Income Tax (Amendment) Bill

Order for Second Reading read.

2.00 pm

The Senior Minister of State for Finance (Mr Chee Hong Tat) (for the Deputy Prime Minister and Minister for Finance): Mr Speaker, on behalf of the Deputy Prime Minister and Minister for Finance, I beg to move, "That the Bill be now read a second time."

We sought views from the public on the draft Bill earlier this year and have taken into account the feedback received. We thank the respondents for their inputs.

Let me start with the amendments that give effect to tax measures from Budget 2022.

First, the top marginal personal income tax (PIT), rate of tax-resident individuals will be increased from the Year of Assessment 2024. The portion of chargeable income in excess of $500,000 up to $1 million will be taxed at 23%, while that in excess of $1 million will be taxed at 24% – both up from 22% today.

This move would further enhance the progressivity of our PIT system, where individuals who earn more will contribute more. We estimate that this could raise around $170 million of additional tax revenue per year.

The PIT rates for certain income by non-tax-resident individuals that are pegged to the top marginal tax rate of tax-resident individuals will also be revised to 24%.

Clauses 22, 42 and 44 of the Bill provide for these amendments.

Second, to support data-driven policy-making, operations and integrated service delivery, we propose two amendments to the Income Tax Act and Goods and Services Tax Act to facilitate the disclosure of information by the Inland Revenue Authority of Singapore (IRAS) for official duties.

The first change relates to the scenario where taxpayers such as individuals and companies have provided consent for their information to be shared.

Today, IRAS can disclose such information to public sector agencies or an authorised person who is engaged by the Government or a Statutory Board, if the disclosure is for the sole purpose of administering a written law or public scheme.

For example, to determine what level of subsidy a patient can receive, healthcare personnel in hospitals designated to administer public healthcare schemes may obtain such information with consent, to provide the appropriate subsidies to patients efficiently and conveniently.

However, the current approach has some limitations where the official duties of public officers go beyond administering written law or a public scheme – such as for policy-making or providing public services in an integrated manner.

For example, Enterprise Singapore needs to regularly review its internationalisation schemes that support local companies expanding into overseas markets. Even if the companies have given consent for their information to be shared with Enterprise Singapore, IRAS is currently unable to do so, because such a review does not fall under “administration of a written law or public scheme”.

Where taxpayers have provided consent for IRAS to disclose their information to a public officer, or an authorised person outside the public sector who is engaged by the Government or a Statutory Board, the proposed amendment in the Bill will enable such disclosure by IRAS for the performance of official duties.

Sir, the second change relates to the scenario where taxpayers have not explicitly provided consent for the data disclosure. This will apply only to company-related information and does not include data of individuals.

To enable public sector agencies to carry out their official duties more effectively, the proposed amendment enables IRAS to disclose a prescribed list of identifiable company-related information to other public sector agencies, for the performance of official duties, without requiring the taxpayer’s consent. This list of company-related information will be prescribed in the Income Tax Act and Goods and Services Tax Act.

Let me provide an example of how this approach benefits our companies. With access to the data on specific companies, a public sector agency will be able to identify which are the companies that could benefit from certain enterprise development schemes and proactively share with them information on the relevant schemes.

Without the data sharing, we are faced with a chicken-and-egg problem. These companies may miss out on the benefits as they do not know that they are eligible and they may not apply for the schemes.

We recognise that this approach can be sensitive and we need to strike a balance between improving service efficiency and convenience, versus protecting data confidentiality. There will be two safeguards.

First, information in the prescribed list will be provided in a less granular form. For instance, the company’s sales revenue will be shared in ranges, rather than the exact value.

Such information will also not be disclosed to any person outside the public sector, even if the person is engaged by the Government or a Statutory Board. It will only be disclosed to public officers.

Clauses 3, 41, 43, 46 and 49 of the Bill provide for these amendments.

The information on taxpayers will continue to be safeguarded under existing tax legislation, the Official Secrets Act and the Public Sector (Governance) Act, as well as data governance policies set out in the Government’s Instruction Manuals.

Collectively, these data protections set out when data can be shared across agencies, limit the access to data to only authorised persons and ensure accountability for access and use of data through penalties for unauthorised disclosure and improper use of data.

All persons with access to such information on taxpayers are bounded by secrecy provisions under the applicable tax legislation – Income Tax Act or Goods and Services Tax Act – and the Official Secrets Act, where any unauthorised disclosure of such data is an offence.

Where personal data is involved, non-Government Entities acting on behalf of the Government will also be subject to the Personal Data Protection Act.

Mr Speaker, the Ministry of Finance (MOF) regularly reviews our income tax regime. Let me now elaborate on two of the proposed amendments arising from the review.

First, we will update the definition of local employee for the Mergers and Acquisitions Scheme, to recognise individuals hired under central hiring and secondment arrangements as employees of the acquiring company.

Currently, only individuals that are directly hired by the acquiring company are taken into account for assessing whether the three local employee condition is met.

As businesses may have different hiring practices, the change allows us greater flexibility to recognize an equivalent material outcome of local workers being hired, be it through direct hiring, central hiring, or secondment arrangements. Clause 21 of the Bill provides for this amendment.

