COMMITTEE TO REVIEW INCOME TAX ORDINANCE

3.33 p.m.

Mr Lee Choon Eng (Queenstown): Mr Speaker, Sir, I rise to move the motion standing in my name which reads,

That this Assembly urges upon the Government to set up a committee without delay to review the provisions of the Income Tax Ordinance (Cap. 166) with a view to recommending such amendments to the Ordinance as to suit local conditions, with particular reference to personal reliefs to aged parents and other close relatives solely dependent on the taxpayer.

Mr Speaker, Sir, at the last sitting of the Assembly on 24th April, in reply to my question regarding amendments to grant personal reliefs under the Income Tax Ordinance, the Hon. the Acting Financial Secretary had this to say:

"Sir, a proposal of this nature requires consideration on a pan-Malayan basis. This is one of the many questions that are constantly engaging my attention. I am sure the hon. Member will not wish me to anticipate any statement that I might wish to make at a future date."

At that time, Sir, I did not press for an anticipated statement because I fully realised the complicated nature of the consultations with the Government of the Federation of Malaya, but I asked whether there had been any consultations with that Government and the reply was, "I have nothing more to add."

It really surprises me, Sir, that in spite of the admission by the Hon. the Acting Financial Secretary that this matter has engaged his attention for some time, no attempt had been made to negotiate or commence consultations with the Government of the Federation of Malaya. The answer given last month was most unsatisfactory and has prompted me to table my motion today because I realise that filing in more questions will serve no useful purpose. If I had not put in my motion today, I am quite certain that, at the expiry of the term of office of the Government, the Ordinance will remain what it is today.

Everyone knows, Sir, that Government, including the Hon. the Financial Secretary, is fully aware of the anomalies in the Income Tax Ordinance, yet it has taken no action on the matter. Why has it adopted a tida apa attitude? I believe, Sir, that the most probable reason is that most of them are now Ministers drawing fat salaries and do not mind being taxed at all, whatever the amount may be.

Mr J. M. Jumabhoy: Shame!

Mr Lee Choon Eng: Shame! Real shame! A few months ago, Sir, the Labour Front, through its General Secretary, Mr Tang Peng Yeu, made a public announcement that it was going to call upon the Government to set up a committee on the same principle as set out in my motion, but right up to today nothing more has been heard. What has happened? I do not know. Nobody has made any further announcement. I think, from a further announcement by the General Secretary, that the proposal has died a natural death. I will not comment on what that statement was. I hope that the Hon. the Chief Minister or the Chairman of the Labour Front will be able to explain better because I am not in the Front and I do not know what its activities are.

Sir, the delay in amending the Income Tax Ordinance is causing great concern to the public. Singapore is an Asian country and with Malayanisation in progress, I believe that this Island will be fully Asianised (not Malayanised) in five to ten years' time. If that be the case, Sir, let us adopt the Asian way and attitude; let us frame our legislation on the same principle - in the Asian way.

This delay in amending the Ordinance has prompted the formation of a new body called the Income Taxpayers' Association. The anomalies in the Ordinance and the tida apa attitude of the Government has prompted this Association to send a memorandum to the Government. I have a copy with me. I am happy the memorandum has been submitted as it will save me from making a long speech. Without it, I might have had to elaborate on the technicalities or details of the Ordinance. The points which I intend to raise this afternoon are almost identical with those contained in the memorandum, so there is no need for me to elaborate my motion much.

The present Ordinance, Sir, gives a lot of power to the Comptroller of Income Tax, but to the taxpayer there is no way out at all. There is no privilege at all for him. He is oppressed. Even if he should submit an appeal, it will serve him no good. I will quote, Sir, what the Income Taxpayers' Association has said about appeals:

"In the case of an appeal, the appellant is required to furnish a statement of the grounds of appeal, and he is not allowed to rely on any ground other than those in the statement save with the consent of the Board of Review. This cannot but operate to the detriment of the appellant as where the grounds are divulged, the Comptroller is allowed time to prepare his defence and put forth counter-proposals without the former knowing what those proposals are. In addition, when we take into account the fact that the taxpayer is not allowed to rely on any grounds for appeal besides those contained in the statement, it is felt that the Ordinance is one-sided. The burden of proving that an assessment is excessive is onerous enough without these provisions. We suggest that the words 'a statement of the grounds of appeal' in section 75 (1) (b) together with subsection (6) of section 75 should be deleted."

That is what the Association had to say. Apart from the fact that an appeal will serve no useful purpose, the present personal reliefs granted to the taxpayer are far from adequate. It has been stated again and again in this Assembly by many Members, Government and Opposition, that the reliefs are very, very inadequate. The present reliefs are for the wife and children only. But what about parents? Oh, do not mind them at all! The Hon. the Chief Minister himself is an Asian and I think he knows that he has the responsibility of maintaining his parents if they are unemployed. If such be the case, why forget about such reliefs in the Ordinance? Two years have passed, yet nothing has been done. It is an unsatisfactory Ordinance which provides only for the wife and children but nobody else.

