Private-hire drivers may get to claim some tax deduction

Posted on June 20, 2018.

The Ministry of Finance (MOF) has proposed allowing private-hire drivers to claim tax deductions for car-related expenses such as vehicle rental and petrol – a move that could potentially benefit at least 32,000 licensed private-hire drivers.

It is now seeking public feedback on these draft provisions, as well as a slew of other proposed amendments to the Income Tax Act.

This comes four months after Senior Minister of State for Finance Indranee Rajah said during the Committee of Supply (COS) debate on Budget 2018 that the Government’s policy on not allowing private-hire car drivers to claim tax deductions on any car-related expenses would remain unchanged.

She was responding to a query on tax deduction matters from Ang Mo Kio GRC MP Ang Hin Kee. Mr Ang, who is executive adviser to the National Private Hire Vehicles Association (NPHVA), has made similar representations to the Inland Revenue Authority of Singapore (Iras) on behalf of the association.

Unlike cabbies, private-hire drivers are not allowed to claim tax deductions on car-related expenses. But the MOF yesterday said it has reviewed this with the Ministry of Transport, as part of its periodic review and arising from feedback from various MPs and the NPHVA.

Under proposed amendments, a private-hire driver, subject to conditions, can claim tax deduction for expenses incurred to earn driving income, based on a deemed expense ratio prescribed in the Income Tax Act, set at “40 per cent of all driving income less service fees”.

The driver could also be allowed to claim tax deductions for service fees paid to platform providers based on the actual amount incurred under normal tax rules.

Alternatively, instead of taking these deductions, the private-hire driver may opt to claim tax deduction based on the actual amount of running expenses and service fees incurred in earning driving income.

If approved, the amendments will take effect from year of assessment 2019, for income earned in 2018.

But capital allowance for the purchase costs of cars will still not be allowed for private-hire drivers. As for taxi drivers, almost all do not own their taxis and therefore do not claim capital allowance.

“The changes in tax treatment maintain support for our long-standing policies on car ownership, while updating our tax regime to allow deduction for car-related expenses incurred by private drivers,” the MOF said.

Mr Ang said yesterday that he was happy the authorities had taken up the recommendation from NPHVA, adding: “My proposal on Feb 1 this year was to allow private-hire drivers to claim tax deduction for fuel and car rental expenses, because the nature of their business is similar to that of taxi drivers.”

He further urged the authorities to consider giving concessions to private-hire drivers for tax paid for year of assessment 2018. Mr Ang said as they are required to be licensed and their income earned and driving volume can be monitored by Iras, they should be eligible for tax deductions like cabbies.

Other proposed amendments in the consultation exercise, which runs from today to July 11, include enhancing Iras’ enforcement powers for investigation of specified serious tax crimes, or where the suspect attempts to destroy evidence.