CINEMATOGRAPH FILM HIRE DUTY BILL

Order for Second Reading read.

2.50 p.m.

The Deputy Prime Minister (Dr Toh Chin Chye): Mr Speaker, Sir, I have the Yang di-Pertuan Negara's recommendation to proceed with the Bill. Sir, I move, "That the Bill be now read a Second time."

The cinema business is in a flourishing state. The revenue from entertainments duty in respect of admissions to cinemas has been increasing during the last two years. There have been built a number of new cinema theatres during this period, and it has been found that the present rates of entertainments duty cannot be increased without the burden being passed to the patrons. The local exhibitors who have to bear a number of expenses would pass any additional taxation on the cinema industry to the patrons, unless legislation were passed to control the admission prices. On the one hand, the local distributors who have a share in the profits are subject to income tax. But the overseas distributors who obtain greater profits are not subject to local taxation. Large amounts of royalty are therefore being remitted overseas, tax free, as they are not within the charging provisions of the Income Tax Ordinance.

Furthermore, it has been found that the greater the amount paid by the local distributors to the overseas producers, the smaller is the chargeable profit of the local distributors here, as these royalties are deducted from receipts to arrive at income. As the local distributors are, in the main, subsidiaries of the overseas producers, they can conveniently so arrange their business that the local distributors pay little income tax, and the great bulk of their gross income receipts are paid and remitted overseas without being subject to local taxation.

At the moment the law is such that the royalty received by the producer is not subject to tax, since he is non-resident, and the income is derived outside Singapore and therefore not income chargeable within the scope of the Income Tax Ordinance.

It is usual that agreements are made outside the country and payments effected outside, 50 that it does not suffer from local taxation. This exempts payment of tax on royalties received by producers resident overseas and in addition in respect of producers resident in the United Kingdom. The United Kingdom/Singapore Double Taxation Agreement exempts royalties from income tax when they are received by producers resident in the United Kingdom from Singapore. It is considered desirable that some measures be taken to extract a due from these overseas producers, and this objective is what the proposed Bill intends to achieve.

It is based on similar legislation in force in New Zealand since the 1930's. The main contents of this Bill are indicated in the Explanatory Statement. But there are some main provisions in the Bill which should be mentioned.

In clause 4, it is proposed to levy with effect from today a film hire duty in respect of proceeds which are derived from the renting of foreign films. It is not the intention of Government to impose this tax on films which are locally produced.

"Renter" and "rent" are defined in clause 2.

This duty is not allowed for deduction under subclause (8) of clause 4 for purposes of income tax on account of loss in revenue.

Renters of these films will be required to be registered under clause 5, and to keep records as specified in clause 6.

They are liable to pay duty at the rate of one-quarter of 60 per cent of such gross receipts as laid out in clause 9. It may be suggested why one-quarter of 60 per cent is used instead of a straight 15 per cent. Perhaps this ought to be explained. Film hire duty is in nature a customs duty, and therefore the country of origin of the contract has no bearing on the liability. In strict theory, it should be levied on the value of the film imported. It is virtually impossible, however, to ascertain the value of films at the point of entry by ordinary methods of valuation, such as actual cost, occurrent domestic value in the country of origin, and so on. The imposition of a film hire duty seeks to overcome this difficulty of valuation by making the gross rentals derived, the determining factor for valuation. How gross receipts from rentals should be calculated is set out in clause 10. From experience elsewhere, it has been found that 40 per cent of such gross receipts would be considered quite an adequate allowance to cover expenses and for profit. It is, therefore, considered that the levy should be imposed on the balance of 60 per cent. In other words, for every $1 that a non-resident producer takes out of this country, he is charged 15 cents.

Nonetheless, I would like to say here that this quantum can be adjusted in the light of our experience. One-quarter is an elastic quantity and according to subsequent events and experience, if necessary, we shall adjust it.

