TAXATION OF SELF-EMPLOYED

Mr Rohan bin Kamis asked the Minister for Finance what are the plans to enlarge our tax-base to include those people who are self-employed and should be paying taxes.

Mr Hon Sui Sen: Sir, the answer to this is related to the last one.

Tax evasion by the self-employed is a universal problem which challenges the ingenuity of all tax administrators. My Ministry has examined the statistics more closely and estimated the magnitude of this problem in Singapore.

According to the Labour Force Survey of 1977, there were 903,900 persons in our labour force. Of these, 132,602 persons or 14% of the labour force were self-employed. 77,200 of them appear to have incomes in the taxable brackets. Allowing for 25% under-disclosure, probably 97,000 or more were earning incomes that would put them in the tax-paying bracket. However, Income Tax records show only 42,900 of our taxpayers as self-employed. This means that at least 54,100 or 56% of the self-employed persons who have taxable incomes are not paying tax. By comparison with persons in the labour force who are employees and taxable, out of 247,800 such persons, only 1,000 or 0.4%, escaped the tax net. Therefore, the self-employed persons have not, as a class, been shouldering their fair share of the tax burden. My Ministry plans to bring these people into the tax net.

Several measures have been taken to check tax evasion by the self-employed. Firstly, the Anti-Evasion Unit in the Inland Revenue Department has been paying increasing attention to the problem and stepped up its efforts particularly against evasion by self-employed persons. Secondly, income tax assessment forms were sent to identifiable self-employed persons, such as hawkers and taxi drivers. Thirdly, an exercise matching car-owners with taxpayers was carried out.

As a result of the three measures taken, 18,425 new taxpayers have been netted up to 30th April, 1979. The next step will be to ensure a proper assessment of their incomes so that they will be paying their fair share of the tax. This is a bigger problem.

These three measures have been directed mainly at tax evasion by the more easily identifiable self-employed persons. However, a large number of self-employed persons need not be registered or licensed to carry out their trade or business. These will cause greater difficulty, but my Ministry will also study measures against tax evasion by them.