Thumbs up for private-hire driver tax deduction proposal
Praise for proposals that allow drivers to claim deductions on some expenses
Private-hire drivers and industry players are applauding proposed changes to the income tax code announced by the Ministry of Finance (MOF) last week.
The long-standing bugbear of not being able to account for rental and petrol when filing taxes is set to be resolved, with the MOF calling for public feedback on proposed amendments to the Income Tax Act, including one that will allow private-hire drivers to claim deductions on car-related expenses.
"When it announced (the proposal), everybody was so happy... Hopefully there is more to come," said Mr Mohamad Azan, 50, who owns a limousine business and drives for Grab part-time.
A spokesman for Grab said the company was glad MOF is considering the tax deductions, "following months of discussions and sharing of our drivers' typical costs".
"This will help drivers keep more of their hard-earned income, and we remain committed to looking at other ways of doing so, such as reducing daily operating costs through fuel discounts and rental rebates.
"We will also continue to liaise with all parties to ensure our drivers get a fair tax deduction policy that is easy to comply with," the spokesman said.
You cannot put our capital into our earnings, that does not make sense at all.Full-time Grab driver Johnson Koh
If the draft provision is approved, both taxi and private-hire drivers will be able to claim these expenses in the 2019 tax season, either at a ratio of 40 per cent of their total annual driving income, which includes incentives and excludes service fees paid to platform providers, or based on the actual amount of running expenses.
Currently, only taxi drivers are allowed to do so, based on the actual amount incurred.
Private-hire drivers will still be unable to claim capital allowance for purchase cost of cars.
"The (tax) deduction is good and fair to us," said Mr Johnson Koh, 46, a full-time Grab driver.
"You cannot put our capital into our earnings, that does not make sense at all."
Mr Koh said he makes close to $60,000 gross a year after Grab's 20 per cent commission, driving about 10 to 12 hours a day for the whole week. His rental, $75 a day, and petrol costs come up to about $35,000 a year.
For drivers like him, the proposed deductions can mean that, after reliefs, the assessable tax income is zero, said Mr Ang Hin Kee, executive adviser to the National Private Hire Vehicles Association (NPHVA).
Mr Ang had proposed the tax deductions after taking over the NPHVA role in February.
The MP for Ang Mo Kio GRC had also raised it in Parliament during the Committee of Supply debate in March.
Before the Private Hire Car Driver's Vocational Licence was introduced last year, private-hire drivers had to register as businesses and could therefore file for allowable business expenses.
With the new licence, many drivers could no longer claim tax deductions for doing essentially the same thing, Mr Ang said.
He said: "The tax issue actually affected the parity on the ground."
Mr Ang said the proposed tax deductions would ensure operators are not relying on artificial pull and push factors to attract and retain drivers and instead come up with good packages and business models to do so.
Transport economist Walter Theseira had similar observations.
"Both private hires and taxis are providing pretty much the same service as perceived by commuters, so, as far as it is practical, they ought to be treated equivalently. Otherwise over time there will be market distortions," he said.
"Even though realistically the marginal tax rate on a private-hire driver is not high, it is still probably going to make some difference. Once this move comes into place, perhaps some people on the margin will be a private-hire driver instead of a taxi driver... It will swing the pendulum back again."