Second, we will amend the provisions relating to the Board of Review, also known as the BOR, which is a tribunal set up under the Income Tax Act to hear and adjudicate tax disputes between the Comptroller and taxpayers.

The BOR provisions will be updated and streamlined by:

(a) removing outdated references such as the requirement for lodgement of the notice of appeal in “duplicate” and the petition of appeal in "quadruplicate", which are no longer relevant where documents are sent digitally,

(b) clarifying the Minister's regulation-making powers regarding tax appeals, as well as the case management powers of the BOR and chairperson, and

(c) moving BOR provisions on procedures to subsidiary legislation.

In addition, we propose to allow the chairperson to have the option to convene a one-member coram where appropriate. Currently, each hearing committee comprises at least three BOR members. In deciding whether or not to convene a one-member coram, the chairperson will consider the parties’ submissions, as well as the facts and circumstances of the case.

Taken together, these changes will allow greater flexibility and ensure that BOR cases are resolved in a more timely and efficient manner.

Related amendments will also be made to the BOR provisions in the Goods and Services Tax Act.

Clauses 34, 35, 36, 37, 38 and 46 of the Bill provide for these amendments. Mr Speaker, I beg to move.

Question proposed.

2.10 pm

Mr Liang Eng Hwa (Bukit Panjang): Mr Speaker, I support the amendments to implement the tax changes announced during Budget 2022 as well as the other changes to enhance the progressivity of our tax structure.

My speech, in particular, will focus on the amendments to facilitate the sharing of information by IRAS for official duties.

The first change grants powers to IRAS to disclose information to other Government agencies for the purpose of performing official duties as long as the taxpayers have given consent. Under the current section 6 (Official Secrecy) of both Income Tax Act (ITA) and Goods and Services Tax Act (GSTA), IRAS is obliged to preserve the confidentiality of a taxpayer’s information unless it is for the administration of any written law or public scheme. The second change allows IRAS to disclose to other Government agencies company-related information without the consent of taxpayer.

Both changes are intended to support data-driven policy setting, improved public office operations and integrated service delivery.

Sir, I support the intent. Better and judicious use of data can significantly improve the effectiveness of Government, operations and also better service to the public. However, the obvious concern is how do we safeguard taxpayers’ confidentiality; especially where IRAS may be privy to documents containing sensitive commercial information.

In this regard, I have a few questions for the Senior Minister of State.

First, whether the agencies requesting the information from IRAS would need to justify the specific purposes and use of the information?

Secondly, is there an evaluation and approval process for each of these requests for information and is IRAS the approving authority? What is the governance and accountability structure here?

Thirdly, would the changes have any impact our competitiveness as a premier destination to attract international investments, now that we can disclose this information to the agencies?

Fourthly, with this expansion of the scope for data disclosures and sharing, would there be further safeguards to ensure data confidentiality and privacy?

Sir, it is worth noting that the intent to allow disclosure of data without taxpayer consent apply only to corporate entities and not individual data.

Sir, we need to continuously review and strengthen the safeguards to protect confidentiality and privacy of taxpayers’ information so that we uphold the public’s trust and confidence in the public sector’s handling and use of taxpayer data. It is on this basis of high public trust and integrity that we can then look to further harnessing the value of data within the public sector system to provide more effective government and better public service. Sir, notwithstanding my questions, I support the amendments.

Mr Speaker: Assoc Prof Jamus Lim.

2.14 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Mr Speaker, the Income Tax (Amendment) Bill will implement tax changes associated with the Government's 2022 Budget Statement. On balance, I support the Bill. However, I will concentrate my remarks on clause 46, which concerns related amendments to the Goods and Services Tax Act.

My speech will focus on the general merits and principles behind these amendments and, in particular, the impending increase in GST, which in part, necessitates these amendments. More specifically, I wish to revisit the case for rebating fiscal surpluses, in lieu of a more immediate in GST.

As Members of this House are aware, consumer prices continued their stubborn climb in August. Headline inflation clocked in at a scorching 7.5%, a 14-year high last experienced during the throes of the Global Financial Crisis in mid-2008. Pause for a moment and consider what this implies. Were inflation to remain at this rate, prices would double in just nine years.

Think – in 2031, a plate of chicken rice, my favourite example, will cost $7 instead of $3.50. A slightly used Honda Civic would be $220,000 and that is assuming COE prices do not increase further. A four-room BTO flat in Sengkang, the constituency I represent, would go for $700,000 and likely double that in the resale market.

To place this number in even more stark context, for the half decade between 2016 and 2021, median household income rose by a respectable 2.8% per annum, after adjusting for inflation. But had inflation been just at rates experienced over the past six months, paychecks would have shrunk by about half that rate. For those of us that still rent, the hit has been even more severe. Stories of landlords raising rental by up to 40% are not unheard of. What is worse, core inflation, the stable component of price increases, which strips out the more volatile components of private transportation and accommodation struck 5.1%.

This means that, much like in the US and a number of other economies, price rises are gradually becoming entrenched in people's expectations, running the risk of a self-reinforcing inflation cycle.