I will quote again from the letter of the Taxpayers' Association, on the matter of reliefs:

"Child allowance - Section 35 (2) (d) provides allowance for children whether legitimate or adopted maintained by the taxpayer, but it is too often that the taxpayer brings up his younger brother or sister, or the children of his Sister or brother who is destitute or deceased. He may also have to support his aged parents who have no income of their own, as is the custom in the East. Allowance for these dependants should be deducted from the income of the taxpayer before it is subject to tax. For instance, in the United Kingdom [United Kingdom, it says, Sir] apart from personal allowance of �440 to a single person or �240 for a married man in addition to two-ninths of the net earned income, a maximum of �450 for the following allowances are allowed:

"(1) Dependant relatives: �60, if a taxpayer maintains a relative of himself or his wife. Children: �100 for each child, stepchild or adopted child under 16 years. House-keeper or person looking after children: �60 for widow or widower with female relative or house-keeper looking after children. Unmarried men with widowed mother, or husband with incapacitated wife, daughters' service: �40 if daughter is maintained by and lives with taxpayer because he or his wife is infirm.

"There are innumerable cases which have come to our notice why, by reason of the execution of the father by the Japanese or his death during the enemy occupation, his children are being supported by other relatives. It is formally recommended that consideration be given to the amendment of section 35 (2) (d) to provide for the deductions to be allowed in respect of such dependant relatives or child."

Sir, you see from what the Taxpayers' Association writes that even in the United Kingdom allowances are provided for the father, mother, children and close relatives of the taxpayer.

My motion, Sir, does not seek to ask the Government to amend the Ordinance straightaway. What it calls for is the setting up of a committee to review the Income Tax Ordinance with a view to granting reliefs for aged parents and close relatives. I am fully aware of the complications which that may involve. As the Hon. the Acting Financial Secretary has said, he has to consult the Government of the Federation of Malaya before he can amend the Ordinance. What I want now, Sir, is to have a committee set up to review the Ordinance and report to Government. With that report, the Government can hold consultations with the Federation and see whether amendments can be made to suit both territories. Therefore, I hope, Sir, that both sides of the House will accept my motion.

Before I end, Sir, may I make it clear that by "committee" I do not mean a select committee of this Assembly, but one set up by Government of experts such as accountants and economists who can really go into the Income Tax Ordinance and make recommendations. A select committee of this Assembly will not serve much purpose as I can see very few accountants here; apart from the Hon. the Acting Financial Secretary, I do not think anyone else here can claim to be an expert on figures. So I do hope, Sir, that my motion will receive the unanimous support of the Assembly. Sir, I beg to move.

3.44 p.m.

Mr Seah Peng Chuan (Kampong Kapor): Mr Speaker, Sir, I rise to second the motion moved by the Member for Queenstown. Income tax, Sir, is in force in Singapore and it is the same method as in the United Kingdom. I have here a circular to claim for repayment of United Kingdom taxes given to me by a Britisher who is affected by this. Refer to clause 13. Sir, there, if you maintain a relative of yourself or your wife who is incapacitated by old age or infirmity, or if you maintain your widowed mother or your wife's widowed mother, although she may not be incapable, you can claim an allowance of �60 for each person so maintained. This allowance, however, is reduced by one pound for every pound of the relative's own income excluding voluntary contributions and income specifically exempted from income tax such as unemployment benefit and national assistance. The maximum allowance is �105; if the income is �160 or more, there is no allowance. In Singapore, we do not have national assistance or unemployment benefit, but I see no reason why the allowance for maintaining relatives granted in the United Kingdom cannot be introduced into this Colony, where the taxpayer usually has several dependants to support.

As an example, I would like to quote the case of a bachelor. His present personal allowance is $3,000 per annum or $250 a month. If the additional benefit of �105 is given, at the rate of $8.50 to a pound we get $892.50, making a total allowance of $3,892.50 per annum or $324.38 per month. A bachelor in Singapore earning $320 a month with one dependant therefore need not pay income tax. If he has two dependants, his allowance will be $892.50 multiplied by two, giving $1,985, plus $3,000, making a total of $4,985 per annum or $415.45 per month, under which figure he need not pay tax.

In the case of married couples, Sir, the husband is now entitled to $3,000 and the wife to $2,500, making a total of $5,500. If they have one dependant, the proposed benefit will mean an allowance of $892.50, making it $6,392.50 per annum or $532.75 per month. Married couples earning $530 will therefore not be liable to tax if we introduce the extra benefit. If they have two dependants, their allowances will total $5,500 plus $1,985, making $7,485 per annum or $623.75 per month. Couples drawing $620 a month will therefore not be liable to pay tax.

It is well known, Sir, that we Asians living in this country have to support parents and other dependants on account of filial love, which is known to the world. I am not challenging the Hon. the Acting Financial Secretary but, speaking on behalf of the people of Singapore, who are mostly wage-earners, I ask the Government to consider introducing this benefit.

Question proposed.

3.51 p.m.

Mr John Ede: Mr Speaker, Sir, I rise to move an amendment to the motion:

To leave out all words after "set up" in line 1 to "Ordinance" in line 4 and to insert "an independent committee without delay to review the operation of the Income Tax Ordinance and the working of the Income Tax Department with a view to recommending such amendments to the Ordinance as to allow of a more efficient and equitable collection of income tax revenue, and".

Amendment handed in.

Mr Speaker: The amendment is in order. Please proceed.

Mr John Ede: Mr Speaker, Sir, the motion as I wish to amend it, now reads (for the sake of clarity):

That this Assembly urges upon the Government to set up an independent committee without delay to review the operation of the Income Tax Ordinance and the working of the Income Tax Department with a view to recommending such amendments to the Ordinance as to allow of a more efficient and equitable collection of income tax revenue, and as to suit local conditions, with particular reference to personal reliefs to aged parents and other close relatives solely dependent on the taxpayer.

