Parent Relief for Income Tax Restricted to 1 Child

Date: 16 January 2012

To ask the Deputy Prime Minister and Minister for Finance:

(a) why is the parent relief for income tax restricted to one child;

(b) whether the Minister will consider extending it to all children who support their parents; and

(c) what is the current number of people who claim parent relief and the estimated impact of such an extension to all children

Reply by DPM and Finance Minister Tharman Shanmugaratnam:

The parent relief recognizes the role of children in supporting their parents in old age. The relief is granted as a fixed dollar amount with respect to each elderly person who is a parent, regardless of how many children he has. The dollar amount is fixed, as it would be inequitable for families with more children to enjoy a larger benefit than those with fewer children. An elderly person with no children also enjoys no such benefit.

Extending the fixed dollar relief to more children means that each claimant would have only a fractional share of the available relief. In practice, this would raise many difficulties in implementation. Often the duty of caring for the parent is shared in various ways among children and their spouses, and sometimes grandchildren as well. Depending on the circumstances of each family, care can be given in monetary or non-pecuniary forms and may not be easily quantifiable. There will be practical challenges in apportioning the parent relief in an equitable manner. Further, an equal apportionment to all involved may result in not a very meaningful amount of relief, including for the child who may be most significantly engaged in supporting the parent.

Nonetheless, MOF will study this idea further and engage in consultations to see if it can be implemented practically.

In Year of Assessment 2010, about 151,000 taxpayers claimed a total of $1.16 billion of parent relief. This cost the government about $106.4 million^[1] in tax revenue foregone. As for the Member's question on extending parent relief to all children, there will be minimal tax revenue impact if the proposal is to share the current quantum of parent relief among all children. However, the revenue impact will be significant if every child or grandchild can each claim the full amount of relief for supporting his parent or grandparent.

^[1] Source: IRAS. Information extracted on 20 Dec 2011.