Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC
at the Second Reading of the Income Tax (Amendment No. 2) Bill [Bill No. 16/2016].
Madam, I stand in support of this Bill. I will focus my speech on the Productivity and Innovation Credit Scheme or PIC scheme.
The PIC scheme was introduced to encourage productivity and innovation activities in Singapore. It provides support to businesses that make investments to improve their productivity.
Success of the PIC Scheme
There is no doubt that the PIC Scheme has been a success. As stated by SMS Indranee Rajah in March, since inception until January this year, 102,000 companies or 70% of all active companies in IRAS’ records for the Year of Assessment 2014 have benefited in one way or another from the PIC Scheme. This is a pretty impressive statistic.
Closing the loopholes
However, as with any scheme, there are bound to be loopholes and people are bound to try to exploit and abuse the scheme.
As previously mentioned by SMS Indranee, IRAS does conduct rigorous compliance programmes to review and audit PIC claims.
However, only 30% of claims from Years of Assessment 2011 to 2015 have been investigated or audited and about 2.1% of these claims investigated or audited required clawback. For Years of Assessment 2011 to 2014, IRAS has clawed back $11 million.
While the percentage requiring clawback seems low, it does represent a significant number of people trying to cheat the system or submitting inaccurate claims perhaps unintentionally and $11 million does seem like a sizable amount of money.
Quite clearly, if we investigate and audit the remaining 70% of claims, we will uncover even more cases and have to claw back even more funds.
But what alarms me more is the other figures published in a Straits Times article which stated that “IRAS has rejected or clawed back the sums paid out for about one in three cash payout claims filed by the self-employed as the claims were inaccurate or false. The sums not given out or recovered from these dubious claims amounted to about $358 million in the last five years.”
This means that IRAS is either spending a lot of resources weeding out inaccurate or false claims or spending a lot of resources trying to claw back funds paid out. Either way, this $358 million figure points to a real need to strengthen the system.
Strengthening the system
While we are phasing out the PIC Scheme, I understand that on the ground, PIC consultants are going all out, doing whatever it takes to source for clients and make as many claims as possible and whilst stocks last. Quite understandably, they are doing this.
This makes it even more important to strengthen the system and strengthen it in the right way.
The fact is that many people are trying their luck. We need to strengthen the system so that less people want to even try their luck.
We need to strengthen the approval process and make sure people know that it is being strengthened.
We need to urgently investigate and audit more claims. We need to send a deterrent message to companies that if they try to cheat the system, they will get caught and the penalties are severe.
We need to increase odds significantly and the current odds are in favour of the cheaters as there is only about a one in three chance of your claim being audited.
Will the Ministry also consider cutting down on providing grants to low-yield productivity projects like websites or app design?
And will the Ministry consider giving out the grants in disbursements for innovation projects that need to show payoff in terms of productivity gains and projection of sales. All of which requires information filing 1 year from implementation.
Ultimately, We need to safeguard taxpayers’ money.
We also need to take a stronger stand when it comes to PIC consultants.
A PIC consultant is a person or a business entity that provides advice or assistance to businesses on PIC matters for a fee. A PIC consultant is expected to be knowledgeable about the PIC scheme and be familiar with the correct procedures when submitting PIC cash payout claims for his clients.
I’m sure we have all seen their claims and guarantees of cashing in on the PIC scheme and I have met numerous residents telling me stories of how they have been approached by the consultants.
We need to make changes to ensure that consultants are no longer able to cheat the companies and also the government.
The amendment in the Bill requiring the use of the electronic service is a step forward. It will help to end the abuse of the system where companies sign blank PIC application forms and pass them to the consultants.
As we now streamline the application process, I question the need for PIC Consultants to submit the application forms on behalf of the applicants. Can the Ministry clarify why we continue to allow this and whether they are plans to phase this out?
I appreciate that some companies need help for PIC matters but can IRAS not handle these enquiries directly? IRAS already states on it’s website that companies can contact them for assistance or clarification on PIC matters.
There are even separate phone numbers for companies and the self-employed. And if the enquiry contains confidential information, they can email IRAS via myTax Mail for added security. With all these in place, is there a need for consultants to help provide advice and submit applications?
I ask that this be reviewed also because I’ve met residents at the Meet-the-People sessions who have been cheated by the consultants.
Madam, the PIC scheme has benefitted many and as I’ve shared during the COS debates, I’m concerned that we are ending it.
However, I’m more concerned that as we now get closer and closer to the end date, more and more people will try to cash in.
The Bill does help to strengthen the system but I sincerely believe that we need to do more.
Madam Speaker, my request for the government to review the above notwithstanding, I support the Bill.