TAX RELIEF FOR CPF CONTRIBUTIONS AND LIFE ASSURANCE PREMIUMS (Revision of limit)

Mr Tan Soo Khoon asked the Minister for Finance, in view of the continual increases in contributions to the Central Provident Fund resulting in less take-home pay for many wage-earners, whether he will now revise the limit of $4,000 allowed for income tax relief on contributions to the CPF and life assurance premiums.

Dr Tan Eng Liang: Mr Speaker, Sir, in 1977, 12,665 taxpayers were given the maximum relief of $4,000 on their CPF contributions and life assurance premia. They form only 4.5% of the total tax-paying population. The increase in the number of taxpayers who enjoyed the full $4,000 tax relief as a result of the recent increase in CPF contribution rate is not expected to be significant.

Any upward revision of the $4,000 relief ceiling would, therefore, only benefit a small group of taxpayers who are the higher salaried employees. For most of the middle and lower income groups, the combined CPF contributions and life assurance premia are not likely to pierce the $4,000 relief ceiling. Furthermore, the concessions in personal income tax rates effective from Year of Assessment 1978 have benefitted most taxpayers in the higher income group. I, therefore, do not see any justification to warrant a revision of the $4,000 limit allowable for purposes of tax deduction.