INCOME TAX (AMENDMENT) BILL

Order for Second Reading read.

3.52 p.m.

The Minister for Finance (Dr Goh Keng Swee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The publication of this Bill, both in the Federation and Singapore, has aroused some comment in the Press and elsewhere. No doubt partly because of this, the Federation Government decided to withdraw their Bill at the Second Reading, and this gave rise to hopes that we in Singapore might do likewise. Actually the reason why the Federation Government withdrew the Bill was not that they wavered in their resolve to implement the policies underlying the Bill. It became apparent to both Governments that much of the objections raised against the provisions of the Bill rested on misunderstandings and misconceptions. Accordingly it was agreed between the two Governments that a meeting of their Finance Ministers, with Government Backbenchers and their official advisers could profitably discuss public response to the Bill and how best the provisions of the Bill could be explained and presented to the public. A meeting duly took place in Kuala Lumpur on the 0th of April and agreement was reached on all points. This meeting proved most useful in that it drew attention to many points on which public disquiet had arisen, and the reasons why this came about.

As a result of this meeting, a number of amendments were agreed upon, all of which are of a minor nature, and I will move these amendments at the Committee Stage. But first I wish to discuss some basic considerations. Income tax legislation must be as close as possible in the two territories. And this is no more than a realistic admission of the essential economic unity of the two countries. At all stages of the drafting of the Bill, continuous discussions took place between the two Governments both at official and Ministerial levels. This Bill represents the fruition of the co-operative effort made by the two administrations in tackling a problem common to both. I may, perhaps, be allowed to place on record the keen and detailed personal interest and initiative taken by my Federation opposite number, the Hon. Mr Tan Siew Sin, in the drafting of the Bill now before us. His contribution to our deliberations was a most valuable one, as my colleagues who accompanied me to Kuala Lumpur can testify.

In view of the interest taken by certain sections of the public in this Bill, I consider it necessary, at the Second Reading, to discuss the principles of the Bill in more detail than is perhaps customary in this Assembly. Many professional and trade organisations have written to me expressing their opinion on various clauses of the Bill. This is not the proper place to answer these bodies but there is a common thread running through much of what they have to say and it would not, therefore, be out of place to refer generally to some of these. I shall, of course, be sending detailed replies to these associations in due course.

Let, me now deal with the specific clauses of the Bill. Clause 1 provides that the Bill shall come into operation with effect from the 1st of January, 1960, unless it is otherwise expressly stated. A harmless enough provision. But it has given rise to the charge that this constitutes retrospective legislation.

Now, Sir, restrospective legislation is not unknown in the annals of Income Tax legislation - I have been advised that there are, for instance, section 20 of the U.K. Finance Act, 1922 and section 242 of the U.K. Income Tax Ordinance, the details of which, need not detain us here. But clause 1 of the Bill cannot be cited as an example of retrospective legislation. Tax assessments relate to a year of assessment and to allow amendments to operate as from the date of the passage of the Bill would lead to anomalous assessments during the year. For instance, the Bill introduces a new element, namely, the taxation of incomes derived from certain types of settlements. It would be wrong to tax such incomes during the current year, when the assessments are raised after the passage of the Bill and exempt those assessed before that date.

Clause 2 has not aroused much controversy. It gives the Minister authority to issue to the Comptroller-General or the Comptroller directives of a general character not inconsistent with the provisions of the Ordinance. However, I note, in the Notices of Amendments to Bills in Committee that the clause does not meet with the approval of the Member for Farrer Park. I do not intend to anticipate his objections, and will now move on to clause 3, which regulates the exchange of information between the Tax Administrations of the Federation of Malaya; and Singapore. Again the Member for Farrer Park does not wholly approve the clause as it stands, but we shall doubtless come to that in Committee stage.

In clause 4, we come against what looks like a minor outcry. This clause provides that income from settlement shall be deemed to be the income of the settlor if the beneficiary is a relative of the settlor and if he is unmarried and less than 21 years of age at the commencement of the year of assessment. In simple language, this means that a man cannot reduce his tax liability by, for instance, giving shares in his business to his young children. When you go through the Income Tax files of certain persons, you will be astounded at the number of boys and girls who are nominal partners or shareholders of the businesses of their fathers. In some families, hardly is a baby born before he becomes a registered partner or shareholder.

Well, all this is going to stop and about time too. But this does not prevent some people raising objections to clause 4. Settlements made by parents in favour of their children it is claimed, is a singularly Eastern virtue, inspired both by motives of prudence and love of the family. Why should virtue be discriminated against? Mr Speaker, Sir, I am all in favour of the principle that virtue should be rewarded. In a well ordered society virtue will doubtless bring about its own reward in, for instance, the form of greater happiness. But in the imperfect world we live in, this does not always happen and so some people lead a life of virtue in the hope of a reward in the hereafter. But it is a novel proposition that the reward for virtue should be given by a Minister for Finance here and now, more especially so when its exercise would lead to a diminution of the State Revenues.

It is therefore not possible to agree to the request that income from all forms of settlements to minor relatives be exempted from taxation. Nor is the Government willing to allow exemption in respect of income from irrevocable settlements in favour of minor relatives.

