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Ministry of Finance
Second Reading Speech by Second Minister For Finance Lawrence Wong, on the Income Tax (Amendment) Bill 2018, at The Parliament, 2 October 2018
Mr Speaker, I beg to move, "That the Bill be now read a second time."
The Income Tax (Amendment) Bill 2018 covers 17 income tax changes announced in the 2018 Budget Statement as well as 19 tax changes arising from the periodic review of our income tax regime. Of the 19 non-Budget proposed tax changes, eight changes are proposed refinements to the income tax regime while the remaining 11 changes are technical amendments to remove obsolete provisions or to provide clarifications on the law.
We sought views from the public on the draft Bill from 20 June to 11 July 2018. MOF evaluated all the feedback received and incorporated them where relevant to the draft text of the Bill.
Let me start by highlighting some of the key tax measures.
First, the existing Corporate Income Tax (“CIT”) rebate for the Year of Assessment (“YA”) 2018 will be enhanced by raising the rebate percentage from 20% to 40% of tax payable, and the rebate cap from $10,000 to $15,000. The CIT rebate will also be extended to YA 2019, at 20% of tax payable, capped at $10,000. This will help companies, especially smaller ones, cope with near-term cost pressures. Clauses 43 and 44 of the Bill provide for this change.
Second, adjustments will be made to the Start-Up Tax Exemption (“SUTE”) Scheme and Partial Tax Exemption Scheme from YA 2020. The tax exemption under both schemes will be reduced from the first $300,000 to $200,000 of normal chargeable income. Exemption under the SUTE Scheme will also be lowered from 100% to 75% for the first $100,000 of normal chargeable income. Even with these changes , corporate tax will remain low for start-ups and smaller companies. In addition, start-ups and smaller companies can tap on a wide range of Government support measures to build capabilities and grow their businesses.
Clauses 32(f), 50(a) and 50(d)-(g) of the Bill provide for these changes.
Third, to encourage research and development (“R&D”) to be done in Singapore, the tax deduction for staff costs and consumables incurred on qualifying R&D projects performed in Singapore will be increased from 150% to 250%. This enhanced deduction will be available from YA 2019 to YA 2025. Clauses 16 and 17 of the Bill provide for the change.
Fourth, to further encourage internationalisation, the expenditure cap for the Double Tax Deduction for Internationalisation claims, without prior approval from Enterprise Singapore or the Singapore Tourism Board, will be raised from $100,000 to $150,000 per YA from YA 2019. Clauses 14 and 19 of the Bill provide for the change.
So these are the tax changes that give effect to the announcements that were made in Budget 2018 this year.
As mentioned earlier, the Ministry of Finance also regularly reviews and refines the income tax regime. So I will now highlight the three broad changes arising from this periodic review of the tax regime which are in the Bill.
First, we will enhance IRAS’ powers to investigate tax crimes. Tax offenders and criminal syndicates are becoming more obstructive and are employing more sophisticated schemes to defraud the authorities and cover up their crimes. Currently, IRAS has powers to require persons to provide information, record statements and take possession of documents or items that constitute evidence of tax offences. Enhanced investigative powers are required
to more effectively deal with serious tax offenders, as well as acts of obstruction which may hamper IRAS’ investigations and prosecution. Such obstructive acts include taking flight, destroying or refusing to hand over evidence, and contacting other witnesses to collude or fabricate evidence.
The proposed amendments will enhance IRAS’ investigative powers, by providing authorised IRAS officers with the (i) power of forced entry; (ii) power to arrest without warrant; and (iii) power to carry out body search; subject to conditions. I will refer to these as enhanced investigative powers in my speech. I should also note that investigation officers of other tax authorities such as the UK and US have similar powers to facilitate their investigations.
We will put in place safeguards in the way these enhanced investigative powers are implemented.
power to arrest without a warrant may only be exercised for an investigation of serious tax offences such as tax evasion, or where a suspect attempts to destroy evidence with a view to hindering or obstructing IRAS’ investigations.
The power of forced entry may only be exercised if entry cannot be gained to a building or place in two situations:
One, when it is for an investigation of a serious tax offence and there is reason to believe that there is in a place an item relevant to the investigation or prosecution that may otherwise be concealed, removed or destroyed,
Or, two, when there is a reason to believe that a person liable to be arrested under the Act is in the building or place.
