Deducting Expenses from Assessable Income Tax for Taxi Drivers and Private Hire Car Drivers
Ministry of FinanceSpeakers
Summary
This question concerns why taxi drivers can deduct car-related expenses from assessable income tax while private hire vehicle (PHV) drivers cannot, and the possibility of implementing mileage-based deductions for full-time PHV drivers. Second Minister for Finance Mr Lawrence Wong stated that car-related deductions are currently restricted to support car ownership policies, though PHV drivers may claim non-car expenses like commissions. He acknowledged that the rise of PHV services has changed the transport landscape and stated that the Ministry of Finance is reviewing tax policies to ensure they remain relevant. This review is being conducted in parallel with the Ministry of Transport’s regulatory review of PHV services to ensure consistency between tax and regulatory treatments. Any adjustments to the tax regime will be announced once both ministries have completed their coordinated assessments of the private hire and taxi sectors.
Transcript
10 Mr Louis Ng Kok Kwang asked the Minister for Finance (a) what is the rationale behind allowing taxi drivers but not private hire vehicle drivers to deduct expenses, such as vehicle rental fees, fuel and ERP, from their assessable income tax; and (b) whether the Ministry will consider allowing tax deductibility of these expenses for private hire vehicle drivers based on the mileage clocked on private hire driving.
The Second Minister for Finance (Mr Lawrence Wong) (for the Minister for Finance): Mr Speaker, Sir, tax deduction of expenses incurred for a private car is currently not allowed. This is applied consistently to both corporate and individual taxpayers. It is in support of our long-standing policies on car ownership. That is why private car drivers today are not allowed to claim tax deduction on any car-related expenses. Private hire car drivers can, however, claim tax deduction on non-car-related expenses, such as commissions paid to third-party operators.
The current tax treatment that we have was introduced before the advent of companies like Grab and Uber. With the introduction of private hire car services, the private hire car drivers are essentially operating in the same space as taxis. We have noted the feedback from Members of this House and the National Private Hire Vehicles Association. We are carefully reviewing this matter to see how we can refine the tax policy to ensure they remain relevant and effective.
Mr Speaker: Mr Louis Ng.
Mr Louis Ng Kok Kwang (Nee Soon): I thank the Minister for the reply. I do agree that perhaps the tax regimes for taxi drivers and part-time private hire drivers should be different. But I think for full-time private hire drivers, it should be the same and I am just wondering whether the Minister would consider establishing, say, a minimum mileage clock, after which then the private hire driver is considered full-time and can then enjoy the same tax regime as a taxi driver.
Mr Lawrence Wong: Mr Speaker, Sir, we are reviewing this holistically and it has also to be done in conjunction with the Ministry of Transport's (MOT's) ongoing review of the regulations on such private hire car services. So, that is happening now. MOT and Land Transport Authority (LTA) are reviewing the regulations for this group of companies, how they should be regulated vis-a-vis taxi companies. When that is done and clearer, I think the tax treatment can also be adjusted accordingly.
Mr Speaker: Er Dr Lee Bee Wah.
Er Dr Lee Bee Wah (Nee Soon): Sir, I would like to ask the Minister how long will the Ministry take for the review, that is, what the timeline is, because this is quite a hot topic discussed on the ground.
Mr Lawrence Wong: Mr Speaker, Sir, I have to look to my colleagues from MOT. Because as I said earlier, the reviews are being done in parallel. I think the tax treatment must be consistent with also the regulatory treatment. I believe MOT and LTA have announced that they are doing this review on the regulations of private hire car services, and we at the Ministry of Finance (MOF) are also looking at the tax treatment. And both are moving in parallel. Once the reviews are completed, we will be able to announce on the MOT side, the regulations; and on the MOF side, the tax treatment.