INCOME TAX (AMENDMENT) BILL

Order for Second Reading read.

3.15 p.m.

The Parliamentary Secretary to the Minister for Finance (Mr Tang See Chim) (for the Minister for Finance): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Subsection (lA) of section 10 of the Income Tax Ordinance provides relief for owner-occupiers of residential premises by exempting from the computation of income the net annual value of the property up to $3,000.

The annual values of properties have risen in recent years, and the Property Tax Department is doing a revaluation exercise on properties whose values are outdated. It has revised the values upwards in a number of cases.

In order that the benefit of relief to owner-occupiers is not restricted by the limit of $3,000, the amendment seeks to empower the Minister to determine, by an Order, the maximum amount which will not be subject to tax in respect of the net annual value of any one owner-occupied property.

Members will recall that the House was informed on the 17th of this month, in reply to a question by the Member for Thomson, that it was intended to increase the exemption limit from $3,000 to $6,000. The amendment as proposed will permit this to be done and also any subsequent variations of the maximum amount as and when required.

Sir, I beg to move.

Question proposed.

3.17 p.m.

Mr Ng Kah Ting: Mr Speaker, Sir, whilst supporting this Bill, I wish to seek clarification and an assurance from the Parliamentary Secretary to the Minister for Finance. Sir, this Bill in a way will benefit owner-occupied properties which carry an annual value of not more than $6,000. But in my view it will not help those owners who have to pay property tax on owner-occupied property of an annual value of $6,000; let it be at a concessionary rate of 18 per cent, 23 per cent or 27 per cent. In other words, if an owner-occupied property is today assessed at an annual value of $3,000, it can be reviewed annually, and in most cases it is revalued upwards. Therefore, more property tax will be paid as the annual value is reviewed each year.

My contention is this: whilst one benefits from exemption of income tax in respect of owner-occupied property valued at not more than $6,000, such a property, if revalued upwards, will carry a higher property tax. Under such circumstances, I would be grateful if the Parliamentary Secretary to the Minister for Finance could assure this House that properties which are considered sufficiently assessed or valued today will not be revalued next year or the following year.

Mr Tang See Chim: Sir, I am afraid I cannot give such an assurance to the Member for Punggol. In fact, "annual value" is defined by the Property Tax Ordinance as the value that a house can be let out unfurnished, the owner paying for its maintenance and repairs. In order to get the correct annual value, the property should be revalued every year so that it will correctly reflect its current market value. The Member for Punggol is asking us not to do that very thing, an annual revaluation, so that the annual value of a property can reflect its market value.

When this Bill comes into operation, any property having an annual value of more than $6,000 will attract income tax. In my reply to the Member for Thomson on the question of property tax a few days ago, I did say that any property having an annual value of $6,000 is, in fact, very luxurious property. And there is no reason why a person living in such luxurious splendour should not pay income tax.

Mr Ng Kah Ting: Sir, I think the Parliamentary Secretary completely missed my point. It is that if the annual value of a property is over and above the $6,000 limit, there is the imposition of income tax. And at the same time, Sir, there is also the question of property tax. In other words, there are two taxes coming under one income. I am not saying that properties should not be valued annually, but surely the officers in the Inland Revenue Department, in which the Property Tax Division is, should look into this aspect of owner-occupied properties.

Mr Tang See Chim: Mr Speaker, Sir, I am afraid I do not know what assurance the Member for Punggol wants me to give. I thought he wanted me to give an assurance that properties would not be revalued year by year, and I said that I could not give that assurance. In fact, our very aim is to revalue properties annually so that their annual values could reflect their current market values. I am not too sure, Mr Speaker, Sir, what the Member for Punggol wants, but perhaps if he could simplify his question, I might be able to say whether or not I can give him the assurance he wants.

Mr Ng Kah Ting: Sir, perhaps there is a confusion between property tax and income tax. My question is simply this. What I said just now was that those owner-occupied properties which have already been reasonably assessed should not be reassessed every year.

Mr Tang See Chim: Mr Speaker, Sir, I have already said that the very purpose of revaluation is to ensure that the property correctly reflects its market value, and that it should be done annually.

I just do not understand what the Member wants. If he says that any annual value above $6,000 will attract income tax, that is not correct because it is only if the net annual value of the property is above $6,000 then it will attract income tax. The "net annual value" is defined as the gross annual value minus the property tax you pay, minus the premium you pay on insuring your property, minus maintenance, and also minus any interest that you may have to pay on mortgaging the property. But I suppose anybody who lives in a house that has a net annual value of $6,000 or above would have bought it outright and not have to pay any mortgage interest.

I am still not quite sure what the Member wants, Sir. I think what he objects to is that any property having a net annual value of above $6,000 attracts income tax as well as property tax. Therefore, he says it is two taxes. That is not correct because any income is supposed to attract income tax, and a piece of property gives you a notional income. However, the Government is generous enough and now provides in the law that any property having a net annual value of less than $6,000 will not attract income tax on its annual value.

Mr J. F. Conceicao (Katong): Sir, may I just seek clarification? Will this relief on income tax on a net annual value of less than $6,000 be made retrospective to the time when this annual value was raised?

Mr Tang See Chim: Sir, consideration will be given to whether or not this exemption will be back-dated to the 1st January of this year. Sir, my attention has just been drawn to clause 1 of the Bill which says:

'This Act shall be deemed to have come into operation on the 1st day of January, 1970.'

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill.-[Mr Tang See Chim.]

Bill considered in Committee; reported without amendment; read a Third time and passed.