In clause 11 there is provision whereby the Minister may grant exemption in respect of all or any of the provisions of the Ordinance. The reason for this clause is this: for example, if a film society or a body or any other association wishes to exhibit a film, we would wish to exempt him from the tax defined in this Bill, and therefore discretion is left to the Minister to so exempt.

It is not the purpose of Government to go at the small fry. We consider that tax should be borne by those who can bear it, and in this particular instance, taxation is imposed upon non-resident producers, those who make the money in this country escape from income tax by devious ways. Now it is natural that we would expect that when this film tax is imposed, the renter would try to pass it on to the cinema-going patrons. This has been forestalled by a clause here which says that the existing admission charges cannot be increased without the approval of the Minister. This clause is in clause 13. In other words, when this Bill comes into force, there should not be any increase in cinema charges, which, as it is, are already high. There are other clauses which make provisions for an effective collection of the duty. We do not pretend that this Bill is absolutely perfect. Someone may find loopholes. But when we discover that someone has used these loopholes, we shall plug them quite quickly.

We estimate that in a year, the Government should be able to collect $1 million revenue from this taxation.

Sir, I beg to move.

Question proposed.

3.02 p.m.

Mr A. P. Rajah (Farrer Park): Mr Speaker, Sir, I venture to hazard the guess that this Bill is going to set a record. From the moment it was conceived to the time it is put on the statute book, the time taken is probably the shortest in the history of legislation.

I have no doubt, Mr Speaker, Sir, that the Government are interested in collecting as much revenue as possible, and if what the Government are saying is correct - that certain non-residents are escaping the payment of income tax because of some loopholes in the Income Tax Ordinance - then such people should be made to pay the tax because the profits are earned in Singapore.

Mr Speaker, Sir, I had hoped that when the Deputy Prime Minister was asked by you, "Second Reading when?", he would at least have given us a couple of hours in which to study this Bill, but instead of which the answer was, "At the end of item 5", which meant no time at all.

If the intention of Government in doing this is to prevent the Opposition from raising any queries on it, then they have certainly succeeded. But I must protest, Mr Speaker, Sir, at the way in which this legislation is being pushed through in this Assembly. The Press had been informed some time back that legislation was going to be introduced. I would suggest, with respect to the Government in power, that the least they could have done would have been to take the Members of this Assembly into their confidence and let them have this Bill for some time in order that they might study it and express any views, if they had any, or support the Bill, as the case may be. Instead of which, even the normal practice with regard to Bills introduced on a Certificate of Urgency has not been followed, Mr Speaker, Sir; and that is, through your courtesy in such matters you send us a cyclostyled copy, and we have time at least to go through it hurriedly, and put out any views which we think would assist the Government in the consideration of the Bill. But apparently the point and purpose of this procedure now being followed by the Government is to muzzle everybody, even the Opposition - a point which I do not appreciate. If the sole purpose of this Bill is to bring into the income tax net those who have been escaping it by some subterfuge, then the Opposition would certainly have supported the Government. Where then is the necessity to keep the Bill away from the Opposition Members? I have nothing to say on the Bill, Mr Speaker, Sir, because I have had no time to read it. I tried to read it, but I had at the same time to listen to the Minister moving the Second Reading. Between listening to the Minister and trying to read the Bill, I heard nothing.

3.05 p.m.

Dr Toh Chin Chye: Mr Speaker, I thought I would hear wisdom from the Opposition bench. Instead allegations were made that the Government intended to muzzle the mouths of those sitting on the opposite side. I would say this to the hon. Member for Farrer Park. If he had heard nothing between my introducing the Bill and my moving the Second Reading of the Bill, I would recommend that he visit a Ear, Nose and Throat specialist.

Sir, I would say that it is never the intention of the Government either to stifle the voice of the Opposition or not to receive criticisms from them. I am quite sure that we are capable of meeting any challenges which the Opposition should put up. Nonetheless, coming to the subject under discussion, I would like to say this that when you see money for the taking, you do not start looking at - what does the proverb say - "looking at the teeth...looking at the horse's mouth".

