ESTATE DUTY (AMENDMENT) BILL

Order for Second Reading read.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

In my Budget Speech this year, I announced a series of measures to encourage innovation, creativity and enterprise in Singapore. To create a more conducive environment for entrepreneurial development, one of the measures was to allow a Singapore residential property used for business activities to also qualify for estate duty exemption. This is allowed so long as the residential character of the property is not materially affected.

This change will support the Technopreneur Home Office Scheme introduced last year. It will also allow small businesses to be carried out from a residential home without the property being automatically disqualified from estate duty exemption. Accordingly, the proposed amendment to section 14(5A) seeks to include residential properties used for businesses under the $9 million exemption for residential properties.

The amendment in section 14(6) is a change in the definition of "dwelling house" as used in the Estate Duty Act. This amendment will explicitly exclude quarters and hostels from dwelling houses. This will make it clear that residential properties used as hostels and quarters will not qualify for the $9 million exemption.

The other two amendments in this Bill seek to improve the estate duty procedures administered by IRAS.

First, the estate duty affidavit will be replaced by an estate duty return. At present, affidavits are required for estate duty submissions, one for non-dutiable estates and another for dutiable estates. These are sworn documents which require the endorsement of a Commissioner of Oaths or the Commissioner of Estate Duty. The estate duty return will do away with the need for the oath. There will be a standard form for dutiable estates, and another standard form for non-dutiable estates. The return for non-dutiable estates will be much simplified compared to the current affidavit: it will ask for fewer details. The return continues to be a legal document admissible as evidence in court. The administrator has to make sure that the return is free of error or misrepresentation.

The second proposal allows the Commissioner of Estate Duty to delegate his authority to his senior officers to sign the certificates, schedules of assets and Notices of Assessment under the Estate Duty Act. The delegation of authority will improve overall efficiency and allow IRAS greater flexibility in case processing. The quality of the assessment will not be compromised as the authority will be delegated only to experienced senior officers in supervisory positions.

Sir, I beg to move.

Question proposed.

Mr Simon Tay: I rise to support the Bill. I think that it is very tidy to relook at the laws and bring them into consistency with other new initiatives.

In that spirit, may I raise another anomaly in the Estate Duty Act for the Ministry to consider. Sir, in making these comments, I appreciate that the general trend in estate duty has been to make it less onerous in order to allow people who have worked hard in their lifetime to pass on property to their loved ones after their death. And this is especially for dwelling houses, an exemption of $9 million.

Sir, under the present law, if a person owns a house solely and this person dies, there is no estate duty so long as his house is a dwelling house and it is valued at less than $9 million. The anomaly I would point to, however, is that it differs if he has purchased the house in the joint names of himself and his spouse - his wife or her husband.

In other words, Sir, under the standing provision of section 8(1)(b), if a man buys a house with his own purchase money and puts it in the name of himself and his wife and then, if he should unfortunately die within five years, this, I understand, is treated as a gift and would be subject therefore to estate duty tax. This seems to me to be an anomaly, because, as I said, if he had purchased it and kept it solely in his name, there would be no tax accruing. It also seems to me to be a potentially unfair decision on the surviving spouse since there will be more tax payable and, perhaps, at a late stage in life, there may not be that much cash to meet the tax.

I hope that the Ministry might consider this anomaly and, if it is found justifiable, to remedy it in a further provision.

Dr Richard Hu Tsu Tau: My Ministry will look again into this particular clause, but I want to point out that if the transaction is made within the 5-year period, then of course the issue does not arise. It is only when a person dies before the 5-year period that the gift condition applies.

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. - [Dr Richard Hu Tsu Tau].

Bill considered in Committee; reported without amendment; read a Third time and passed.