Rationale for Personal Income Tax Relief Cap
Ministry of FinanceSpeakers
Summary
This question concerns the rationale for the personal income tax relief cap and its impact on the Working Mother's Child Relief (WMCR), as raised by Mr Christopher de Souza. Minister for Finance Tharman Shanmugaratnam stated that the $80,000 cap ensures tax progressivity by preventing high-income earners from claiming excessive reliefs to reduce taxable income. He noted that the cap will not affect 99% of tax residents, with 90% of working mothers currently claiming the WMCR expected to remain unaffected. The Minister also detailed broader support for families, including the Baby Bonus, Child Development Account, and education subsidies to assist with child-raising costs. Finally, he highlighted enhancements to paternity and shared parental leave schemes designed to help parents manage their various work and family commitments.
Transcript
25 Mr Christopher de Souza asked the Minister for Finance whether he can explain the rationale behind the personal income tax relief cap in greater detail, especially in light of the effect it has on the Working Mother's Child Relief scheme.
Mr Tharman Shanmugaratnam: The personal income tax relief cap makes our personal income tax system more progressive. We currently have 15 personal income tax reliefs. Each tax relief serves a worthy objective. However, taken together, the tax reliefs may unduly reduce the taxable income for a number of individuals with high incomes. After studying the reliefs being claimed, we decided to limit the total reliefs that one individual can claim to reduce taxable income, in order to preserve the progressivity and fairness of our tax structure.
The relief cap of $80,000 is set at a level that will not affect 99% of tax resident individuals. A majority of working mothers will not be affected. In fact, among those currently claiming the Working Mother's Child Relief (WMCR), nine out of 10 are expected to continue to claim it fully, without being affected by this cap. This includes those with more children – slightly over eight in 10 individuals claiming WMCR on two or three children are not expected to be affected by the cap.
Beyond tax reliefs, the Government provides a comprehensive suite of measures to support Singaporeans in having and raising children, managing work and family commitments, and sharing parental responsibilities. Over the years, we have introduced and significantly enhanced various schemes to support parents in having and raising children. This includes the Baby Bonus Cash Gift, Child Development Account (CDA), MediSave Grant for Newborns, Foreign Domestic Worker Levy Concession and also the newly introduced CDA First Step. We also provide significant subsidies for education, from preschool level through to the institutes of higher learning.
Our support for families also goes beyond monetary support and includes our wider push to make it easier for families to manage their work and family responsibilities. For example, in 2013 we introduced Child Care Leave for parents of older children aged seven to 12 years and introduced one week of paternity leave. This year, we announced the legislation of a second week of Government-paid paternity leave for all fathers of citizen children born from 1 January 2017 and an increase in Shared Parental Leave from one week to four weeks for citizen children born from 1 July 2017. With all these measures, the Government remains committed to supporting Singaporeans in fulfilling their marriage and parenthood aspirations.