Sir, the object of this amendment is merely to widen the scope of the motion and not, of course, to conflict with it. I think that I have the acceptance by the hon. Member for Queenstown of this amendment.

The motion then, as amended, is a simple one - that this House is of the opinion that an independent committee be set up to look into the operation of the present Income Tax Ordinance, its inconsistencies, anomalies and injustices. Sir, this Ordinance has been in operation for about nine years. During all this time there has been no thorough examination of the way in which it has been operated. There has been no consideration by an independent body as to how far this Ordinance has been adapted to suit the customs and traditions of a multi-racial population, and to suit the particular needs and conditions prevailing on a small island depending almost solely on trade for its existence. Let me therefore give some examples of the questions which deserve close and careful examination.

My first example is that of errors or mistakes in assessments and returns. The taxpayer has only 30 days in which to lodge a valid objection or appeal against an assessment before the assessment becomes final and conclusive. On the other hand, the Income Tax Department can raise additional assessments under section 73 (1) of the Ordinance at any time within six years. In other words, if a taxpayer has made a genuine error or mistake in his return, after 30 days he has no means of correcting his error, and the Department is not obliged to reopen and amend his assessment. But if the Department makes a mistake, it can rectify the assessment at any time up to six years. It has been said that the Department is prepared to reopen assessments in cases of genuine errors by taxpayers, but the public of Singapore is entitled to written safeguards so that the Department cannot change its policy at any time according to its fancy, and so that there can be no suspicion of discrimination between one taxpayer and another. In the United Kingdom Act of 1952, section 66 allows relief in respect of error or mistake at any time not later than six years after the end of the year of assessment. Here is an injustice limited to Singapore and the Federation which quite clearly requires a committee of enquiry to look into.

Sir, there is then the question of personal reliefs on which the Members for Queenstown and Kampong Kapor have already touched, and I do not want to repeat their arguments. Nevertheless, there are three points which should be subjects for consideration. The first is the allowance for a wife. In the year of marriage, a taxpayer in Singapore is assessed, firstly, on his own income of the previous year on the normal basis, and secondly, a proportion of the wife's income of the previous year, but no personal allowance for the wife is granted. While it is true that the wife is granted a personal allowance for herself against the balance of her income for that year, it must be pointed out that the combined effect is to tax total income at a higher rate than normally. This is extremely unjust and this anomaly falls at a time when the young couple is most in need of funds to go on their honeymoon or to set up a home. In brief, the method of assessing the wife's income is such as to be either a dis-incentive for married women to work, or an encouragement to living in sin. Our view is that the wife's earned income should be subject to an additional allowance (it is in the United Kingdom; why not here?) based on a certain percentage of income and subject to a certain maximum, let us say, for example, $1,000. This allowance of course should be granted in the year of marriage, also, at a time when it is most needed.

Secondly, another form of allowance which needs consideration is an education allowance in respect of a son or daughter studying at the University of Malaya. Allowances are given to parents who can afford to send children to universities overseas. Should not an appropriate allowance be allowed to parents who cannot even afford to send their children to our own university?

Thirdly, a committee of enquiry should consider the question of earned income relief. From the point of view of equity, we consider that greater relief should be accorded to a person who earns his income by personal exertion than to a recipient of investment income, whose monetary reward is not obtained from productive effort. In other words, there should be a distinction between income from salaries and income from dividends. I believe, Sir, that this matter was considered some years ago shortly after the Income Tax Ordinance was introduced, but it was rejected at that time on the ground that the rates of tax were low and the personal allowances generous. Those grounds, in our view, are no longer valid. Firstly, the rates of tax have been increased and, secondly, personal allowances which might have been generous then, are no longer so in 1957 due to increases in the cost of living.

Whilst on the subject of dividends, consideration should be given to the question of making assessable for tax, dividends received from a source outside Malaya by persons resident in Malaya. At present, such dividends are only liable to Malayan tax if they are exclusively received in Malaya. It appears wrong, to say the least of it, that persons resident in Malaya may invest their money abroad, leaving dividends or interests abroad and not paying Malayan tax. Since this country needs money for investment in new enterprises, such a provision may deter persons from investing abroad and induce them to invest in Malaya.

Mr Speaker, Sir, it might be considered by Government that these points do not merit the setting up of a special independent committee of enquiry, that the things which are wrong purely as a matter of opinion or policy do not need special investigation. But I will now go into detail regarding a matter which is very, very wrong indeed. Sir, at question time on 20th November last year, the Hon. the Financial Secretary was asked to give the figures of the number of persons who had left the Colony without paying their income tax, the total amount of income tax due by them and the break-down for each year since the coming into force of the Income Tax Ordinance. The Hon. the Financial Secretary, who was Mr Hart at that time, replied:

"...since the Income Tax Ordinance came into force, 1,827 persons have left Singapore without paying their income tax. The total amounts due from these persons are ... $1,102,007."

I will not worry you with the details for each year but I will ask you to note that the figure was just over $44,000. Now Sir, I have to submit to this House that the picture presented to us was extremely misleading. When the Hon. the Financial Secretary stated that 1,827 persons had left Singapore without paying their income tax over a period of eight or nine years, what he meant was 1,827 persons known to the Income Tax Department left Singapore without paying their income tax. Let me give you the real facts. The present practice of the Income Tax Department is, in view of section 10 (1) (b) and section 12 (4) of the Ordinance, to consider all persons other than British subjects or Commonwealth citizens who visit Singapore for business purposes as liable to tax, and liable moreover at the rate of 30 per cent without the benefit of personal reliefs. Let me read to you the relevant sections. These are:

"Section 10 (1) (b) Income tax shall, subject to the provisions of this Ordinance, be payable at the rate or rates specified hereinafter for each year of assessment upon the income of any person accruing in or derived from the Colony or received in the Colony from outside the Colony in respect of gains or profits from any employment;".

