DONATIONS TO SCHOOL FUND-RAISING ACTIVITIES (Tax exemption)

Mr Chng Hee Kok asked the Minister for Finance whether tax exemption will be allowed for donations to school fund-raising activities without deducting the cost of the activities.

Cdre Teo Chee Hean (for the Minister for Finance): Mr Speaker, Sir, under section 37(2)(c) of the Income Tax Act, only outright cash donations to the Government and approved institutions of a public character will qualify for tax deduction. This means that the donations must be given without any benefits accruing to the donors.

However, from time to time, schools raise funds through various projects, such as dinners and concerts. Persons making contributions to these projects enjoy something of value in return. The contributions will strictly not qualify for tax deduction. However, in recognition of the fact that the amount paid for such an event invariably has an element of donation, the school is allowed to issue a tax exempt receipt for the contribution after deducting the value of the benefits enjoyed by the donor. If, however, a donor turns down the benefits offered, he can claim a tax exempt receipt for the full amount donated.

Mr Chng Hee Kok: Sir, the Minister of State is clarifying that if a person who takes part in a golf tournament and refuses to play, he can claim for a full tax exempt receipt. Is that correct?

Cdre Teo Chee Hean: If he does not partake of the benefits, then he claims full tax exemption.

Mr Chng Hee Kok: Sir, will the Minister of State clarify whether all these fund-raising tournaments are really necessary if the Government has provided full funding for the schools and other charities?

Cdre Teo Chee Hean: I think that is quite a separate principle from whether or not income like this is brought to tax.

Mr Chng Hee Kok: Sir, I beg to differ. They are all related. The point is whether the Minister of State will confirm that not all participants in all these activities really enjoy the benefits, because they had enough of dinners and golf tournaments. But because of insufficient financing from the Government they feel that it is their social duty to take part in these tournaments. I do not see the need for the income tax department to be so petty on such an issue. Perhaps the law should be revised.

Cdre Teo Chee Hean: Sir, the two issues are quite separate. Whether or not Government funding is sufficient or not is a separate issue from whether or not income or donations should be exempt from tax. The principle for exempting donations from tax is based on whether or not any benefit is derived from such a donation, and the deduction of the benefit derived from the donation constitutes the amount that is tax exempt. That is a fair principle.