One criticism against clause 4 which I have come across is its allegedly retrospective effect on settlements previously entered into. I cannot see how the, question of retrospective taxation comes in at all since these settlements will be taxed for the first time in 1960. And it would surely be inequitable to tax future settlements and not existing ones.

Clause 5 strengthens the hands of the Comptroller against evaders of income tax. The need for these powers are so apparent that not much need be said other than to state that these powers are perfectly normal ones and are contained in the taxing legislation of most countries of the Commonwealth.

Clause 6 requires all businesses to keep proper records of their transactions. Under the existing legislation a person need not keep any records at all unless the Comptroller specifically directs him to do so. And of course when matters have reached this stage, much damage has already been done. The purpose of the clause is to make tax evasion more difficult to carry out and more easy to detect and punish. No one would object to that.

It is necessary, in the application of this section of the Bill, to frame a proper strategy. It is important that we do not waste time and effort straining after the small fry while allowing the big fish to escape. I have discussed this matter with the Comptroller, especially the application of clause 6 (1) (b). This requires all businesses with gross receipts exceeding $18,000 a year from sales of goods or $12,000 a year from the performance of services to issue serially numbered receipts. The Comptroller under sub-clause (3) has the power to waive this requirement in respect of any person or class of persons. It has been agreed that for the current year of as sessment, the following categories of persons will be exempted from the requirement to issue serially numbered receipts:-

(i) All hawkers unless individually directed by the Comptroller to issue receipts.

(ii) Market and roadside stallholders (not shop-keepers) unless individually directed by the Comptroller to issue receipts.

(iii) Retail traders carrying on businesses in premises for which the rent paid does not exceed $50 per month and not more than three persons assist in carrying on the business.

(iv) All traders whose gross receipts did not exceed $36,000 in the previous year.

(v) Taxi drivers, trishaw-riders and self-employed boatmen plying for passengers in the harbour.

These are extensive exemptions. If any business not covered by the above wishes to obtain exemption from the provisions of sub-clause (1) (b), it may apply to the Comptroller. It may be appropriate for me to say something about Government's policy in this matter. There are two aspects of the question I want to discuss. First there is the general problem of inadequate record keeping and accounting systems of private businesses. The second deals with possible differences in the administration of this part of the income tax law as between Singapore and the Federation.

Now as regards the first problem, it has been a long standing complaint that the taxpayer who discharges in full his tax liability are the salaried employees and the public corporations with modern accounting systems. Other persons, in cluding sole proprietorships and partnerships, are suspected of extensive tax evasion because of the inadequate system of record keeping. If you are paid a salary of $1,000 per month, you can hardly hope to pretend to the Comptroller that you did not earn such an amount. But there is no assurance that receipts from miscellaneous small and medium businesses are properly accounted for.

To ensure proper accounting in this sector of the economy would mean not merely the passage of the necessary law. There are two further requirements. First the machinery of enforcement must be built and geared into action. Next there must be widespread consciousness among the public who buy things that the retailer must be made to observe the law. When the public is aware that tax evasion is a reprehensible crime whose victim is the public itself, then we shall be able more adequately to enforce the law. It will take time and effort to build up public opinion along these lines. This we must and shall do.

Coming to the possible different application of this clause as between the Federation and Singapore, it must be remembered that the scale of personal reliefs in Singapore for the time being is higher than that in the Federation. So long as this is so, the Comptroller in Singapore can be freer in the exercise of his powers of exemption under sub-clause (3). But the position must be kept under continuous review, and in principle it is desirable that in the Bill itself the limits for automatic exemption from the issue of receipts should be kept identical in both territories.

We may now move on to clause 7. This requires an employer to retain for a period of 30 days any moneys owing to an employee who has ceased employ ment with him, unless the Comptroller releases him from this obligation before then. The penalty for infringement is laid down in clause 15. Some employers have expressed the fear that under clause 15, they may be saddled with the tax liability of an employee who disappears as soon as he has received his pay packet. This apprehension is groundless. For if the employer does not hold any money payable to an employee, as would be the case in the instance quoted, he is free from any obligation under clause 7.

Some explanation is due for the extension, provided by clause 8, of the period, during which additional assessments may be raised, from six years to twelve years. It has been found impos sible to dispose of all cases of suspected evasion given the present number of experienced staff. The position is improving but there is a backlog of cases arising from the post-Korean War boom years of 1950-52. It is not easy to obtain convictions for fraud but the proposed amendment will ensure that omissions of income, when discovered, can be included in the assessments for the relevant years and that the tax not lost forever.

Clauses 9 and 10 introduce a radical change in regard to the payment of tax which is the subject of appeal or objection. Section 85 of the Principal Ordinance, which is repealed by clause 9, allows the deferment of payment of disputed tax until the objection or appeal is determined. Clause 10 lays down that the tax must be paid first though the Comptroller may at his discretion allow an extension of time. These new proposals have caused agitation in certain quarters. Fears have been expressed that these clauses now give the Comptroller untrammelled power to ruin a person, if he is so disposed. The critics would hardly be satisfied with the argument that there is no reason to suppose that the Comptroller would be so disposed and would not exercise his powers other than in accordance with accepted principles of tax assessment. The lurking fear remains. Supposing the man, acting in all honesty, makes a mistake?