"Section 12 (4) The gains or profits from any employment exercised in the Colony shall be deemed to be derived from the Colony whether the gains or profits from such employment are received in the Colony or not."

Section 12 (4) is the more important of the two for it means that any person visiting Singapore for business reasons for however short a time is subject to tax even if the income or salary he receives is paid to him elsewhere. In effect I should make it clear that this applies to non-British subjects only because British subjects or Commonwealth citizens will be covered, as a rule, by double taxation arrangements.

Now, Sir, let us look at the facts. If we turn to the 1955 Report of the Income Tax Department, Abstract B, on page 8, we find that the number of persons non-resident in Malaya assessed for tax for the year 1955 is 1,786. Our next enquiry is on the 1955 Report of the Immigration Department, Appendix B, which is a statement of persons arriving in Singapore during 1955 by sea and air.

Under the Head "Aliens", those other than British subjects who come under another head, we find that the number of aliens who arrived in Singapore on business visits in 1955 was 6,565. In addition, a further 18,377 visited Singapore in transit, making a total of nearly 25,000 persons. Now it may be argued that most of those 18,377 were only here for a night or two and were not here for business reasons, but nevertheless the Income Tax Department pursued some of them. I have known of a case only recently of a businessman who was here in transit for only a couple of days, arriving by one plane and waiting to leave by another, who received a letter from the Department asking the purpose of his visit and for a statement of his income paid to him in the United States.

Let us, however, leave aside the 18,377 transit visitors and consider the 6,565 persons here on business. As the income tax figures show, the Department caught only 1,786. In other words, 4,779 left Singapore without paying tax in 1955, whereas the Financial Secretary gave us the figure of 1,827 persons over a period of nine years. It is clear, therefore, that section 12 (4) of the Ordinance is badly enforced, and a rule badly enforced is worse than no rule at all. Since 6,565 aliens entered the colony for business, presumably all should have paid tax on their income earned whilst in the colony; and yet the 1955 Report of the Income Tax Department shows that only 1,786 did so. In fact, it is well known that the majority of these people do not pay. Only those unfortunate enough to come under the Department's eye through newspaper reports and other sources receive the usual demand for a return and eventually for payment of tax. This naturally is leading to two results: firstly, people are deliberately evading tax; and, secondly, Singapore is losing business and foreign currency as the minority who are caught are advising others to by-pass this island. It would be the duty of a committee of enquiry to consider whether persons bringing business and wealth to Singapore should be asked to pay 30 per cent of their earnings over to the colony as income tax, and whether in truth it is not a direct discouragement to the expansion of trade and industry in this country which the present Government professes to wish to encourage. An American businessman arrives in Singapore wishing to make business contacts and interested in the possibilities of building a new factory on the island. In a misguided moment he expresses his intentions to newspaper reporters at the airport and finds himself the subject of an article on a commercial page of the Straits Times or the Singapore Standard. What is the first response he gets? A letter from the Income Tax Department asking for 30 per cent of his earned income - and his response is to take the next plane out of Paya Lebar Airport before the Department can catch him, and with no further interest in building a factory in Singapore.

Conversely, there are many persons coming here for a short period who cannot afford to pay 30 per cent in tax and maintain themselves here at the same time. Indeed it would be pertinent to enquire from the Department how much tax on non-residents has had to be written off through their inability to pay. Let us take the case at random of a Dutch bank assistant earning the equivalent of $800 a month in Holland who comes out from his homeland to relieve a colleague for a few months who is going on leave. His salary is taxed at a straight 30 per cent, leaving him with $560 per month and no benefit of reliefs or allowances. If in the United Kingdom a non-resident is immune from tax for a stay of six months until he becomes defined as a resident, we see a number of reasons to do the same here if businessmen are to be encouraged to come to this country.

Sir, I know that I am going to be told that the Government cannot afford to lose the $2,343,456 which the 1,786 non-residents paid in tax in 1955. There is, however, in our view, a simple answer to this. Instead of spending their energies and their staff on tracking down non-residents who bring wealth to this country, the Department should first turn their attention to those entering the country to reside here. Once again, we turn to the Immigration Department table giving the number of persons who arrived in Singapore for residence during 1955, that is, those filling in an Immigration Landing Card. Let us take the males only, leaving out females and children who, in the main, will of course not be subject to tax. We find that 16,939 British subjects or Commonwealth citizens and 13,585 aliens entered Singapore, making a total of 30,524 males who entered Singapore for the purposes of residence in 1955, and let it be noted that of this number 8,246 (or more than one-quarter) were Europeans almost all of whom would be liable to tax.

Now, allowing for those males entering who would not be liable to tax - and that number is limited by our immigration laws - for those entering the colony from overseas more than once during the year, for those who have left the colony, and for those who proceed direct to the Federation, there must be a very fair number of taxable persons taking up residence in Singapore. Whether the figure - and it is obviously not 30,000 - is 20,000 or 10,000 or even 5,000, it is still a large one if taken into conjunction with my next point. If we look at the Income Tax Department Reports for 1954 and 1955, we will note that 18,752 resident individuals were assessed in 1954 and 19,340 in 1955, a total increase of only 588. Is it conceivable that the number of 30,000 entries can be whittled down as low as that, and you must in any case allow for an increase in old Singapore residents becoming subject to tax?