Mr Speaker: A gift-horse.

Dr Toh Chin Chye: Yes, I beg your pardon. Looking at a gift-horse in the mouth. If there is money to be picked, we do it.

Mr Rajah: Not from my pocket!

Dr Toh Chin Chye: Oh, you will feel it quite soon!

Mr Speaker: Order. Please address the Chair.

Dr Toh Chin Chye: I am quite sure the Member for Farrer Park would be generous enough to contribute to the coffers of government.

Now, let us proceed with this. As I was saying, Mr Speaker, the cinema business is flourishing. That we cannot deny. Much of the development that has been going on in the past few years is visible. You see cinema theatres popping up in all corners of the island, and from that we can conclude that the number of people who are going to the cinemas is increasing. In fact, Sir, I can give you figures to prove this. For example, in 1957 alone, the total number of full-length feature films imported into this country and passed for public exhibition numbered 858. Besides these full-length feature films, there was a total number of 440 shorts. The total footage censored came to 9½ million feet. So the population of Singapore had quite an eyeful of films.

In Singapore, the major source of entertainment is the cinema. Why that is so I do not wish, at this place or at this time, to go into the reasons. But it is a fact that it is the major source of entertainment, and therefore it contributes considerably to the prosperity of all those involved in the cinema industry. Now, in simple words, what I would like to inform the House is this. The reason for this Bill is that, for example, agreements made between the Paramount Films of Malaya Incorporated and the Paramount International Films Incorporated are entered into in the United States of America. It is agreed that the delivery of all negative and master positive prints is to be made in the City of New York, and payments under the agreement are to be made at the office of the Paramount International Films incorporated in New York City in the lawful money of the United States of America.

Now, it is obvious that in drawing up these agreements, action is taken to ensure that the income therefrom cannot be said to be derived anywhere but in the United States of America. That being so, therefore, any profits made from the renting of films to exhibitors in Singapore do not come within the scope of the local Income Tax Ordinance. However, in bringing forward this example, I do not wish to make it appear that the Government is making any discrimination against films of any particular country.

I would like to inform the House that in 1957 alone, there were imported 55 films from the United Kingdom, 323 films from the United States of America, 277 from Hongkong, 125 from India and 78 from other countries. This tax applies equitably to all films irrespective of the country of origin. Being a signatory to G.A.T.T., we are not in a position to offer preferential treatment to films made in the United Kingdom. At the same time, this tax being a new one, we do not conflict with the Ottawa and Geneva agreements on imperial preference.

Sir, in moving this Bill, I wish to point out that it is not our intention to stifle the film industry. But it is also necessary that in the interest of our people we should extract our due from all those who make money in this country.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole Assembly.

Assembly immediately resolved itself into a Committee on the Bill.-[Dr Toh Chin Chye].

Bill considered in Committee.

[Mr Speaker in the Chair]

3.17 p.m.

The Chairman: I intend, for the benefit of hon. Members on the Opposition benches, to go through this Bill as slowly as I can and pause more than usual at the important clauses.

Clauses 1 to 4 inclusive ordered to stand part of the Bill.

Clause 5 -

Mr Rajah rose -

The Chairman: Is it an amendment?

Mr Rajah: No, Sir. On a point of elucidation.

The Chairman: If the hon. Member will indicate the point of elucidation.

Mr Rajah: The point, Mr Speaker, Sir, is clause 5 (2). It seems that the whole point and purpose of this Bill is to bring into the net people who are not liable to income tax, but clause 5 (2) seems to talk about registering persons only if they are liable to income tax.

Dr Toh Chin Chye: Mr Speaker, it must be understood that a renter can also be someone who is resident in Singapore and who, therefore, comes under the Income Tax Ordinance.

Clause 5 ordered to stand part of the Bill.

Clauses 6 to 22 inclusive ordered to stand part of the Bill.

Bill reported without Amendment; read the Third time and passed.