Introduction
Mr Speaker, the Finance (Income Taxes) Bill before this House seeks to implement the tax changes announced in Budget 2025, by amending the Income Tax Act and related legislation. While this may appear to be a procedural exercise to give legal effect to the Budget measures, I see it as an opportunity to do much more.
It is an opportunity to refine our tax system so that it continues to work well for Singaporeans, and to ensure that our broader national objectives are met, particularly given the critical redistributive role that taxes play in fiscal policy. It is also an opportunity to look ahead, to make constructive suggestions for the upcoming Budget 2026.
As I have emphasised in my past Budget speeches, we must move beyond transitional cost-of-living measures and strengthen structural support through lasting tax changes that achieve greater redistributive efficiency. As we look towards Budget 2026, how can our tax system best serve Singaporeans, especially at a time of persistent cost pressures and growing inequality? How can our fiscal architecture reinforce fairness, resilience, and growth? Can our tax policies play a stronger role in redistribution, support for families, and domestic capital formation?
I will focus my remarks on three themes: first, the importance of putting in place structural changes rather than relying on recurring one-off measures; second, the potential role of refundable tax credits in improving equity and efficiency; and third, how we can better align our tax system with our ambition to strengthen Singapore’s equities market.
Structural Changes versus Recurring One-Off Measures
Mr Speaker, in both my Budget 2024 and Budget 2025 speeches, I emphasised the importance of structural rather than episodic fiscal measures. Let me reiterate that call once more today. Our tax system should automatically adjust to reflect the economic realities Singaporeans face, rather than depending on annual ad-hoc adjustments that create uncertainty and add administrative complexity.
Under Clause 55 of the Bill, a personal income tax rebate worth 60% of tax payable, capped at $200, will be granted for the Year of Assessment 2025. This is similar to the rebate in YA2024, where it was 50% of tax payable but capped at the same $200, and also to the one granted in YA2019. Should such rebates become a recurring feature of every Budget, they would effectively raise the tax-free threshold from the current $20,000 of chargeable income. However, the Government has framed this as part of the SG60 package, which would suggest that this is only temporary.
Instead of offering periodic rebates, I believe we would be better off instituting a mechanism to regularly review both the personal income tax brackets and basic relief quanta to avoid “bracket creep”, so that the system keeps pace with changes in wages and prices over time. After all, the last time the personal income tax brackets were last updated was more than 24 years ago in 2001! This was a point I had raised in a Parliamentary Question in 2022, and again in last year’s Budget debate. Based on my estimates, close to 80% of resident taxpayers will only receive the $200 cap, which means that the headline “60% rebate” appears more generous than it truly is.
Another example is the Earned Income Relief. For workers below 55 years of age, this relief has remained at $1,000 for as long as I can recall. For older workers aged 55 to 59, the relief stands at $6,000, and for those aged 60 and above, $8,000. These figures have not been revised since Budget 2012, more than a decade ago. For handicapped workers, the reliefs are also unchanged. Given the rise in the cost of living, wages and labour participation since then, it is long overdue for a comprehensive update.
In addition, I agree with the exemption from tax of a wide range of initiatives such as the Workfare Training Support Training Allowance, SkillsFuture Mid‑Career Training Allowance and Workfare Skills Support. Again in the spirit of making scheme-specific changes each time, it would be better for us to introduce a broad-based “Skills Investment Relief”, allowing individuals to claim a capped deduction for out-of-pocket training expenses. This would be an expansion of the existing Course Fees Relief, which only provides relief for specific approved academic, professional or vocational qualification, or courses relevant to a person’s current employment, trade, business, profession or vocation, but not does not reward initiatives to better position oneself for an alternative career even as it has no linkages to his or her current profession.
Turning to Clause 43, which introduces a new Section 92L(1) providing for a 50% corporate income tax rebate, this continues a familiar pattern of annual corporate rebates, varying from 20% to 50% over the last decade, with caps ranging from $10,000 to $40,000. While such rebates can provide short-term relief, they do not offer the long-term certainty and predictability that businesses, especially SMEs, require.
As I argued in my speech on the Income Tax (Amendment) Bill in 2021, I suggested that we consider introducing more structural progressivity into our corporate income tax regime, particularly to better support local SMEs. Even as other forms of enterprise support are strengthened, the Government could consider raising partial tax exemption limits or introducing a two-tiered corporate profits tax system, similar to Hong Kong’s model introduced in 2018.
