Tax System Does Not Disadvantage Older Workers

I REFER to the letters, 'Can older workers pay less income tax?' (ST, Sept 29) by Ms Lily Wong and 'Don't increase tax burden of older workers with falling income' (ST, Sept 30) by Mr Tenzin Quek Gim Soon.

Our income-tax system already provides a higher amount of tax relief for older workers. Workers between 55 and 59 years of age and those who are 60 and above are entitled to $3,000 and $4,000 of Earned Income Relief (EIR) respectively, compared to $1,000 in EIR for those below 55 years of age.

To reduce their tax burden, older workers also have the option to make contributions to the Supplementary Retirement Scheme (SRS) up to the age of 62. These contributions qualify for tax relief, resulting in less income tax payable.

Currently, regardless of his/her salary, an individual may make a maximum annual contribution of $11,475 to his/her SRS account.Since only 50 per cent of withdrawals at or after retirement age are taxed, and withdrawals can be made over 10 years, an SRS member may end up paying minimal or no income tax on the withdrawals.More details of the SRS may be found on the Inland Revenue Authority of Singapore (Iras)'s website at www.iras.gov.sg.

As for GST, it is a tax on virtually all domestic consumption of goods and services, including medical insurance and health services. This broad-based GST enables us to keep our GST rate low and the GST system simple. In any case, GST does not raise the cost of subsidised health services, as the Government increased subsidies to restructured hospitals and polyclinics to fully offset the GST payable on such services.

Mr Quek also raised the issue of whether insurers should pay for the GST on their policyholders' medical bills. This is a matter between the insurers and their policyholders. However, with effect from Jan 1, 2007, insurers will be entitled to claim input GST on cash payments paid to qualifying policyholders under insurance contracts, including health policies which are subject to GST. This tax change, announced in Budget 2006, will help insurers reduce their business costs. The savings arising from this for the insurers could be passed down to policyholders in the form of lower premiums.

Singapore's personal income tax and GST rates are among the lowest in the world. A simple tax system with low rates allows Singapore to remain a competitive economy. We thank Ms Wong and Mr Quek for their feedback.

CHEONG SWEE YING
CHIEF TAX POLICY OFFICER
MINISTRY OF FINANCE