Here then is the position. New residents are coming into the country at the rate of thousands per year, whereas the increase in the number being assessed is a few hundred per year. I must confess that I was staggered when I examined these figures, and I hope the Government will be shocked into the realisation that there must be evasion on a large scale, and that our request to the Government from this side of the House for the setting up of an independent committee is thoroughly justified. Indeed there seems to be sufficient evidence to suggest that the tax clearance scheme before people leave the country should be considered, as it is adopted in Australia or New Zealand. Consideration needs to be given as to whether the Income Tax Department is using or is being allowed to use all possible legitimate ways of obtaining information. There seems to be a case for considering whether section 64 of the Ordinance empowering heads of firms to send in a list of employees liable to tax is enough when one knows the numbers of representatives of overseas firms residing here who have no heads of firms here sending in those returns.

In the Budget debate last November the Financial Secretary said, "I consider that the Department has done and is doing a splendid job." In the face of these figures, we beg to differ. If there has been an excuse, it has always been that of a lack of experienced staff and trained income tax officers. In our view, if the existing staff - and it is a hard-working staff - were taken off the job of chasing non-residents who stay in this country for three days and turned their attention to the detection of new residents through more street surveys, the Income Tax Department would be more respected and more revenue would flow to our coffers.

Sir, I hope I have said enough to convince the Government that this present situation is thoroughly unsatisfactory and that the time has come for an independent enquiry into the operation of an Ordinance which was drafted in something of a hurry just after the war and has not been given a thorough enough scrutiny and attention. I congratulate the Member for Queenstown for introducing this motion. We on this side of the House are fully in support of it, coupled with the amendment which I have moved and which merely widens its scope. Sir, I beg to move.

Mr Lim Choon Mong: Sir, I rise to second this amendment to the motion and reserve my right to speak at a later stage.

4.17 p.m.

Mr Speaker: The original Question was,

"That this Assembly urges upon the Government to set up a committee without delay to review the provisions of the Income Tax Ordinance (Cap. 166) with a view to recommending such amendments to the Ordinance as to suit local conditions, with particular reference to personal reliefs to aged parents and other close relatives solely dependent on the taxpayer."

Since when an amendment has been proposed,

To leave out all the words from "up" in line 1 to "as" in line 4, that is to say, the words "a committee without delay to review the provisions of the Income Tax Ordinance (Cap. 166) with a view to recommending such amendments to the Ordinance", and there to insert "an independent committee without delay to review the operation of the Income Tax Ordinance and the working of the Income Tax Department with a view to recommending such amendments to the Ordinance as to allow of a more efficient and equitable collection of income tax revenue, and".

Question proposed, "That the words proposed to be left out, be left out."

4.20 p.m.

Mr Seah Peng Chuan: Mr Speaker, Sir, I see there is no difference between the original motion moved by the Member for Queenstown and the amendment moved by the Member for Tanglin. The committee proposed to be set up under the terms of the motion will investigate the collection of tax also, Sir. I am against the amendment moved by the Member for Tanglin because it has come from a member of the Liberal-Socialist Party. I would rather prefer to have the motion moved by an Independent member, and I think the Government will consider it.

Mr Lee Choon Eng: Mr Speaker, Sir, speaking in support of my seconder for the original motion, I would like to point out that, on the face of it, the amendment moved by the Member for Tanglin seems to be very well worded and looks as if it will allow the committee wider scope for investigation. My motion says:

"...to review the provisions of the Income Tax Ordinance (Cap. 166)...".

Sir, Chapter 166 has 12 items covered in the Income Tax Ordinance. The difference, as I see it, between my motion and the amendment is the working of the Income Tax Department and the efficient and equitable collection of income tax. As I have said. Sir, Chapter 166 covers 12 items and all these items do include the working of the income Tax Department as much as the efficient and equitable collection of income tax. These 12 items are:

(1) Deductions and disbursements;

(2) Foreign companies;

(3) Dividends;

(4) Funds for retirement;

(5) Losers;

(6) Depreciation of buildings;

(7) Stock valuation;

(8) Commencement and cessation of business;

(9) Allowances (which are personal allowances) or reliefs;

(10) Statements of accounts;

(11) Mistake of facts;

(12) Appeals.

Sir, the working of the Income Tax Department and the collection of tax could be covered in any of these 12 items, so I do not see much purpose in moving the amendment. The Member for Tanglin said that I agreed originally. Sir, I have agreed to the submission of the amendment, but I have not committed myself by saying that I will agree to accept the amendment. I do not think I have any right to stop any hon. Member from submitting an amendment, but it is my right to vote according to my conscience and whether I support or do not support.

Another difference that I can see is the word "independent" appearing in the amendment. It has the words "independent committee", whereas my motion has the word "committee" only. Sir, in the last part of my speech, I think I made it very clear that the word "committee" does not mean a Select Committee of this Assembly. The word "committee" means an independent committee to be set up by the Government composed of independent individuals who are experts in the Income Tax Ordinance and know the working of the Income Tax Department. So I do not see much purpose in moving the amendment. To do so is just to overshadow the original motion, and as the Member for Kampong Kapor has rightly said, it becomes a clash of Parties. I think this House is more prepared to accept a motion in the name of an Independent where no Party inclinations are involved. In the circumstances. Sir, I do not agree to the amendment.

4.24 p.m.