Such an approach could offer greater certainty than the current system of fluctuating rebates. To illustrate, an SME earning $300,000 in chargeable income today pays around $34,000 in corporate income tax before rebates, an effective tax rate of roughly 11.2%, compared to about 8.4% before the exemption restrictions introduced in Budget 2018. Building these reforms directly into the tax regime, rather than relying on discretionary rebates, would send a clearer signal of support to our local enterprise base.
The Role of Refundable Tax Credits
Mr Speaker, I next wish to turn to a topic that deserves greater attention in Singapore, that of refundable tax credits. These function as a form of “negative income tax”, providing benefits through the tax system but paying out the difference in cash to those with insufficient tax liability to benefit otherwise. In doing so, they allow governments to extend support to lower and middle-income households more efficiently, without distorting work incentives or relying on other specific schemes.
Refundable credits are widely used in advanced economies, such as the US Earned Income Tax Credit and Canada’s various refundable credit systems for example.
In Singapore, one promising area to consider refundable tax credits is in relation to Child Relief or the Working Mother’s Child Relief (WMCR). As I have shared previously, this relief was restructured for children born on or after 1 January 2024, from a percentage-based formula to a fixed dollar amount, $8,000 for the first child, $10,000 for the second, and $12,000 for the third and subsequent children. While this change benefits some lower-income mothers marginally, my estimates suggest that roughly 80% of working mothers will either be unaffected or worse off.
I have spoken previously about how Singapore’s Total Fertility Rate, which fell below 1.0 in 2023 and remained there in 2024, represents an existential challenge. President Tharman has pledged that this term of government will do more to help parents better manage their work and family commitments, and to foster a culture that celebrates families. In that spirit, we should consider whether the revised WMCR structure truly achieves its intent of encouraging married women to stay in the workforce, or whether it inadvertently discourages some from doing so.
The Government has said that, when the WMCR changes are considered alongside the one-off $2,000 increase in the CDA First Step Grant, about 97% of mothers will be no worse off in the year of birth. But I would ask: what about the next 15 years of tax assessments? Perhaps a reversion of the WMCR, or its reform into a refundable tax credit, could be explored as part of future Budget changes. After all, this concept is not new to Singapore, with refundable investment credits already introduced in Singapore.
Aligning Our Tax System to Strengthen Equities and Domestic Investment
Mr Speaker, I now turn to the final theme of my speech, aligning our tax regime more closely with the goal of strengthening Singapore’s equities market. My colleague and MP for Aljunied GRC Mr Kenneth Tiong will be elaborating further on this point. Let me first declare that I’m an equity analyst working in a financial institution in Singapore.
Clause 54 operationalises the 13O and 13U fund tax incentive schemes for family offices. These schemes aim to offer a conducive operating environment for Singapore-based fund managers and family offices. In my earlier Parliamentary Question in 2022, I had asked about the number of family offices, their aggregate business spending, assets under management, and local investments. Back then, the MAS shared that it does not have estimates on aggregate business spending, aggregate AUM held and the amount invested locally by SFOs. Do we now have such data? Otherwise, how do we assess the effectiveness of the Capital Deployment Requirement rules?
Under current rules, family offices must invest the lower of 10% of AUM or S$10 million in designated investments. However, the definition of “invested locally” is broad. Even an investment into a global fund distributed by a financial institution with a Singapore presence can qualify. This means the actual capital deployed into Singapore’s productive economy may be far smaller than the headline numbers intended.
I would urge the Government to strengthen this capital deployment requirement, perhaps by raising it to at least 15-20% of AUM, or S$20 million, and tightening the definition of eligible investments to require a minimum portion in Singapore-listed equities, REITs, or funds with domestic exposure, even as I note that there is a 1.5-2x multiplier applied to certain investments. Greater transparency and periodic reporting of aggregate investment data would also help the public assess whether these generous tax incentives are delivering tangible benefits to Singapore’s economy.
Conclusion
Mr Speaker, as I conclude, allow me to recap the three themes I have raised. First, we should move away from recurring one-off measures toward structural reforms, indexing tax brackets and reliefs to inflation, updating outdated reliefs like the Earned Income Relief, and embedding greater progressivity into our corporate tax regime. Second, we should consider introducing refundable tax credits to make our fiscal system more equitable and efficient, particularly in supporting working families and lower-income Singaporeans. And third, we must align our tax incentives more strategically with our goal of strengthening Singapore’s capital markets and ensuring that incentives like those for family offices deliver meaningful local benefits.
Ultimately, our tax system is more than a means of raising revenue. It reflects our values as a society: fairness, resilience, and solidarity. As we look ahead to Budget 2026, I hope we can take this opportunity to refine our fiscal architecture to serve Singaporeans better, strengthen inclusivity, and build an economy that works for all.
