Income Tax (Amendment) Bill – Speech by Chen Show Mao

(Delivered in Parliament on 2 October 2018)

Sir, wish to return to the implications for gig economy workers in the income tax amendment bill before us today. To begin, I wish to express my appreciation that the Ministry of Finance has been responsive to public feedback to simplify and increase the allowed tax deduction on car-related expenses incurred by private-hire car drivers. Tax simplification is always welcome, both to promote compliance as well as improve the efficiency of administration and enforcement.

Sir, the participants in our gig economy include many private-hire car drivers, and taxi drivers constitute the largest category of our self-employed persons. And that is how we typically think about the gig economy worker, a self-employed person, an independent contractor, and not an employee protected by the Employment Act. In fact, the tripartite workgroup report whose recommendations on gig economy workers were recently accepted by the government is entitled Support for Self-Employed Persons. And as the recommendations themselves make clear, we are focused on the risks of self-employment that have been laid bare and exacerbated in recent years by the gig economy, such as unstable income that can fluctuate much more sharply and quickly than for more traditional self-employed persons outside the gig economy, such as a stallholder in a hawker centre.

Sir, gig economy workers can be a very diverse group — drivers, delivery persons, coaches, accountants — and includes substantial numbers among the lower-income, more vulnerable groups in our population. Because of the temporary and uncertain nature of gigs, these workers are more likely to be living from paycheck to paycheck, and finding their short-term cash flow needs often trump their longer-term economic interests in saving for future retirement.

The question is: how can we provide them with better support, including through income tax amendments?

The government has accepted the tripartite workgroup’s recommendation for a “contribute-as-you-earn” model whereby a Medisave contribution is required as and when a service fee is earned; and intermediaries and corporate service-buyers are required to make the deductions whenever they pay the self-employed person. With deduct-as-you-go and consequently smaller paychecks, it is likely that short-term cashflow crunches will get worse for the gig economy worker, making it even more challenging for him or her to make voluntary CPF contributions in a disciplined way.

As the government studies the implementation of contribute-as-you-earn, may I urge that it also look into tax incentives for self-employed persons to encourage them to make voluntary CPF contributions that will help with their retirement adequacy in the future.

The government has also accepted the tripartite workgroup’s recommendation that the tripartite partners work with insurers to make available to self-employed persons insurance products that will provide daily cash payouts in the event of loss of income due to prolonged illness or injury. Will the government consider tax incentives to encourage the take-up of such insurance products by gig economy workers, including along the lines of existing income tax relief for life insurance?

Sir, As I indicated, the provisions in this bill that work to the greater ease and benefit of private-hire-car drivers are welcome. I urge the government to examine more generally the overall regime of tax incentives faced by gig economy workers. Let us help this growing, and often vulnerable, group of workers with the support and protection that they, their dependents, their work and their enterprise deserve. Thank you.