The power to carry out a body search may only be exercised on a person found in a place which IRAS has lawfully gained entry into for the purpose of investigating a tax offence, and to search for items which may be relevant for investigation or prosecution. There is an additional safeguard for a woman to only be searched by a female officer.
All these enhanced investigative powers may only be exercised by officers authorised by the Comptroller of Income Tax. These authorised officers would receive training consistent with those in other law enforcement agencies, such as Singapore Customs.
The amendments will also expand IRAS’ power to gather all information relevant to its investigations or prosecution of tax offences from any person. Currently, IRAS may gather information relating to a person’s income, assets or liabilities only. The amendment will allow IRAS to gather all information as long as it is relevant to the investigation or prosecution. For example, this could include information relating to business transactions or information relating to accomplices.
In addition, the amendments will align the penalties imposed under the Income Tax Act for persons who obstruct officers acting in discharge of their duty with those for a similar offence under the Goods and Services Tax Act. Specifically, Section 66 of the Goods and Services Tax Act imposes a maximum fine of $10,000 and imprisonment of up to 12 months, or both, for obstruction of officers.
Clauses 2(b), 3, 41, 42, 45, 46 and 47 of the Bill provide for all of the changes which I have just described.
The second broad change pertains to the proposed amendment of the Income Tax Act to allow IRAS to share with law enforcement agencies (“LEAs”) information that may be necessary for investigation or prosecution of serious crimes. Serious crimes are offences listed in the First and Second Schedules to the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act.
We need the proposed amendments as the activities of criminals including syndicates are often multi-faceted. Their criminal activities may not be limited to tax evasion, and may extend to other forms of illegal activities like drug dealing and corruption. A Whole-of-Government approach is required to better tackle such serious crimes. And again, I would highlight that other countries including Australia, Norway, Sweden and the UK, also allow for the disclosure of tax information to LEAs to combat non-tax crimes.
Under the proposed amendments, information shared is
to be disclosed by the Comptroller to the head of an LEA for the purpose of investigation or prosecution of serious crimes. Unauthorised onward disclosure of such information would constitute an offence. Clause 4 of the Bill provides for the changes.
Third, we propose to amend the Income Tax Act to allow tax deduction for motor car-related expenses for private hire car (“PHC”) drivers. Unlike taxi drivers, PHC drivers are currently not allowed to claim tax deduction on car-related expenses. We have reviewed this issue with the Ministry of Transport, and taken into account feedback from various Members of Parliament during debates on this matter, as well as the National Private Hire Vehicles Association.
In view that taxi and PHC drivers now provide similar point-to-point transport services, we will allow tax deduction on car-related expenses incurred by PHC drivers, against their driving income. Such expenses will include car rental and petrol for example. And to keep compliance manageable, a PHC driver may claim tax deduction for expenses incurred to earn driving income based on a deemed expense ratio prescribed in the Income Tax Act. We consulted with the National Private Hire Vehicles Association and the National Taxi Association, and have proposed to set the deemed expense ratio at “60% of gross driving income”. The ratio is a proxy for all expenses incurred to earn driving income, including service fees paid to platform providers. Alternatively, the PHC driver may opt to claim tax deduction based on the actual amount of expenses incurred in earning driving income. So they can opt for the deemed 60% deduction or they can claim tax deduction based on their actual amount of expenses incurred.
The convenience of a deemed expense ratio will be extended to taxi drivers. Like PHC drivers, taxi drivers will be allowed to opt for the deemed expense ratio to ease tax compliance. Alternatively, taxi drivers can choose to continue with their current practice of claiming tax deduction based on the actual amount incurred on relevant expenses.
Capital allowance for the purchase costs of cars will continue to be disallowed for PHC drivers. As for taxi drivers, almost all currently do not own their taxis and therefore do not claim capital allowance. Only about 80 individuals today own taxis. These taxis are the yellow-top taxis. For taxi drivers who own these yellow-top taxis, the capital allowance in respect of their taxis will be grandfathered.
These changes in tax treatment update our tax regime to allow deduction for car-related expenses incurred by PHC drivers, while maintaining support for our long-standing policies on car ownership
under our tax regime
. The proposed amendments will take effect from YA 2019, for income earned in 2018. Clauses 22, 23 and 24 of the Bill provide for the changes.
Mr Speaker, I beg to move.
Published on : 02 Oct 2018
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