The Chief Minister: Mr. Speaker, Sir, so far Members of the Opposition have had the floor. The Government had in mind to accept the original motion, but since then it has been amended by the Member for Tanglin. What the hon. Member seeks to achieve by his amendment is that the Government should appoint an independent committee. To that extent, Sir, the Government opposes the amendment.

The taxation policy is the sole responsibility of the government of the day, and it cannot relegate this responsibility to any independent body. Any government of the day should be brave enough to state its taxation policy and stand up to any criticism which the Opposition Members may bring up.

I must confess that I am greatly interested in the various points raised by the Member for Tanglin in his speech. I have not yet had time to consult my colleague the Financial Secretary, but I can say this: that some of the points raised by the hon. Member have already been occupying the attention of the Financial Secretary, and I give the hon. Member the assurance that all the points he has raised will be thoroughly investigated. I know he is just as anxious as the Government that we should improve the Income Tax Ordinance so as to ensure better collection and greater revenue. Since the question of dependant allowances was brought up at the last Budget debate, the Government has been giving serious consideration to it. Last month-

Mr Speaker: Order. Will the Chief Minister confine himself to the amendment?

The Chief Minister: Mr. Speaker, Sir, in moving his amendment the Member for Tanglin did touch on the subject of family allowance, and this is in reply to what he said.

Mr Speaker: The position is that the mover of the amendment spoke to the original Question which of course includes the question of allowances. Having done that, he moved his amendment and any Member who speaks on the amendment will have to confine himself to it. Later on if the amendment is lost, or even carried, the original Question, or the original Question as amended, comes back to the Assembly and then hon. Members can speak on that aspect of the motion. The Chief Minister has a second chance to speak, in other words.

The Chief Minister: Mr. Speaker, Sir, I thought of just speaking once on this amendment and when it came to the motion, I did not wish to speak again because I did not think it was necessary to repeat what I had said when speaking on the amendment.

4.28 p.m.

Mr Lim Choon Mong: Mr. Speaker, Sir, listening to the arguments against the amendment to the motion, I feel that Members in this House sometimes do not understand what is right or what is wrong. It is not important whether a motion is moved by a Party Member or an Independent Member. If the motion, or the amendment, is right, then we must accept it, no matter from whichever quarter it comes from. If it should come from an Independent, well and good, he should be given the credit. If it should come from the Government, well and good, we can say that the Government knows the feelings of the people. If it comes from another Party in the Opposition and that Party is genuinely for the people and voicing the opinion of the people that there is a real need for such a motion or an amendment, then it should be accepted. Nothing should be said that because it comes from this quarter, it should be rejected, because then it boils down to a question of personalities. The Chief Minister rose -

Mr Speaker: Point of order?

The Chief Minister: Point of elucidation, Sir.

Mr Speaker: Will the hon. Member give way?

Mr Lim Choon Mong: Yes, Sir.

The Chief Minister: Mr. Speaker, Sir, the Government has not stated that, because the amendment has been moved by a Member of the Opposition, it is opposing it. The Government opposes it on the ground that it cannot relegate its responsibility in so far as taxation is concerned.

Mr Lim Choon Mong: Certainly, we will come to that point. Sir. It so happens that the Member who spoke in that trend comes from the Opposition. I think that if Singapore is going to progress, it should be on a basis of what is right and not who is right. Therefore on a question of this sort, I cannot agree with the Member for Kampong Kapor (Mr. Seah Peng Chuan) or the Member for Queenstown (Mr. Lee Choon Eng) for putting forward the statement that it comes from a certain Party and that therefore it should not be accepted. On the other hand, Sir, the Government says that it is its duty to see that its taxation policy is defended and that it will defend it to the very end. I would like to ask one question, Sir. If the policy were wrong, inhuman and undemocratic, would the Government still defend it because it is a Government measure?

The Hon. the Chief Minister mentioned, Sir, that he is accepting the original motion. What is the difference between the one and the other? Is there a great deal of difference? An independent committee, Sir, I believe, is the best committee to investigate into such affairs. It is not a committee empowered with operating the law. It is not a committee empowered with collecting the tax. That committee, Sir, so far as tax collection is concerned, has only advisory power, to advise the Government on the change of the Schedule. It does not infringe upon the powers of the Government. I am certain, Sir, that this Labour Front Coalition Government has appointed many committees. Many of its committees, it is said, are independent committees. It has its committees to help in its education policy and in all sorts of policies. Would the Government say that it is handing over power to these various committees and that these various committees are running the Government? Would it say that it would not accept the advice of these committees? On the contrary, I find that whenever an attack is made on the Government, invariably it hides behind all such committees by saying, "This has been recommended by the Hawkins Committee. This has been recommended by the All-Party Committee. This has been recommended by all sorts of Committees." But when it comes to the appointment of an independent Tax Committee to advise Government on the whole matter, it says that it cannot give the power to such a Committee. Where is the logic of this? It applies in one case; it does not apply in another case. I cannot understand the attitude of the Government. What the Government should do is to express its gratitude for the assistance of the Opposition in bringing to its notice all the various shortcomings of a department in helping it to collect more tax. After all, the Government is spending more than what it earns, and if this state of affairs carries on with more spending and less saving, Singapore will one day become insolvent. Somebody comes along to help the Government and this is the way the Government receives it! It rather reminds me of rendering a good act and in return being back-bitten for offering that help. This is setting a bad example for people to follow.

