RETIREES' INCOME (Tax concessions)

Mr Yeo Toon Chia asked the Minister for Finance, in respect of retirees, whether he will consider (i) allowing interest earned from their savings tax-free, subject to a maximum to be fixed by his Ministry and (ii) allowing tax deduction for their medical expenses.

The Minister of State for Finance (BG George Yong-Boon Yeo) (for the Minister for Finance): Sir, the Member for Ang Mo Kio asked whether the Finance Minster would consider allowing the interests earned by retirees from their savings to be tax-free, subject to a maximum amount.

I would like to first point out that we cannot exempt from tax the interests earned by retirees from their savings. This is because such exemption could lead to tax avoidance schemes such as placing funds in the names of retirees. Secondly, I would like to point out that retirees are also entitled to the personal relief of $2,000, like everyone else. This means that a retiree's income - if it is only interests from savings alone - will not be taxed unless it exceeds $2,000. Additional relief of up to $6,000 per year is also available to the retiree if he tops up his own CPF account to the Minimum Sum. Income from annuities purchased under the Minimum Sum Scheme, and interests from the POSB, are also tax-exempt. In regard to cases where the savings are indeed substantial and taxable interests earned do exceed $2,000, I should point out the tax rate for chargeable income of up to $5,000 is less than 3%.

The Member for Ang Mo Kio also asked whether the Finance Minister would consider allowing tax deduction for medical expenses of retirees.

Sir, this is a question of how we should help the needy retirees. Government policy has been that children should be encouraged to look after their aged parents. For this purpose, children have been allowed to use their Medisave balances to pay for their parents' medical expenses, and the tax relief for maintaining parents has been increased. Tax deduction for retirees for their own medical expenses is also not appropriate because the financially needy retiree would have little or no assessable income for deduction.

Nevertheless, I would like to assure Members that no citizen would be denied medical attention simply because he cannot afford it. The Finance Ministry administers a remission scheme for those who cannot afford their medical fees.