To be clear, this is hyperbole. I do not expect inflation to remain at an elevated level of more than 7% over the next decade, nor do I expect that the Monetary Authority of Singapore (MAS) does either. But that does not detract from the fact that higher prices have significantly eroded the purchasing power of Singaporean families. That real and present danger of inflation becoming persistent means that the monetary authority cannot simply stand pat in the face of price pressures.

What is the MAS to do? It has already adjusted depreciation path of the Singapore dollar four times over the past year and has even taken on a more aggressive stance of adjusting the exchange rate upward over the past two cycles. There is concern that in a small, export-oriented economy, an excessively strong Singapore dollar will erode our competitiveness. Since October of last year, Singapore's exchange rate relative to its main trading partners has appreciated by almost 5%. Even so, the main bilateral rate of interest, the dollar exchange rate between Singapore and the US, for which global commodities such as agriculture and energy which we import are pegged, has gone the other way and depreciated by close to 6%.

Small wonder then, that in our economy, which is almost entirely reliant on imported food and fuel, we have continued to battle under the weight of inflation. Singapore's inflation dynamics appear to closely track that of the US, writ small. And since the Federal Reserve remains undeterred in its effort to raise interest rates to break the back of domestic inflation in the US, it is not unreasonable to expect for MAS to embark on at least another round of tightening monetary policy. Things look to remain challenging at least a while longer before they get any better.

Indeed, it appears increasingly likely that we may need to accept that a soft landing, that our economy, where labour markets remain robust, may be a pipe dream. And we if accept that unemployment has to rise, then, our workers are due for a double whammy. Singaporeans everywhere are already feeling the pinch from increases in the cost of living, hurting from things they were previously able to comfortably afford. But should the economy be slow in response to tighter monetary policy, it is the marginal worker that will be displaced from their jobs, losing their incomes at a time when they least can afford it.

With the economy about to face a right jab and a left hook, do we really want to "shoryuken" our workers with a jump in prices of another 1% because of the GST rate hike in January? After all, as I shared in my Adjournment Motion with this House on 5 July, we should not be building up fiscal surpluses at a time when the economy is still in recovery and inflation is biting into our citizens' pocketbooks. I suggested that instead, any excess revenues from taxes and duties should, as much as possible, be rebated back to our people. This is because fiscal policy should be playing a stabilising role rather than amplify the stresses felt by the private sector.

In the time that the speech was delivered, IRAS subsequently reported that tax revenue surged by more than 22% for the financial year 2021/2022. This increase was led by corporate income but individual tax receipts also rose as the revenue across the board for most sources. The largest increase of $2.9 billion was due to higher stamp duties, which due to, in IRAS' own words, "a buoyant property market" and "an increase in property transactions". Notably, the take from GST, also increased by 22% even without any increase in the rate of GST, telling me observers also expect the tax revenues in the upcoming fiscal year are likely to increase yet further. One analyst said that he expected Government revenue to continue exceeding Budget projections while another believes that this increase will be due to strong corporate profits, rising wage growth and higher property tax and stamp duties.

In my speech on the Budget this year, I suggest that with the inflation fire burning as hot as it did, raising GST would only add fuel to the flame. That was back in February, when inflation was only 4.3%. Inflation is now almost double this rate.

The Government has previously argued that they stand ready to address inflation with additional measures. Deputy Prime Minister Lawrence Wong assured this House during his Budget speech and I quote: "If inflation turns out to be persistent and higher than expected, we as the Government will deal with this separately through other tools". He reiterated this position in April stating that the Government will assess the overall situation and then consider what additional steps they could take.

One immediate objection to rebating fiscal surpluses is that the increase is only reflective of a low base from repressed collections in the prior year. But the revenues of $60.7 billion booked last year is not only larger than the low base of $49.6 billion booked last fiscal year, understandably due to pandemic related reasons, but also almost $9 billion higher than the average of the three years before.

Whichever our base year, it is evident that last year's revenue was an anomaly larger than previously anticipated. Another objection is that unexpectedly high surpluses, much of which are derived from real estate related duties, are unlikely to be replicated and hence should not be utilised for recurrent expenditure. In principle, this is true. We should not be planning recurring expenditures on the basis of one-off revenue gains.

Yet, what is being proposed here is likewise a one-off expenditure meant to tide households over this difficult period of high inflation. Nobody expects a continuous stream of payout from the Government once inflation returns to historical norms. Moreover, there is the prospect of even more extraordinary revenues in the forthcoming months. This Government had previously indicated that it would be unwise to plan for new revenues arising from the OECD-led BEPS collaboration to roll out a minimum corporate tax. This caution may appear to be warranted, given the unwillingness of the United States Congress to ratify the deal, which ironically, it helped broker.

But Mark Twain, the American novelist and social critic, is often said to have quipped that reports of his own death had been largely exaggerated. And much like this quote, reports of the demise of the global corporate minimum tax appear to be incorrect or at least premature. There are good reasons to believe that in the medium run, there are strong incentives for non-adopters of the treaty, such as the US, to continue to do so, as long as other major economies also ratify it.