My colleague has voiced his opinion of the various ways in which the Government can collect more tax. My colleague has said that there had been a large number of people who had made money in Singapore and then left for their homelands. These are the expatriate officers I expect and people who come from investing countries making their pile and then going away from this country. In fact, I almost feel that the Member for Tanglin is voicing something that the Government usually would not believe, he himself being of European extract and the voicing of such a sentiment for the benefit of Singapore is really a credit to my colleague, the Member for Tanglin. The Government cannot deny that there are such tax evasions and the number of such people involved is not too many - a few thousand people perhaps. When these people are about to leave this country, they have to go through the Immigration Department. Co-ordination between the Immigration Department and the Income Tax Department should make the collection of such taxation easier. I know that the tax clearance scheme is not new in this world. Many of the Western countries have had that for many, many years and a suggestion like this should not be spurned. Furthermore, the amendment did not exclude any real substance from the original motion. It also asks that the whole question be investigated as regards reliefs to close relatives who, of course, include aged parents, dependants, brothers, sisters and children probably exceeding nine in number, but I hope it does not include secondary wives or kept mistresses which I think would be a wrong thing to include.

Sir, on the whole, I am of the opinion that the amendment to the motion is a really good one and whoever opposes such an amendment, opposes it not because it is not good but because probably of personal reasons. Any opposition to such a motion, Sir, means that the Member is not having the interest of Singapore at heart but is calculating on what will be gained by his own person or by his Party.

Sir, I support the amendment.

4.40 p.m.

Mr R. C. H. Lim (Nominated): Mr. Speaker, Sir, I have not been convinced by the proposer nor by the seconder of the amendment that the amendment is an improvement on the original motion. I would have supported the amendment if I could have been so convinced notwithstanding that the amendment has come from the Liberal-Socialists.

This morning a Member of this House - I cannot remember who - said that a little knowledge is a dangerous thing. It is, Sir. The alarming figures given by the Member for Tanglin of the number of visitors to Singapore - aliens and otherwise, Sir - is no indication that the Income Tax Department has allowed these people to escape paying income tax, because referring to the same section 12 referred to by the Member for Tanglin, we will find, Sir, under that section that where a non-resident carries on business partly in Singapore and partly out of Singapore, the profits he derives from such business operation shall be deemed to have been derived from Singapore which are not directly derived from outside Singapore, and these profits are liable for assessment for taxation. Further, Sir, in another section, a person must have resided here for six months in the year of assessment before he becomes liable. So, Sir, the number of visitors coming into Singapore is no indication of the negligence on the part of the Income Tax Department.

Sir, the Member for Tanglin has expressed great interest in the tourist business of Singapore. If we were to say that any visitor to Singapore is liable to pay income tax, Sir, that idea of tourist business will be absolutely killed.

Mr Braga: Mr. Speaker, Sir, I listened, I would say not with interest but with amusement, to the ramblings of the Member for Serangoon for the past ten minutes. He opened his address, and I speak subject to correction, by saying that he could not see any difference between the original motion and the amendment. If he could not see any difference, why bring in the amendment and waste ten minutes of this House's time?

Question put, "That the words proposed to be left out, be left out."

Mr Lee Choon Eng: Division, Sir.

The House divided: Ayes, 4; Noes, 19; Abstentions, Nil; Absent, 7. Ayes Noes Ede, John. Abdul Hamid bin Haji Goh Tong Liang. Jumat. Lim Choon Mong. Ahmad bin Ibrahim. Tan, William. Braga, A. J. Butterfield, C. H. Chew Swee Kee. Abstentions Goh Chew Chua. Nil. Jumabhoy, J. M. Lee Choon Eng. Absent Lim Cher Kheng. Jumabhoy, R. Lim, R. C. H. Lazarous, A. R. Lim Yew Hock. Lim Ching Siong. Mak Pak Shee. Lim Koon Teck. Mohd. Sidik bin Haji Sutherland, G. A. P. Abdul Hamid. Thomas, Francis. Nair, M. P. D. Wong Foo Nam. Ong Piah Teng. Oon Khye Kiang. Seah Peng Chuan. Stewart, S. T. Tan Theng Chiang.

Amendment accordingly negatived.

Original Question again proposed.

4.50 p.m.

The Acting Financial Secretary (Mr Oon Khye Kiang): Mr Speaker, Sir, the Government accepts the motion.

This Government is well aware of the feelings of the Asians, expressed both in the Press and public statements as well as in the speeches of the hon. Members at the last Budget debate, towards this matter and is in sympathy with the principle of granting allowances to dependants other than wives and children. In fact, Sir, consideration is being given to review the case for the grant of such allowances. As will be appreciated, this additional form of relief cannot be arbitrarily fixed. There are about 19,000 taxpayers in the Colony, and if this additional form of relief were granted without careful examination of all the implications involved in the proposal, it may well be that there will be a considerable loss of revenue.

Income tax is and will be one of the main sources of revenue to this country. We shall require all the money for the expansion of social services and of economic activities. If it is intended that the social and economic services should be maintained at the present level of activity, it is essential that this source of revenue should not only be maintained but also increased to cope with a mounting expenditure.

The present scale of allowances is: $ (a) Personal 3,000 (b) Allowance for wife 2,000 (c) Allowances up to a maximum of $3,150 for nine children They are very generous compared with those granted in other countries. The following allowances are granted in respect of personal allowance and allowance for wife in these countries: Personal Allowance Allowance for wife $ $ India 645 645 Pakistan 1,000 Nil Ceylon 1,350 1,000 U.K. 1,200 840 Australia Nil 875 New Zealand 3,180 1,000 U.S.A 1,800 1,800 The allowances for children in these countries are also comparatively much less.

