Second Reading Speech By Mrs Josephine Teo, Minister of State For Finance And Transport On The Income Tax (Amendment) Bill 2012 at The Parliament, 14 Nov 201214 Nov 2012
Mr Speaker, Sir, I beg to move, "That the Bill be now read a second time."
2. The Income Tax (Amendment) Bill 2012 covers both the income tax changes announced in the 2012 Budget Statement and other changes arising from the regular review of our income tax system.
3. The draft of the Bill was released for public consultation from 24 July to 13 August this year. MOF has revised the Bill to incorporate the suggestions accepted for implementation.
4. Sir, most of the tax changes in this Bill have already been debated in this House following their announcement in the 2012 Budget Statement. Let me highlight the key changes.
5. First, the Productivity and Innovation Credit (“PIC”) Scheme has been enhanced with special consideration to the needs of small businesses. The cash reimbursement for up to $100,000 of PIC expenditure was doubled from 30% to 60%. We are allowing the cash payout to be paid in a more timely manner, on a quarterly rather than yearly basis. To help more SMEs qualify for training support, we are also removing the requirement for certification by the Workforce Development Agency and Institute of Technical Education for in-house training which cost up to $10,000 per Year of Assessment (YA). Clauses 14, 15, 19, 21, 22, 23, 32 and 51 of the Bill provide for the changes.
6. Second, a one-off SME cash grant of up to $5,000 has been provided. This grant gives the SME-recipients a very high degree of flexibility to invest in areas that are most helpful to their coping with the changing business environment. This is provided for in Clause 47.
7. Third, the Renovation and Refurbishment Deduction Scheme has been made a permanent feature of our income tax code. These enhancements are particularly helpful to small businesses in the retail and F&B sectors, which number some 20,000. Further enhancements include the doubling of the existing cumulative expenditure cap to $300,000 over three years. Clauses 18 and 31 provide for these changes.
8. Fourth, the new tax provisions will give businesses certainty on the non-taxation of gains on disposal of qualifying equity investments. This will help facilitate corporate restructuring, minimise compliance costs and enhance Singapore’s attractiveness as a place for business. This is provided for in Clauses 11 and 51.
9. Fifth, the earned income relief and handicapped earned income relief will be doubled for older workers aged 55 years and above, to support and encourage them to stay employed. This is provided for in Clause 35.
10. Sir, I shall now deal with the other tax changes covered in this Bill that arise from our ongoing review of the Income Tax Act. Let me highlight three of these changes.
11. First, we will exempt Workfare payments from income tax. Workfare payments are currently taxable even though most recipients would not need to pay income tax because their wages fall below the threshold for liability for income tax. This change has been introduced to provide certainty of non-taxation. The exemption will apply retrospectively from Year of Assessment 2006 when Workfare was first introduced. This is consistent with Workfare’s policy objectives, which are to supplement the wages of older low-wage workers, and encourage them to find work or continue working. Clause 3 provides for this.
12. Second, with effect from 1 January 2011, eligible entities have been able to prepare their financial accounts using the Singapore Financial Reporting Standards (SFRS) for Small Entities. MOF and IRAS have assessed that the resultant change in accounting treatment do not require changes to existing tax rules, except for financial instruments. We propose to amend the Income Tax Act to allow small entities the option of aligning the tax treatment of financial instruments to their accounting treatment in the SFRS for Small Entities. This is provided for under Clause 25.
13. Third, the CPF Minimum Sum Topping-Up Scheme has been enhanced to extend tax deductions on cash top-ups made to the CPF Special or Retirement account of parents-in-law and grandparents-in-law. These changes will take effect from 1 January 2013. Clause 35 provides for this.
14. The remaining legislative changes arising from our periodic review of the income tax system are either technical in nature or relate to improvements in tax administration.
15. Mr Speaker, Sir, I beg to move.