The probability that this tax will proceed regardless of American participation or acquiescence lends further reason for the Government to rebate surplus tax revenue now. Were the agreement to proceed, even in slightly diluted form, it will almost certainly require changes to local corporate tax laws that are far more likely to raise corporate tax revenues then diminish them. The takeaway is that we appear to have fiscal wiggle room to move forward with such a rebate, both now and in the future.

What are some options that may be available to the Government should it choose to rebate the $8.7 million windfall revenue? In June, Deputy Prime Minister Lawrence Wong announced a $1.5 billion support package, which still leaves $7.2 billion on the table. One approach is to postpone the GST tax increases. Even if we accept that we cannot, in Deputy Prime Minister Wong's own words, "keep delaying the GST tax increase given our pressing revenue needs", we can at least try to forestall the increase for another two years. This will afford our households and businesses a breather and allow our economy to avoid a simultaneous constriction of both monetary and fiscal policy next year.

Another alternative is to distribute the amount via GST Vouchers. This will amount to another beefing up of the GST Voucher scheme similar to what had been announced earlier this year. The Government had previously suggested that GST expenses would be fully offset for almost 20 years for our poorest households and even for the richest, they will be covered for around two and a half years. The reality of this claim has now since been eroded by inflation and the vouchers would only make up less than 19 years for those in HDB 1- and 2-bedroom flats, and between one and six months less for others. Another GST Voucher distribution with a for temporary targeted and timely support for our most vulnerable groups and help restore the Government's original promise of the number of years of offset.

A third strategy is to roll another off-Budget support package that would offer broad support, similar to the Resilience, Solidarity, Fortitude and Assurance packages, for which I am sure, the Government will accompany with another clever moniker – perhaps "Reassurance".

Such a move recognises not only lower-income quintile groups, while undeniably disproportionately affected by inflation, are not the only ones that have faced difficulties due to a higher cost of living.

Of course, the Government may choose as it did during this year's Budget to combine a broad package that is with additional GST Voucher support. The point is that exercising, any one of these options or them in combination, can make a significant difference to the immediate financial circumstances faced by our struggling households.

Let me be clear. The Workers' Party remains opposed to a GST hike for reasons that we have previously articulated – not least because we believe that there are alternative revenue sources that could still be tapped. However, if the GST hike must go ahead now, the least we can do is to further soften the blow with tools that we already have in hand.

Mr Speaker: Ms Hazel Poa.

2.28 pm

Ms Hazel Poa (Non-Constituency Member): Mr Speaker, the Bill permits the Comptroller to disclose information with consent to public offices and private individuals engaged by the Government to assist public officers. These private individuals have to execute a declaration of secrecy and commit an offence if they were to disclose such information received. Can the Minister tell us what is the penalty involved for this offence? Would that be under section 94 of the Income Tax Act, which states that the penalty is a maximum $5,000 fine and in default, imprisonment not exceeding six months. Is this adequate for deterrence purposes?

Under the PDPA, the penalty for unauthorised disclosure of personal data is a maximum $5,000 fine or imprisonment, not exceeding two years or both. This is more severe than the penalty under the Income Tax Act and yet, income information is something that most consider highly confidential and sensitive, more so than other personal data, like addresses, phone numbers and so on.

Will the Minister review the penalty for unauthorised disclosure of income information?

Secondly, what measures are in place to prevent individuals with access to confidential income information on individuals and companies from utilising that confidential information to benefit themselves or their companies financially? What penalties are in place for unauthorised utilisation of information? The financial gains for such unauthorised utilisation may outweigh a $5,000 fine.

The Bill also permits the Comptroller to disclose information listed in the 11th Schedule without the person's consent. I had earlier intended to ask for an explanation of under what circumstances this would be required. But I note from the Senior Minister of State's speech earlier that he mentioned that this is for the purpose of certain Government departments being able to proactively approach companies that may qualify for certain Government financial assistance or other assistance programmes. I appreciate the good intention of this move but feel that it would be better if the Bill then specifies under what circumstances such disclosure without consent can take place, instead of leaving it open-ended, which then throws the gate open for disclosure without consent under any other circumstances.

The 11th Schedule currently lists only company information and not information on individuals. However, clause 41 of the Bill allows the Minister to amend the 11th Schedule. This seems to suggest that the Minister will be able to add personal information into the 11th Schedule subsequently. If so, this would raise privacy concerns and is quite a major departure from what the current Bill contains.

I have grave concerns about this power being vested in a single individual. Any such decision should be justified and debated in Parliament. I therefore suggest that instead of amending section 106(3), to insert instead section 106(4) to allow the Minister to amend the 11th Schedule subject to the barring of any individual information being included.

Mr Speaker: Mr Louis Ng.

2.32 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill proposes to implement the changes to the tax system announced in Budget 2022. On the whole, these changes will make our tax system fairer and more efficient, and support Singapore's growth across a whole slew of sectors.

I have clarifications on two areas.

My first point is on information sharing by IRAS. The Bill includes provisions to allow IRAS to share information to public officers and other authorised people. I have four questions on this.

First, can the Senior Minister of State share in what situations do Government bodies envision using the information-sharing provisions in the new section 6(12)?

