INCOME TAX (AMENDMENT) BILL

Order for Second Reading read.

3.05 p.m.

The Acting Financial Secretary (Mr Oon Khye Kiang): Mr Speaker, Sir I have the Governor's consent to proceed with the Second Reading. I beg to move, "That the Bill be now read a Second time."

Sir, it is proposed to implement the recommendations of the Malayan Board of Income Tax to amend the Income Tax Ordinance. The opportunity is also taken to make other minor amendments. The proposed amendments are incorporated in the Bill.

Clause 2 of the Bill amends section 13 of the Income Tax Ordinance.

Paragraph (a) of clause 2 confers exemption on the official emoluments of the Yang di-Pertuan Agong and the Raja Permaisuri Agong of the Federation, the Deputy Supreme Head of the Federation, and the Ruler or Governor of any State in the Federation.

Paragraph (b) of clause 2 is designed to bring the provisions of the existing law into accord with the provisions of the Consular Conventions Ordinance and the Diplomatic Privileges (Commonwealth Countries and Republic of Ireland) Ordinance, 1957.

Paragraph (c) of clause 2 makes amendments consequential on recent changes in the Constitution of local authorities in Singapore.

As subsection (4) of section 13 of the Ordinance now stands, employees of foreign principals who exercise part of the duties of their employment in the course of a visit to the Colony are chargeable to Colony tax on that part of the earnings from their employment which is attributable to their period of employment in the Colony. It has been represented that such employees wishing to visit the Colony in the course of their employment may be deterred by the present imposition of tax, and paragraph (d) of clause 2 is designed to allow a visit or visits of up to 60 days' duration in the basis period for any year of assessment before liability attaches to their earnings.

The amendment is recommended by the Malayan Board of Income Tax follows the usual form of exemption in Double Taxation Arrangements with foreign countries. In such circumstances, while there is provision to exempt technicians and managers from payment of income tax in the case of a film company operating in this country, but the motion picture artists are not exempted. It is considered desirable to encourage film companies to come to this country to make films, and as these film artists form an integral part, this Government has decided that the exemption should be extended to such artists. I propose, Sir to move an amendment to this effect at Committee stage.

Section 18A of the Ordinance provides for allowances for capital expenditure on plantations based on the Mudie Mission recommendations that all new capital expenditure on. Plantations should be written off for income tax purposes over a maximum period of 10 years. As the law now stands, all sums recovered on the sale or transfer of a plantation require to be taken into account under subsection 3 (c) up to the amount of the aggregate allowance claimed and allowed under section 18A. It has been represented that allowances claimed and allowed in respect of capital expenditure on that part of a plantation which is not sold or transferred should be disregarded and that recoveries to be taken into account under subsection 3 (c) should not exceed the allowances claimed and allowed in respect of the portion in which the interest has been sold or transferred. 'The amendment of section 18A in clause 3 seeks to ensure that recoveries in respect of capital expenditure shall be deemed to be income for the purposes of subsection 3 (c) of the Ordinance only where relief has been allowed under the section in respect of the relevant capital expenditure. It is also proposed that recoveries in respect of capital expenditure shall be deemed to be income chargeable to tax only after the point is reached when the capital expenditure originally incurred or the consideration paid for such expenditure has been recovered by the taxpayer in the form of allowances under the section. This amendment will be operative from the date section 18A came into operation, namely, 1st January, 1956.

Section 20 of the Ordinance provides for balancing allowances and charges in respect of machinery or plant. Experience has shown that the circumstances are too broadly defined and are likely to give rise to abuses. It is proposed in clause 4 to provide a broader definition of the events giving rise to a balancing allowance or balancing charge. The clause also seeks to provide that where a property in machinery or plant passes by gift or by sale at less than its open market price, or is sold after the permanent discontinuance of the trade, profession or business, for the purposes of computing any balancing allowance or balancing charge, it shall be deemed to have been sold at its open market value at the date of the transfer of ownership or at the date of permanent discontinuance as the case may be.

Clause 5 of the Bill amends section 29 of the Ordinance to clarify the procedure for determining the gross amount of the income from a dividend which has been paid without deduction of tax. The difference between the gross and the net amounts of any dividend is deemed to be tax borne by the shareholder and is available for relief or repayment in his hands. No additional burden would be laid on the taxpayer since difference between gross and net amounts represented tax available for repayment or set off under section 46.

As subsection (1) of section 44 of the Ordinance now stands, dividends paid by companies which are resident in the Colony may be paid either without deduction of tax or under deduction of tax at any rate up to 30 per cent. Practical difficulties have arisen in determining the tax deductible from dividends paid by such companies and the proposed amendment in clause 6 of the Bill is designed to allow the deduction of tax at the rate of 30 per cent only. The right of companies to pay dividends without deduction of tax is not accepted.

