Second Reading Speech By Mrs Josephine Teo, Minister of State for Finance and Transport On The Income Tax (Amendment) Bill 201122 Nov 2011
Mr Speaker, Sir, I beg to move, "That the Bill be now read a second time."
2. The Income Tax (Amendment) Bill 2011 comprises two categories of legislative changes. The first category puts into legal effect the income tax changes announced in the 2011 Budget Statement. The second category covers other amendments to the Income Tax Act arising from the regular review of our income tax system.
3. The Income Tax (Amendment) Bill was released for public consultation from 11 July to 1 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 upon in this House following their announcement in the 2011 Budget Statement. Let me summarise some of these key changes.
First, the Productivity and Innovation Credit ("PIC") Scheme has been enhanced to encourage innovation and productivity efforts. Changes include increasing the PIC deduction from 250% to 400%, increasing the cap on qualifying expenditure from $300,000 to $400,000 per activity, and raising the cash payout in lieu of deduction to $30,000. Clauses 17, 19, 23, 24, 25, 29, 30, 31 and 33 of the Bill provide for the changes.
Second, a one-off corporate income tax rebate of 20% up to $10,000, or an SME cash grant of up to $5,000 has been granted to help companies cope with rising cost. This is provided for in Clause 61.
Third, businesses will be able to pool their tax credits for foreign tax suffered on their foreign incomes with the new Foreign Tax Credit ("FTC") Pooling system. This should simplify compliance and reduce the tax payable on the remitted foreign income. This is provided for in Clause 54.
Fourth, all existing maritime tax incentives will be streamlined under a new umbrella incentive - the Maritime Sector Incentive. Apart from streamlining, the umbrella scheme improves on existing shipping-related incentives by covering more shipping-related support services and new entrants into the industry. The enhancements will strengthen Singapore as an International Maritime Center. Clauses 7, 10, 12, 43, 45, 46, 48, 49, 69(a) and 71 provide for these changes.
Fifth, a new tax deduction has been introduced to allow a company to claim for the cost incurred on acquisition of its parent company's shares, through a Special Purpose Vehicle, for its Employee Equity-Based Remuneration Scheme. This is provided for in Clauses 22 and 27(b) and (c).
Sixth, start-ups will be able to claim tax deduction for expenses incurred prior to its earning any revenues. The expenses should be incurred in the accounting year before that in which it earns the first dollar of revenues. This enhancement will further relieve businesses of start-up costs. The change is provided for in Clause 26.
Seventh, the tax deduction of 250% for donations made to Institutions of a Public Character, Government, approved persons and prescribed educational or research institutions will be extended for another 5 years to 31 December 2015. This is provided for in Clause 32(a).
Eighth, the personal income tax rate structure will be amended effective from the next year of assessment in 2012. The new personal income tax schedule is more progressive. A one-off personal income tax rebate of 20% up to $2,000 has also been granted for Year of Assessment 2011. These changes are covered by Clauses 68 and 70 respectively.
Finally, following an increase in the employer's CPF contribution rate from 1 September 2011, the corresponding tax deduction allowable to the employer is increased to the new CPF contribution rate of 16%. The contribution that is exempt from tax or the contribution in excess of which is deemed taxable, as the case may be, is accordingly raised to $5,000 per month. Clauses 4(b) and (c) and 16(a) provide for the change.
5. Sir, I shall now deal with the other tax changes covered in this Bill that arise from the on-going review of our Income Tax Act. Let me highlight four of these changes.
6. First, Clause 3 clarifies for the avoidance of doubt that Government-Paid Childcare Leave payments received by self-employed individuals are taxable income since their introduction on 31 October 2008. This ensures consistency with the tax treatment of Government-Paid Maternity Leave payments received by self-employed women.
7. Second, amendments are made to the income tax appeal procedures for greater clarity and certainty in the timely resolution of tax disputes, and savings in tax compliance and administration costs. Changes include enabling taxpayers to take their case to the Income Tax Board of Review even if their case is non-taxable for that year, and extending the time to file appeals from 14 days to 30 days. Clauses 56 to 60 provide for this.
8. Third, the provision of Unique Identity Number ("UIN") or Unique Entity Number ("UEN") will be made compulsory and extended to donors who make cash donations to IPCs through grant maker, cash donations to Government, donations of computers to prescribed institutions, and donations of art works to approved persons. This requirement was already introduced for qualifying donations made to IPCs directly. With the amendment, donors will not need to declare their donations in their tax returns in order to enjoy tax deductions on their donations. Clause 32(b) provides for this.
9. Fourth, to meet our commitments towards the international Exchange of Information ("EOI") standard, the Income Tax Act is amended to allow Singapore to exchange information via separate EOI arrangements, where necessary. Presently EOI can only be done through Avoidance of Double Taxation Arrangements. Clauses 62 to 67 provide for this change.
10. 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.
11. With the above changes, the Income Tax Act will be enhanced and updated to better achieve our economic and social objectives. Mr Speaker, Sir, I beg to move.