Second, can the Senior Minister of State share how will IRAS obtain "express consent" under the new section 6(12)? When seeking consent, to what standards will the Government bodies hold themselves? Will they state the exact piece of information to be shared, the frequency of this information sharing, the recipient of the information and the intended usage of that information? Or will Government bodies ask for a blanket agreement without providing such details?

Third, can the Senior Minister of State share if someone can be held in contempt of the authority of a public servant for not providing consent to disclose their income information under section 6(12)? After all, many actions involving non-disclosure of information constitute such an offence under the Penal Code, including refusal to answer a public servant authorised to question and obstructing a public servant in discharge of their public functions.

Fourth, the new section 6(12B) allows IRAS to disclose certain prescribed information without consent. One piece of information is whether a company claimed deductions under seven sections in the Income Tax Act. Can the Senior Minister of State share why these seven specific sections were chosen for the 11th Schedule? Why not any of the other deductions in Part 5 of the Act? The rationale for the differentiated treatment is unclear.

My second area of clarifications is on the hearing of appeals by the Board of Review. I have three questions.

First, the new section 78 will allow the chairperson of the Board of Review (BOR) to appoint a single member of the Board to hear a case if the issues involved are not complex. The chairperson is required to have regard to the facts and circumstances of a case in deciding whether to appoint only a single member to hear the case. Can the Senior Minister of State share if the chairperson will take into account the preferences of the parties to the case in deciding whether a hearing by a single Board member is appropriate? For instance, there may be cases where the issues are not complex but the relationship between parties are extremely acrimonious and it may be preferable to have the case heard by a panel.

Second, the Bill proposes substituting a number of terms. Can the Senior Minister of State clarify if these substitutions are intended to be significant? For instance, "in the absence of a member of Board" is substituted by "by committee where a member becomes unavailable". Should these terms be interpreted differently? Additionally, "do not consent" is substituted by "object" in a number of provisions. Is this substitution significant and is a positive expression of an objection now required where previously the absence of consent would suffice?

Third, sections 80A and 80B allow parties to object to the hearing of an appeal in various cases. Section 80A provides that "the parties may object" whereas section 80B provides that "any party may object". Can the Senior Minister of State clarify if the objection of a single party is sufficient in both cases? If not, can the Senior Minister of State clarify when are the objections of both parties required and what is the rationale for drawing this distinction?

Sir, notwithstanding these clarifications, I stand in support of the Bill.

Mr Speaker: Mr Saktiandi Supaat.

2.36 pm

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, Sir, the Income Tax Act is one of the most frequently amended statutes in Singapore. Since the 1980s, it has been amended almost every year so as to carry out the Government's revised fiscal strategy announced in its latest Budget Statement.

This amendment Bill is no different. Many of the matters of policy or principle would already have been debated in this House when the Government's 2022 Budget Statement was presented.

Hence, I would just like to seek some clarifications on the specific changes proposed in this amendment Bill, before touching on a couple of issues which I believe should be considered in our periodic review of Singapore's income tax system. Mr Speaker, in Malay, please.

(In Malay): [Please refer to Vernacular Speech.] This amendment Bill does not seek to implement all the tax changes announced by the Deputy Prime Minister and Minister for Finance at Budget 2022.

The headline change in this amendment Bill is the announced increase in the top marginal personal income tax rate with effect from Year of Assessment 2024, where chargeable income in excess of $500,000 up to $1 million will be taxed at 23% instead of 22%, while chargeable income in excess of $1 million will be taxed at 24% instead of 22%.

By my calculation, this change will only affect individuals who are making an average of more than $41,000 per month. The Deputy Prime Minister has commented during the Budget debate that we cannot sustain a tax system and hold our society together if "the bulk or all of the tax burden is borne by a small group of people at the top end". Based on current data, may I ask how many taxpayers will this change affect? What proportion of the total personal income tax collected are they already responsible for today?

Further, what are the main assumptions underlying the projected $170 million in additional tax revenue per year? Since the announcement of such an increase in February 2022, has the Government or IRAS detected any efforts by such high-income individuals to "offshore" their earnings? I am concerned that the lead-time before 2024 would allow companies and individuals to restructure their remuneration packages and erode the additional revenue we expect to receive.

(In English): Moving on to my second area of focus. Of particular interest to me are the amendments to facilitate disclosure of tax information to support data-driven policy-making, operations and integrated service delivery. Just this year, I have spoken in this House and filed a Parliamentary Question on how we should leverage data and technology to "push" schemes and services to Singaporeans and Singaporean businesses.

The amendment Bill broadens the powers of the Comptroller of Income Tax to disclose tax information to any public officer or officer of a statutory board for the performance of any official duties, in some cases without the consent of the person to whom the information relates. We have already seen how useful such tax information can be. As Minister Indranee had shared during this year's Committee of Supply debate, IRAS' data across various tax types was used to automatically disburse more than 110,000 payouts worth almost $1 billion under the Rental Support Scheme.

