Second Reading Speech By Mrs Lim Hwee Hua Senior Minister Of State For Finance On The Income Tax (Amendment) Bill 2008, at The Parliament, 18 Nov 200818 Nov 2008
Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."
2. The Income Tax (Amendment) Bill 2008 comprises three groups of legislative changes. The first group provides for the income tax changes announced in the 2008 Budget Statement. The second group gives legislative effect to the tax changes under the recently enhanced Marriage & Parenthood (M&P) Package. The third group covers other amendments to the Income Tax Act arising from regular reviews to improve our income tax system.
3. The Income Tax (Amendment) Bill was released for public consultation from 27 June to 28 July this year. The Bill has been revised to incorporate public feedback accordingly.
4. I will now touch on tax policy changes announced in the 2008 Budget Statement, which the Bill provides for. Six key tax changes are as follows:
Firstly, personal income tax rebate of 20% for the Year of Assessment 2008, up to a cap of $2,000. This is provided by Clause 56 of the Bill;
Secondly, tax changes to encourage companies, including the smaller ones, to carry out Research & Development in Singapore. Clauses 2, 20, 21, 22, 26 to 29, 32 to 34, and 53 of the Bill provide for this change;
Thirdly, a new deduction for qualifying renovation or refurbishment expenditure. The deduction is aimed at helping businesses upgrade their business premises, especially small companies in the retail and service sector. Clauses 24, 25 and 32 of the Bill provide for this change;
Fourthly, liberalisation of the start-up tax exemption scheme to encourage entrepreneurship, as effected through Clause 39;
Fifthly, various incentives for the financial and maritime sectors. These are covered in various clauses of the Bill such as Clause 18 for family-owned investment holding companies and Clause 42 for container leasing entities; and
Lastly, enhancement of tax reliefs for the CPF and SRS contributions to encourage voluntary savings for retirement and healthcare. These changes are covered by Clauses 5, 25 and 35.
5. Sir, I shall now move to the legislative changes to effect the three tax changes under the Marriage & Parenthood Package announced in August this year.
6. The first tax change is the enhancement of Qualifying Child Relief (QCR) and Handicapped Child Relief (HCR). With effect from the Year of Assessment (YA) 2009, the quantum for QCR will be increased from $2,000 to $4,000, and for HCR, from $3,500 to $5,500. QCR will also be extended to all qualifying children, beyond the fourth child. Clauses 35(a) and 54(a) of the Bill provide for these changes.
7. The second tax change is the enhancement of the Working Mother's Child Relief (WMCR). The WMCR, which is computed as a certain percentage of the qualifying mother's earned income, will be enhanced and is now extended to all her qualifying Singaporean children, including the fifth child and beyond .Working mothers can claim WMCR up to 100% of their earned income for all qualifying Singaporean children. The cap for the total amount of QCR or HCR and WMCR claimable in respect of the same child by all qualifying individuals has been doubled to $50,000. Clause 54 of the Bill provides for these changes.
8.The third tax change is the enhancement of the Parenthood Tax Rebate (PTR). PTR of $5,000 will now be extended to the first child and $20,000 to each child beyond the fourth child. Clause 38 of the Bill provides for this change.
9. Sir, I shall now deal with the third group of tax changes which require amendments to the Income Tax Act arising from our ongoing regular review of our existing tax policies and administration. Let me highlight two of these changes as the rest are either technical or relate to improvements to our tax administration.
10. Firstly, exempting selected groups of taxpayers from income tax filing under the No-Filing Service of IRAS. The No-Filing Service is an initiative where taxpayers, who are selected by IRAS based on pre-determined criteria, will receive their notices of assessment, without having to submit any income tax return. The selected taxpayers will not be required to file a tax return if (i) there are no additional sources of income (other than employment income received from employers under the auto-inclusion scheme) during the year; and (ii) the tax reliefs which they intend to claim are the same as those claimed in the previous year. However, they will be required to declare to IRAS if there is any inaccuracy of the information in the notice of assessment issued to them or if there has been any change in their circumstance, such as a change in their claims of tax reliefs.
11. The No-Filing Service will result in benefits for approximately 300,000 taxpayers and the Government. As these selected taxpayers need not file their returns, others will enjoy a faster and smoother tax filing process. For the Government, it will alleviate the filing load during the peak period and reduce tax administration costs such as the issuance of PIN mailers and paper returns. Clauses 47, 48, 49, 50, 51 and 52 effect the No-Filing Service.
12. Secondly, extending tax incentives to General Partnerships and Limited Liability Partnerships (LLPs). Typically, tax incentives have been awarded to companies. However, as a general principle, we should not discriminate among the different business forms when awarding tax incentives. As business forms other than companies are becoming more prevalent and businesses often seek to structure themselves as partnerships for legitimate commercial reasons, we have decided to extend tax incentives to General Partnerships and LLPs. Nonetheless, we need to proceed carefully on opening up tax incentives to general partnerships and LLPs, because income of partnerships are taxed in the hands of the partners who can be corporate or individuals, and individuals are taxed under personal income tax schedule. Nonetheless, for a start, specific tax incentives such as writing down allowance for acquisition of intellectual property rights, aircraft leasing and further deductions for R&D expenditure will be extended to General Partnerships and Limited Liability Partnerships, subject to conditions. Clause 30 effects this change.
13. Sir, for the remaining nine legislative changes arising from our periodic review of the income tax system, I will not put members through details of these changes. They are either technical in nature or relate to improvements in tax administration.
14. 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.