Politicians use the Islamic call to try and win votes and project themselves as more Malay and more Muslim than the next person,” he said. “An honest politician, an upright politician, will find it very difficult to talk about a united, cohesive Malaysia that is more integrated. The political dynamics is such that he will have to play to the Malay ground. And that is the only way that many people will see as a possibility of offsetting the decline in support for UMNO.”

In the case of the Parti Islam Se-Malaysia (PAS), when it held its central committee elections in June, the professional-class faction was practically “wiped out” by the cleric faction - which had used the soundbite “Islamic law means more Islamic”, he observed.

He cited other examples such as Kelantan state, which has banned female hairstylists from cutting men’s hair; and Selangor and Penang, where non-Muslim women in knee-length skirts have been barred from entering government buildings.

In one poll conducted in January, respondents were asked what was the most important trait a Malaysian Prime Minister should have. The top response: Islamic credentials,  over other criteria such as economic and management skills.  “Even more significant is that 71 per cent of all Malays in Peninsula Malaysia support Islamic law. It’s only a question of time before the politics follow popular opinion,” said Mr Shanmugam.

He added: “(The late Mr Lee Kuan Yew) foresaw these things, which is why he kept talking about such issues. And, each time he talked about those issues, every generation which was not his generation tended to be dismissive. ‘Here goes old man again trying to scare us.’”

ECONOMIC IMPACT ON SINGAPORE

“Now, what is the impact of all of this on us? For a start, we are a completely investment-dependent economy. If you are sitting in Houston and deciding whether to put a five-billion-dollar investment to tiny Singapore, 700 square kilometres, you are going to look at the northern neighbour, 105,000 square kilometres, and 30 million population.  That is going to factor into your economic calculus,” said Mr Shanmugam. 

And in a more direct way, Malaysia’s current economic woes would have an impact on Singapore.

“Three ringgit to the Singapore dollar - Singaporeans see this as a good thing when they go shopping, on holidays. But in reality, when your neighbour’s economy is in such a state and your neighbour is your second-largest trading partner, and you are your neighbour’s second-largest trading partner, you have billions of investments both ways. It doesn’t benefit us,” he said.

Malaysia’s medium to long-term challenge will be how to bring its economy to the next level and get out of the “middle-income trap”, by moving up the value chain from extractive industries, said the Minister.