Currently self-employed persons can claim tax relief for CPF contributions amounting to 20 percent of their income or $14,400, whichever is lower. Essentially this is only the employee's portion of the CPF contributions for employees of companies.

In the knowledge-based economy, we can expect more people to be self-employed. They should be encouraged to save for their old age to the same extent as those who are employees. The self-employed is, in a way, both employer and employee. Today, he is granted tax deductions for CPF contributions up to what employees are required to contribute for their ordinary wages.

This policy will be adjusted so that self-employed persons basically receive the same tax benefits from the CPF scheme as both employer and employee combined with effect from YA 2002. A self-employed person will get tax relief for CPF contributions amounting to 36 percent of his income, subject to a maximum income of $72,000. This way, entrepreneurs running their own businesses will not be disadvantaged. Self-employed persons will be more motivated to save for their retirement by voluntarily contributing more to their CPF accounts. The tax benefits they will gain from this policy change will amount to $6m or more per year. This change will take effect for CPF contributions made from this year.