Clause 8 of the Bill amends section 68 of the Ordinance to place upon employers the statutory obligation to advise the Comptroller when employees enter or leave their service, or leave the Colony temporarily for a period exceeding three months. The principal object of this amendment is to ensure that the Comptroller is given sufficient notice of the departure of employees from the Colony either permanently or for a lengthy period, in order that steps may be taken before their departure to compute and collect the tax payable.

It has been represented that sections 84 and 93 of the Ordinance are difficult to construe and to reconcile. It is proposed to amend in clause 9 of the Bill, section 84, by clarifying the circumstances in which an assessment becomes final and conclusive, and by precluding the revision of any final and conclusive assessment under the provisions of section 93 of the Ordinance. The amendment in clause 10 of the Bill is designed to amend section 93 by making it merely the authority for the Comptroller to repay tax when the greater amount has been paid directly or by deduction than is charged in a final and conclusive assessment or when an exempt taxpayer has suffered by deduction.

It is proposed in clause 11 of the Bill to provide that taxpayers may claim relief at any time within six years of the end of the relative year of assessment in respect of an error or mistake made in a return of statement for the purposes of assessment. To discourage frivolous appeals, where the Comptroller refuses to admit a claim to relief, the clause requires the sum of $250 to be deposited with the Clerk to the Board of Review before an appeal can be entertained, but provides for the refund of the whole sum in the event of the appeal being allowed by the Board. Where an appeal is unsuccessful, the Board is given discretionary powers to decide whether the whole or any part should be refunded.

There are a number of other minor amendments most of which are included in the Schedule to the Bill.

Sir, I beg to move.

Question proposed.

3.17 p.m.

Mr John Ede: Mr Speaker, Sir, out of the improvements made in the Income Tax Ordinance with the introduction of this Bill, I would like to refer in particular to clause 2 (d), a matter on which I asked questions last year, and there is now an exemption of tax for visitors entering this country for a period of two months, and I think, as I stated a year ago, that that was an extremely, restrictive clause.

I welcome further the amendment to place motion picture artists in this category as opposed to stage and radio artists, musicians, athletes, and so on. I think that this is an important point, be, cause the point has been made, and notice has been taken by the Government, that motion picture artists who come into this country to make pictures are not public entertainers in this country in the ordinary sense of the 'word, in that they come here only to make pictures. I think this country has been at a great disadvantage in the past in missed opportunities because this was not provided for before. I know of a number of cases where production companies that wished to make pictures here which would portray Singapore and the Federation on the world's screens had been prevented from doing so because of Income Tax restrictions. I know of an American company wishing to spend something between three and four million dollars in this country making a picture next year which would not only be a welcome revenue to Singapore and the Federation but also would mean that our country and the Federation will go on to the world's screens in the way that Japan is put on the world's screens today in so many films. I think, just as Japan has had great advantages in attracting tourists to that country, that we shall now attract more tourists for the same reason. For these reasons, I very much welcome the broad-minded change in Government policy shown on this particular clause.

Mr Speaker: Mr Financial Secretary, in reply?

Mr Oon Khye Kiang: I have nothing to add further.

Question put, and agreed to.

Bill accordingly read a Second time.

Mr Speaker: Committee stage, what day?

The Chief Minister rose -

Mr Speaker: Mr Chief Minister, perhaps we could complete the proceedings on this Bill before you move your motion.

The Chief Minister resumed his seat.

Mr Speaker: Will you please move, Mr Financial Secretary?

Mr Oon Khye Kiang: Sir, I beg to move,

That this Assembly will immediately resolve itself into a Committee on the Bill.

Inche Mohamed Sidik Bin Haji Abdul Hamid: Sir, I beg to second.

Question put, and agreed to.

Bill considered in Committee.

[Mr SPEAKER in the Chair]

3.21 p.m.

Clause 1 ordered to stand part of the Bill.

Clause 2-

Mr Oon Khye Kiang: Sir, I beg to move,

In page 2, line 45, to leave out ", motion picture".

The object of this amendment is to remove the reference to motion picture artists in the proviso so that motion picture artists will be eligible for exemption under subsection (4).

Amendment agreed to.

Clause 2, as amended, ordered to stand part of the Bill.

Clauses 3 and 4 ordered to stand part of the Bill.

Clause 5-

The Chairman: Mr Financial Secretary, there appears to be a typographical omission in line 14. After "appearing", should not the word "in" be inserted?

Mr Oon Khye Kiang: Yes. Shall I move an amendment?

The Chairman: We will just insert that word as a typographical omission.

Clause 5 ordered to stand part of the Bill.

Clauses 6 to 12 inclusive ordered to stand part of the Bill.

The Schedule ordered to stand part of the Bill.

Bill reported with an amendment; read the Third time and passed.