INCOME TAX (AMENDMENT) BILL

Order for Second Reading reed.

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

This Income Tax (Amendment) Bill is necessary to give legislative authority to the various tax concessions announced in the 1979 Budget Statement and to improve and streamline existing legislation.

In the 1979 Budget Statement, a number of tax concessions were announced. One of the concessions announced was that the whole of the pension income of resident pensioners would be exempted from income tax. Removal of this tax burden is to give resident pensioners due recognition for their faithful services rendered in the past. Clause 3 of the Bill makes provision for this concession by legislating a new section 13(x) to the Income Tax Act. This concession will take effect from the Year of Assessment 1979.

The existing capital allowance for a company registered car is restricted to a maximum of $1 5,000. With effect from 1st April, 1979, the ceiling of capital allowance for a company-owned car will be raised to $25,000. Clause 4 of the Bill amends section 14 of the Income Tax Act to provide for this concession. As a consequential amendment, clause 8(a) seeks to amend section 19 of the Act for the same purpose.

One of the objectives of our trade development policy is to encourage the export of our manufactured goods. Towards this end, double tax deduction benefits for expenditure incurred on export promotion were given. To further encourage more aggressive marketing overseas, the double tax deduction scheme is now extended to include marketing development expenditure incurred on approved overseas marketing projects, and advertisement expenses or advertisements in approved Singapore publications designed for publicity overseas. The expenditure must be incurred principally for the promotion of the export of Singapore-made goods. This concession, however, will not apply to companies which are already enjoying export or other incentives under the Economic Expansion Incentives (Relief from Income Tax) Act from being given the concession. Clause 6 of the Bill provides for the double tax deduction by incorporating a new section 14C to the Income Tax Act. This concession takes effect from 1st April, 1979.

Clause 6 also provides for deduction on expenditure incurred by new manufacturing companies on scientific research projects. The scientific research project must be carried out in Singapore. This concession is in line with our industrial development policy of promoting local expertise and technology.

Income derived from offshore reinsurance business is taxed at a concessionary rate of 10%. Clauses 10 and 12 will extend the 10% concessionary rate to include income derived from general inward direct insurance covering offshore risks. This is to further develop Singapore as a centre for off-shore reinsurance business. The concession will take effect from Year of Assessment 1980.

Clause 11 of the Bill provides for the increase in the maximum allowable deductions on contributions to the Central Provident Fund or other approved pension or provident fund schemes from $4,000 to $5,000.

I come now to those amendments which are intended to streamline procedures and improve existing legislation.

As the law now stands, the income from one property each, owned by a husband and a wife and claimed to be occupied for residential purposes, is not brought to charge, subject to a maximum of $25,000 each. This results in exemption of tax on the income (taken as equivalent to the net annual value of the residential property) which is an unearned income, under the assessment for the wife. The practice goes against the intention to exempt only one family home and is also inconsistent with the general tax treatment for the wife under the Income Tax Act, which subsumes all unearned income of the wife under the husband's name. Clause 2, therefore, seeks to amend section 10 of the Income Tax Act to allow only one owner-occupied residential property to be exempted from tax. The property of the wife who lives with the husband will be deemed for the purpose of income tax, to be owned by the husband. The amendment takes effect from Year of Assessment 1980.

Clause 2 also provides for the exemption from tax of any maintenance payment received by a child under a maintenance order or a deed of separation. It is inequitable to tax such payments which are meant for the maintenance and education of the child who is still a minor.

Clause 5 of the Bill amends section 14B(3)(c) of the Income Tax Act to preclude any company which is enjoying tax relief under the Economic Expansion Incentives (Relief from Income Tax) Act from being given double deduction of expenses under that Section.

Section 15 of the Income Tax Act restricts the deduction of expenses only to motor-cars which are registered as a business service passenger vehicle. Clause 7 of the Bill now also permits the deduction of expenses incurred on motor-cars which are registered outside Singapore and used exclusively outside Singapore to earn income which is subject to Singapore tax.

In line with section 15 of the Act, clause 9 ensures that no balancing allowance will be granted on the sale of a motor-car which has not been registered as a business service passenger vehicle. This is consistent with the tax treatment of not granting capital allowance to motor-cars which are not registered as a business service passenger vehicle.

Sir, I beg to move.

Question proposed.

Dr Augustine H.H. Tan (Whampoa): Mr Speaker, Sir, I would like to seek clarification from the Hon. Minister in regard to clauses 4 and 8 of this Bill. As I understand it, Sir, the Ministry of Communications has been trying to limit the number of motor vehicles in Singapore, and yet here we find the Minister for Finance giving a more generous capital allowance for motor vehicles owned by companies. Would he please explain?

Mr Hon Sui Sen: Sir, I think there is no change in policy. The only change is a change induced by inflation. When we first placed $15,000 as the limit for capital allowance for a company-owned car, this was done at a time when inflation had not quite accelerated. I think the equivalent amount now is $25,000 for the type of car which is normally used as a business passenger vehicle.

Dr Augustine Tan: Sir, surely if the object of the policy is to limit the number of motor vehicles in Singapore, then the effect of inflation ought to be salutary in that direction.

Mr Hon Sui Sen: Sir, the intention is to allow for a certain business use of cars in order to earn income for Singapore. I do not think there is any intention to reduce the value-added of activities such as is intended under this clause.

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.