However, there is no doubt that the tax information is highly sensitive and confidential. If we are to expect an increased flow of such information between Ministries and Statutory Boards, will there be any enhanced safeguards to protect the secrecy of the data? The SingHealth episode tells us that the risks of cyberattacks and data breaches cannot be understated. Government data is not immune from these risks. In fact, they are likely to be higher value targets for malicious threats.

Finally, if the new disclosure regime is aimed at supporting data-driven policy-making, operations and integrated service delivery, what is the basis of distinguishing between the 11th Schedule information which may be disclosed without consent, and other disclosures which will require the express consent of the person to whom the information relates? What percentage of taxpayers have already provided their express consent to the existing disclosure regime and how does the Government or IRAS intend to obtain fresh consent for the new, expanded disclosure regime? Has there been any public consultations with companies which may be impacted and the extent of data which may be disclosed without consent and what the data collected will be used for? I believe the Senior Minister of State has given a brief explanation on what the data will be used for, but I think my other questions are somewhat new in some ways.

The third area in my speech is something that relates to the administrative flexibility that characterises the Government. As I understand it, clause 15 of the amendment Bill seeks to harmonise the accounting basis on which insurance companies prepare their financial statements. Insurance companies will no longer have to prepare financial statements on one basis for the purpose of regulatory returns to be submitted to the MAS and another set of financial statements on a different accounting basis for tax computation purposes.

Even though this change may cause IRAS to have to deal with insurance companies on a different reporting cycle from other taxpayers, I expect such a change to help reduce compliance costs for tax-paying insurance companies. In turn, this could further improve their profitability in the longer term, leading to an increase in the corporate income tax collected. Can this be extended more generally to other types of companies as well?

Taken together with the move to facilitate the disclosure and flow of tax information between Ministries and Statutory Boards, there may even be room for companies to file a single return to satisfy all its regulatory tax and other statutory obligations in future. This may not be a simple switch, but I urge the Government to consider such a possibility as it would boost Singapore's attractiveness as a place for doing business.

My fourth area of focus relates to the changes to the appeal process before the Income Tax Board of Review.

Under the amendments, the chairperson of the Board may appoint a single member, instead of a committee of three members, to hear appeals in a particular case. Will different fees be prescribed for appeals before a one-person panel and before a three-person panel? Will the factors guiding the chairperson's discretion be set out in regulations? Can the chairperson's decision be appealed?

Can I also clarify that the proposed new section 80(2) will not prevent a duly authorised officer of an appellant company, including in-house counsel, from appearing at the hearing before the Board? Because section 80(2) presently states that an appellant can attend "in person" but that will be removed under clause 36 of the amendment Bill.

Finally, allow me to wrap up by touching on one final point that have not been dealt with in this amendment Bill, but which I feel should be considered as part of the periodic review of the income tax system.

As I had again raised in my speech during the Budget debate this year, it may be useful to relook the option of assessing personal income tax on a current-year, pay-as-you-earn basis. In the current economic environment, individuals may experience volatility in income levels or in employment from one year to the next. What are the hurdles that would prevent us from moving away from a preceding-year basis to one that can allow Singaporeans to better manage their cash flow by matching tax payments with contemporaneous income? Mr Speaker, Sir, notwithstanding the clarifications sought, I support the Bill.

Mr Speaker: Senior Minister of State, Chee Hong Tat.

2.44 pm

Mr Chee Hong Tat: Mr Speaker, I thank hon Members, Mr Liang Eng Hwa, Assoc Prof Jamus Lim, Ms Hazel Poa, Mr Louis Ng and Mr Saktiandi Supaat, for their comments and suggestions on the Bill. Please allow me to now respond to the points they have raised.

Mr Saktiandi Supaat asked how many taxpayers will be affected by the increase in the top marginal personal income tax, or PIT, rate, the proportion of the total PIT contributed by them and our projections of additional revenue which can be collected.

The increase in PIT rates will affect the top 1.2% of PIT taxpayers, who account for about 35% of our total PIT revenue. We estimate that this change would raise around $170 million of additional tax revenue per year based on the actual taxpayer base in Singapore in the Year of Assessment 2020 (YA2020).

Mr Saktiandi Supaat also asked whether the Government or IRAS has detected any attempts by high income individuals to "offshore" their earnings, such as restructuring or moving their assets overseas to avoid tax in Singapore.

Sir, under our PIT regime, income tax is levied on income sourced in Singapore or received through partnerships in Singapore from abroad. This includes instances where individuals derive income from providing services in Singapore to overseas-based employers. They are subject to income tax in Singapore.

We do not tax individuals on foreign-sourced income. For example, a person who acquires income generating assets overseas such as by investing in overseas property will pay the applicable taxes and other costs in that jurisdiction.

IRAS has a robust compliance and audit programme to identify high risk cases for review. This is a risk-based assessment. In cases of tax avoidance, IRAS also has powers under the Income Tax Act to impose a surcharge of 50% on the amount of tax imposed by IRAS.

Members are aware that we have been raising our taxes for higher-income individuals in recent years such that those who earn more contribute more. As Mr Saktiandi Supaat alluded to in his question, many high net worth individuals are globally mobile and some of them may shift away from Singapore to alternative jurisdictions with more competitive tax rates if our tax rates are too high. If this happens, our tax base and our tax collections will be eroded. We therefore need to weigh the trade-offs carefully.

