Impact of increased tax deduction for donations to IPCs

Date: 10 January 2011

Written answers to questions for oral Parliamentary Question by Mr Liang Eng Hwa:

To ask the Minister for Finance (a) whether the increase in tax deduction from 200% to 250% for charitable donations to Institutions of Public Character and approved institutions since 2009 has led to a significant increase in donations; and (b) whether the Ministry has plans to extend this increase in tax deduction into 2011 and beyond.

Reply by Finance Minister Tharman Shanmugaratnam:

1. The tax deduction for donations to Institutions of a Public Character (IPCs) was increased from 200% to 250% for donations made in 2009 to encourage charitable giving during the economic downturn. The enhanced deduction was subsequently extended to donations made in 2010.

2. In 2009, the amount of gross tax deductible donations from individual donors increased by 7% compared to 2008, from about $175M to $188M. This should be viewed in the context of the economic recession, which reduced incomes. The percentage of individuals who claimed tax deductions for donations, as a fraction of the individual tax base, has also continued to trend upward, from 55% in 2008 to 58% in 2009. As for corporate donations, the data for 2009 is still incomplete as there is a usual lag in corporate tax filings.

3. MOF is currently reviewing if the 250% tax deduction for donations to IPCs should be extended.