INCOME TAX (AMENDMENT NO. 2) BILL

Order for Second Reading read.

6.59 p.m.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Earlier this year, in my Budget Statement, I announced two income tax changes affecting earned income relief and capital allowances for passenger cars used for business purposes.

Clause 8(a) now proposes to effect an increase in the earned income relief from $1,000 to $2,000 and $3,000 for those over 55 and 60 years old respectively. This concession, Members may remember, was meant as an incentive for our skilled and experienced people to go on working beyond their normal retirement age. It was made also in recognition of the fact that the older people will need to spend more money staying healthy and getting to work.

Clause 5 makes an amendment to section 19 which will limit capital allowances to a maximum of$ 15,000 for those passenger cars registered after 3rd March, 1975, and used for business purposes. There will also be several consequential amendments to this proposed limiting of capital allowances in order that it will not be easily circumvented. First, for those passenger cars acquired on or before 3rd March, 1975, it is also proposed to limit further claims for capital allowances to a maximum of $15,000. Next, for tax deduction purposes, running expenses incurred by those cars costing over $15,000 will no longer be fully deductible but will be proportionately reduced by the method in clause 4(b). Third, where deduction is allowable for renewal or replacement for the cost of replacing a car, the renewal allowance in respect of each car shall also be subject to a maximum of $15,000. Finally, under clause 6, it is proposed to make adjustments to the calculation of balancing charge or balancing allowance, which may arise on the sale or disposal of a car, in the light of limiting capital allowances to a maximum of $15,000.

In March this year, when I moved the motion on the Civil List in Parliament, I mentioned that as from FY 75, the President will be paid his full salary of $12,000 per mensem, but the entire amount will be subject to income tax. Clause 3(a) will, therefore, subject the President's official emoluments to income tax from 1st April, 1975.

The opportunity is also being taken under this Bill to incorporate some other proposed amendments which are part of the continuing process to improve upon and tighten up the existing legislation.

Under clause 3(b), it is proposed to provide for the alternative of a reduced withholding tax, besides the present full exemption, on interest paid to lenders abroad for loans which are used for the economic or technological development of Singapore. In practice, it has been found that some flexibility in the tax relief would be useful. Certain foreign loans have merits, though not enough to qualify for total exemption from tax. At present, there is no alternative but to subject such loans to the full 40% tax. It is felt that in such cases a fairer treatment would be to grant a reduced tax rate if full exemption is not possible.

To tidy up an earlier amendment in 1973 whereby deductions would not be allowed for life insurance premiums paid to insurance companies which have no office or branch in Singapore, it is proposed under clause 8(b) to extend this same principle and deny deductions for life insurance premiums paid to foreign governments.

Some countries impose very heavy tax liabilities on profits of our shipping and air transport enterprises operating in them. In order to protect our own interests and also to strengthen our hands in any subsequent avoidance of double taxation negotiations with the country concerned, we should have a provision to enable us to apply reciprocal tax treatment, that is, impose equally heavy tax liabilities on the other country's shipping and air transport enterprises operating in Singapore. Clauses 7 and 9 provide for these enabling powers.

In the course of administrating the Act, the Comptroller of Income Tax has been faced with an omission regarding penalties. At present, the Act does not provide for specific penalties on taxpayers who are obliged, on behalf of the Comptroller, to withhold tax on interest paid to lenders abroad and who subsequently do not hand over the withheld tax money to the Comptroller or even inform the Comptroller about it. This is akin to criminal breach of trust and it is proposed to make this serious offence punishable with penalties similar to those applicable for tax fraud, that is, a penalty of three times the tax withheld, a fine of up to $10,000 and the possibility of imprisonment. Interest charges are also proposed for any delay in handing over the withheld tax money to the Comptroller. These penalties are provided under Clause 10.

Sir, I beg to move.

Question proposed.

7.05 p.m.

Mr Ng Kah Ting: Sir, I rise to speak in support of the Income Tax (Amendment No. 2) Bill.

I would like to refer to clause 8 of the Bill which amends section 39 of the principal Act by increasing the earned income relief of an individual who is 55 years or 60 years of age to $2,000 and $3,000 respectively. As mentioned by the Minister for Finance just now, the earned income relief is being increased so as to make it an incentive to these people to keep fit so as to be able to continue working. In this respect, would not the Minister for Finance seriously consider giving similar increased tax relief to those who are maintaining their aged parents? I believe that a relief of $750 allowed for the maintenance of an aged parent is insufficient. To my mind, this should be increased in view of the fact that the Government is now encouraging young couples to have smaller families and at the same time encouraging them to maintain their aged parents.

Mr Hon Sui Sen: Sir, this is not a matter which comes within the intention of this Bill, which is to effect the changes I have announced in my Budget statement. Maybe this could be one for the next Budget debate. While I do not make any promises, this obviously can be brought up again on that particular day. In relation to this Bill which is, as I have explained, to bring into effect the changes announced at the last Budget, this particular suggestion may not be quite so appropriate.

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 Hon Sui Sen].

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