Mr Saktiandi Supaat suggested that PIT could be assessed on a current year, pay-as-you-earn basis so that taxpayers can better manage their cashflow by matching tax payments with current year income.

Sir, I understand the intent behind Mr Saktiandi Supaat's suggestion. It is an alternative that we considered before and there are pros and cons to adopting such an approach.

First, a current year, pay-as-you-earn basis for PIT assessment means that the tax payable will be withheld every month by employers and then paid to IRAS. While it matches tax payments more closely with the taxpayer's income, it also reduces their take home pay every month instead of giving them the option of paying the tax using their annual bonus or other sources of income.

Second, some individuals, especially self-employed persons and those with higher variable salary components, may have difficulties estimating their current year income for tax reporting purposes.

Third, such a system could result in greater compliance cost for taxpayers and higher administration costs for IRAS compared to the current arrangement where individuals pay their taxes this year based on actual income earned in the previous year.

To help taxpayers with their cashflow, which I think is the intent of what Mr Saktiandi's suggestion is about, IRAS allows interest-free GIRO instalments up to 12 months for individuals and 10 months for companies.

For those who have difficulties paying, sometimes due to unforeseen personal and family circumstances, they can approach IRAS for assistance. During the economic downturn such as in 2020, we automatically deferred GIRO deductions for corporate tax and income tax for self-employed persons to help them manage their cashflows.

Mr Saktiandi also asked if we could extend the approach taken to ease insurance companies' tax filing compliance by harmonising the accounting basis, to other general taxpayers.

I wish to clarify that insurance companies, like any other company, are not required to prepare a separate set of financial statements for tax purposes. Companies use the information in their financial statements primarily to prepare their tax computations.

Due to changes in the financial reporting standard for insurance contracts, the financial statements of insurance companies will no longer include some information needed to prepare their tax computations. We will allow insurance companies to use the relevant information in the regulatory returns filed with MAS for tax computation purposes.

Sir, I would now like to address the comments from Assoc Prof Jamus Lim.

Sir, I think firstly, to clarify, we do not have – if I heard Assoc Prof Jamus Lim correctly – excess revenues. There were some one-off upsides that we got this year – I think he acknowledged those points as well – from property, for example. But the overall fiscal space for Singapore remains tight, especially because, looking ahead, we also have some structural changes in our society, such as an ageing population which will require us to spend more on healthcare.

This has been explained previously by Deputy Prime Minister Lawrence Wong and also, I believe, Deputy Prime Minister Heng Swee Keat when he was the Minister for Finance.

Secondly, on the impact of GST, we have already provided for a comprehensive offset package and Deputy Prime Minister Lawrence Wong has also given the assurance that we will update the package to ensure that we take into account higher prices. So, yes, inflation is higher than when we first started but our assurance and our commitment remain that we will make sure that lower-income Singaporeans will not feel the impact of the increase in GST for at least 10 years. That commitment remains.

Thirdly, on the impact of higher prices, the Deputy Prime Minister has also said in this House and also at other forums that the Government is monitoring closely what the impact of higher prices is on households and families, especially on lower- and middle-income households. Because as I mentioned in my reply to Mr Ang Wei Neng earlier during Question Time, lower- and middle-income households face a bigger impact from rising prices. Therefore, we want to make sure that we provide more help to these families.

There will be some schemes, as Assoc Prof Jamus Lim also acknowledged, that will be broad-based and would be helping every family like the CDC Vouchers and the Household Utilities Credit, but there will be some that are more targeted towards lower- and middle-income households. This is important.

Also, as we look ahead, how we can help our companies to transform, improve productivity, become more innovative, more competitive, help our workers, through our tripartite partnership with employers and with unions, to upskill and become more productive.

This is still the most fundamental and most effective way of helping our workers to cope with rising inflation. It is to help them to increase their wages in a sustainable way through a combination of policies but also through skills upgrading, productivity improvements, making sure that Singapore's economy remains competitive.

If we can do that, then, as Assoc Prof Jamus Lim mentioned, we can then have real wage growth, real income growth.

Sir, I also want to thank Assoc Prof Jamus Lim for his suggestions earlier. He gave some ideas of what could be done. These are actually very much in line with what the Government has already done. Some of the existing measures – he mentioned GST Vouchers, he mentioned some of the support packages that we have, some of the rebates that we can give – these are things that we have done. As Deputy Prime Minister Lawrence Wong said, we will continue to monitor the situation and if it is necessary to do so, we are prepared to provide more help, to help Singaporeans to cope with rising prices.

Sir, let me now address questions raised on the amendments related to the Board of Review (BOR).

In relation to Mr Saktiandi Supaat's query, we will not hardwire the factors guiding the exercise of the chairperson's discretion in regulations. Different cases may bring up different factors and considerations. The chairperson would be best placed to make a judgement call, taking into account the pertinent facts and circumstances in individual cases.

Mr Louis Ng asked a related question on whether the chairperson will consider parties' preferences in deciding whether to appoint a single-member quorum. The parties may indicate their preferences in their submissions and these inputs will be considered by the chairperson in making the decision.