In the circumstances, it has to be considered whether this proposed relief can be granted in addition to the present scale of allowances or whether some reduction in the existing allowances may have to be made for the introduction of dependant allowances.

It is inevitable that the work of the department will be increased in scrutinising the various claims for relief which, according to experience in other countries, will require careful examination. The difficulties involved in checking the bona fides of claimants will be very considerable. At the moment when the limited resources of the department are strained to collect as much revenue as possible, it will be appreciated that any diversion of manpower to deal with this new work will affect adversely the working of the department as well as the collection of revenue.

A study of the legislation and practice in other Asian countries which have had a lot of experience with this tax will have to be undertaken in order to obtain some guidance in fixing the quantum of such allowances. These, Sir, are the basic problems that have to be tackled in dealing with the proposal as envisaged in the motion. They will have to be carefully considered before a final decision can be taken.

There is in existence, Sir, the Economic Committee of the Singapore Council of Ministers, consisting of the Chief Minister as Chairman, the Financial Secretary, the Minister for Commerce and Industry and the Minister for Communications and Works, which considers at policy level matters involving finance and economics. It meets at regular intervals the corresponding Economic Committee of the Federation Executive Council to consider Pan-Malayan matters of which income tax is one. This Committee has been tackling this task.

This Committee, Sir, has the benefit of the advice of the Malayan Board of Income Tax constituted under the provisions of the Income Tax Ordinance. This Board consists of the Federation Minister of Finance as Chairman, the Singapore Financial Secretary as Deputy Chairman, the Comptroller General of Income Tax and six Unofficials from the Federation and Singapore. The three Singapore representatives are an accountant, Mr J. F. L. Cowin, and two lawyers, Mr A. P. Rajah and Mr Wee Chong Jin, who are familiar with this country and the business conditions in Malaya. Among its main functions, the Board surveys the working of the Ordinance and considers any matters arising out of the provisions of the Ordinance which may be referred to it by either Government.

The Member for Queenstown (Mr Lee Choon Eng) refers to the representations made by the Singapore Income Taxpayers Association on matters arising out of the Ordinance. They are of a technical nature and I do not propose to deal with them. The memorandum was actually received yesterday by me and will be carefully considered and submitted to this Economic Committee.

4.58 p.m.

Mr Lim Cher Kheng: Mr Speaker, Sir, I rise to support the motion with great pleasure. Allow me the privilege, Sir, to extend my congratulations to the mover of the motion the Member for Queenstown and, at the same time, I would also like to express my great appreciation of the stand taken by the Government by not playing party politics in accepting an important measure moved by the Opposition.

Sir, I have three reasons to support the motion. First, I consider that this motion is of great significance as an ideological advancement. I remember that during the Budget sittings for the years 1955 and 1956 regarding the review of income tax, I did mention that the paramount importance of ideological independence should be closely considered. The second part of the motion reads:

"... as to suit local conditions, with particular reference to personal reliefs to aged parents and other close relatives solely dependent on the taxpayer."

We must understand the true feeling of our Asian tradition. Sir, if you will allow me to quote - although the audience is very poor - one example -

Mr Speaker: Order. There is no such thing as an "audience" in this Assembly. Will the hon. Member please address his remarks to the Chair?

Mr Lim Cher Kheng: I am sorry, Sir. I was referring to a friend sitting in the public gallery. I know him personally. He has not only to support a wife, children and parents, but he has also to pay for the secondary education of his brothers. He is only a journalist. How much money can a journalist earn? Yet the Income Tax Department chases him round and round for more money, and he can only claim reliefs for his wife and children. It is his plain duty not only to support his parents, but also to pay for the education of his brothers. This is the custom in our Asian country and it is necessary especially because a social security system has not yet been introduced.

Therefore, the first reason why I support the motion is that I believe it is of prime importance to our ideological advancement. The second is that the committee, in the course of its discussions, may be able to recommend measures to encourage badly needed industrialisation in this country. I am sure the Hon. the Minister for Commerce and Industry will be most pleased if measures can be found to encourage not only local investors but also to attract foreign ones as well to boost our industrialisation. The third reason why I support the motion is that quite a number of facts against the Income Tax Ordinance have been given by the hon. Member for Tanglin and therefore the committee can reveal any loopholes in it, evasion of taxes or inefficiency in collecting them. Sir, for these three reasons, I heartily support the motion.

Mr John Ede rose -

Mr Speaker: Is it a point of order?

Mr John Ede: On the amendment, Sir.

Mr Speaker: The hon. Member spoke on the original motion. I have indicated earlier on that if any hon. Member moves an amendment, he speaks on the original Question.

Mr Lee Choon Eng: Mr Speaker, Sir, I am much obliged to the Government for accepting my motion. I do not think it is necessary for me to reply.

Question,

That this Assembly urges upon the Government to set up a committee without delay to review the provisions of the Income Tax Ordinance (Cap. 166) with a view to recommending such amendments to the Ordinance as to suit local conditions, with particular reference to personal reliefs to aged parents and other close relatives solely dependent on the taxpayer.

put, and agreed to.

Resolved,

That this Assembly urges upon the Government to set up a committee without delay to review the provisions of the Income Tax Ordinance (Cap. 166) with a view to recommending such amendments to the Ordinance as to suit local conditions, with particular reference to personal reliefs to aged parents and other close relatives solely dependent on the taxpayer.