On the appearance by an appellant company before the Board of Review, the proposed new section 80(2) is intended to make clear that there is no need for physical hearings to be held. It does not alter the existing position on who may appear before the board as an appellant company representative.

Mr Louis Ng also asked if the substitutions of certain terms are intended to be significant, such as replacing "do not consent" with "object to" and replacing "in the absence of member of board" to "by committee where member becomes unavailable" in section 80A. Sir, these changes are meant to streamline the language of the provisions for better clarity. They do not effect a change in the substantive meanings of the terms they replace.

Mr Louis Ng also sought clarification on whether any difference is intended between sections 80A and 80B, as to whether the objection of a single party is sufficient or if such objections will have to be made by both parties.

The intention is the same for both sections. If any party objects, the matter will have to be reheard either by a new hearing committee or the newly appointed single-member committee to ensure fairness to the parties.

Next, I will address the clarifications raised by Members on the proposed amendment to facilitate the disclosure of information by IRAS for official duties.

Mr Liang Eng Hwa sought clarifications on the evaluation process and governance for data sharing. IRAS evaluates each request for information against existing tax legislation as well as a standardised set of criteria set out in the Government's instruction manual. This includes ensuring that the purpose of disclosure is aligned with what is allowed in legislation and that the information requested is proportionate and relevant to the purpose.

Mr Louis Ng asked under what situations IRAS would share information with public sector agencies and authorised third parties with the consent of taxpayers under the amended section 6(12). Currently, with taxpayer's consent, IRAS is already allowed to disclose information to public sector agencies and authorised persons engaged by the Government or Statutory Board if the disclosure is for the sole purpose of administering a written law or public scheme. The proposed amendment to section 6(12) in this Bill allows IRAS to disclose such information for purposes beyond that of administering a written law or public scheme as long as it is for official duties.

Mr Louis Ng also asked if it would constitute a contempt of authority for refusing to provide consent to the disclosure of information under this section. I would like to assure Mr Louis Ng that this will not be the case. The taxpayer is allowed to withhold consent.

Mr Louis Ng and Mr Saktiandi Supaat sought clarifications on the process of seeking consent from taxpayers to share their information. The agency seeking consent will provide sufficient information in any request for consent so that taxpayers can make an informed decision whether to give their consent or not. For example, the taxpayer will be told upfront of the information to be disclosed, the purpose of sharing such information and the persons whom the information may be disclosed to.

Consent that had been provided by taxpayers for IRAS to disclose the information for a purpose under the ambit of "administering a written law or public scheme" will continue to be valid. Should public sector agencies require that information for another purpose beyond administering written law or a public scheme in the future, fresh consent will be required. This will need to be obtained under the new section 6(12) as amended by this Bill.

Mr Louis Ng and Mr Saktiandi Supaat asked about the basis for the prescribed list in a proposed new section 6(12B), which can be shared by IRAS with public sector agencies without requiring taxpayers' consent for the disclosure. As I explained in my speech earlier, we have taken a calibrated approach to safeguard information confidentiality. The prescribed list of information under section 6(12B) is limited to company-related information that have been more frequently required by public sector agencies. This includes the range of revenue earned by the company and a yes-or-no indication on whether the company has claimed tax deductions such as for R&D expenditure in Singapore or expenditure on overseas business development.

So, these information in the prescribed list will be disclosed in less granular format, in ranges or as a yes-or-no field, rather than the exact value.

Ms Hazel Poa observed that the prescribed list could potentially be expanded to allow sharing of information and I think she acknowledged the point that I made that it would only be for company-related information. I want to assure Ms Poa that this will continue to be the case – the prescribed list will only be for company-related information.

Collectively, these proposed amendments are intended to facilitate efficient data-driven policy-making, operations and integrated service delivery for public sector agencies to serve the public more effectively. I agree with Members on the need for robust safeguards even as we do so. This is very important. Information on taxpayers will continue to be safeguarded under existing tax legislation, the Official Secrets Act and the Public Sector Governance Act, as well as the data governance and security policies set out in the Government's Instruction Manuals.

Besides offences stated in the tax legislation, the Public Sector Governance Act further criminalises the acts of unauthorised disclosure of data, improper use of data and unauthorised re-identification of individuals from anonymised data.

Ms Hazel Poa asked about the adequacy of penalties for unlawful disclosure of information by an authorised third party engaged to assist public officers with their official duties. For unlawful disclosure constituting an offence under section 6 of the Income Tax Act, penalties under section 94 would apply and this carries a maximum fine of $5,000 or in default of which imprisonment not exceeding six months. For such unlawful disclosure, the offender could also be subject to penalties under the Official Secrets Act, Personal Data Protection Act or other relevant Acts. So, it is not only through the tax legislation but also through other Acts.

As Mr Saktiandi Supaat pointed out, there is a need to continually bolster our data security in the face of evolving threats. The Government has been actively strengthening our data security regime to protect sensitive data and this is an important area of work as we become more digitally connected. Mr Speaker, I beg to move.

Mr Speaker: Any clarifications? None.

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 Chee Hong Tat].

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