I propose to defend these clauses on three grounds. First, let us consider how the large majority of disputed assessments arise. Let us stick to real facts and practices and not move into the world of hypothesis and fancy. The great majority of disputes over assessments are those raised in consequence of information obtained on investigation. These reveal an accretion of assets whose sources the taxpayer cannot explain satis. factorily. This, in itself, does not justify a prosecution for fraud. But the possession of these assets is not in dispute and it is in such instances that assessments are raised and almost invariably disputed. The tax therefore is only a part of these assets and it is not possible for the assessee to be made bankrupt solely by virtue of his tax liability unless he has in the meantime squandered his assets by extravagant and possibly profligate dealings.

The second reason why the present system of deferred payments must cease is that it is only too apparent that too many taxpayers are taking advantage of the existing legislation to postpone the day of payment. On the 31st December, 1959, the amount of tax outstanding on objections was no less than $30 millions. If we apply the current rate of interest, this would mean a loss to the revenue on interest alone of nearly $2 millions a year. It is therefore obvious that the present position is utterly scandalous and cannot be allowed to continue.

Finally for those who consider that the new proposals give abnormal powers to the Comptroller, let me say that similar provisions appear in the tax statutes of India, New Zealand, Australia, Cey lon, Canada and Hong Kong. Hong Kong has never acquired the reputation of harshness towards businessmen and when their Income Tax Ordinance closes this particular loophole, we are well advised to do likewise.

The remaining clauses of the Bill are not controversial, except perhaps for clause 14. The objects of all these clauses are described in the explanatory statement to the Bill and I need not therefore dwell upon them except for clause 14, over which a great deal of the apprehension caused appears to be misplaced. Objection is taken to the provision that in certain classes of civil or criminal proceedings, a statement of the Comptroller shall be accepted as a prima facie evi dence so far as it relates to, a statement of fact. From this position, a great leap forward is taken by some of the melodramatic critics to the conclusion that a man is presumed guilty unless he proves himself innocent. Consequently clause 14 stands condemned as a fundamental breach of natural justice.

Mr Speaker, Sir, no one can say that I am a hard-hearted person or that I am insensitive to the principles of natural justice. But I confess I am quite unmoved by these pleas. I suggest that before these persons take off into the realms of fantasy, they may do well to ask themselves in what kind of proceedings this clause would apply. The answer is given in sub-clause (3) (b) which explicitly excludes proceedings for an offence punishable by imprisonment. And this brings us to section 94 of the Principal Ordinance which defines such offences. These consist principally of the failures to make returns in time and failure to pay tax within the prescribed period. These are relatively trivial offences though the number of offenders is large. It is therefore necessary to make provision for the expeditious disposal of such cases. I am advised by my colleague, the Minister for Labour and Law, that the practice of creating a presumption does not run counter to ac cepted legal principles, and there are many instances in legislation both in our country and elsewhere of this.

Mr Speaker, Sir, I wish to conclude my speech with a few general remarks on the course in which I hope this debate will take. The Government is fully aware that the Bill provides for an extension of powers granted to the tax authorities. We are also aware that any extension of power granted to the executives carries with it a certain degree of risk. This is inevitably so in the nature of things.

How are we to assess the degree of risk as against the possible advantages in the way of improved efficiency that will be brought about? There are two possible approaches. The first is to take a purely academic and theoretical approach and to raise one's hands in horror at every conceivable and even inconceivable possibility of abuse of power. I suggest that this approach is fruitless and sterile.

We must judge this issue on the facts as they are as regards the efficiency and competence of our tax administration. In Singapore we have a small and comparatively young income tax department. This department, like all other Government departments, has gone through the stresses of malayanisation. But I think it will be a fair appraisal of the work they are doing to say that they are a technically competent and responsible group.

The Government is working out a scheme whereby officers of the Income Tax Department can have improved terms of conditions of service in order that efficient officers can achieve promotion to the topmost post. This will help further to raise the level of professional competence of officers of the department. Already there are signs of improved efficiency in tax assessments and collections. For instance, in the first four months of the year, the amount of tax collected has been considerably greater than that for the corresponding period of last year.

Taking all matters into consideration, I have no hesitation in coming to the conclusion that the powers which will be granted to the tax administration by this Bill will be used with fairness and responsibility.

The Opposition, of course, is free to say what they like but their remarks will bear greater weight if they would refrain from taking the purely theoretical approach and instead tackle the problem as a practical problem of tax administra tion. If they take this attitude when discussing specific provisions of the Bill, then I have no doubt that the tax administration, in the execution of their work, will bear their views in mind.

Sir, I beg to move.

Question proposed.

4.20 p.m.

Mr Rajah: Mr Speaker, Sir, there can be very little doubt that there is a great deal of tax evasion in Singapore. We on the Opposition side will support the Government in every reasonable measure it takes to bring to book and to heel all those people who are now evading taxation, because for every person who evades taxation, a correspond ingly heavier burden is put on the honest citizen who pays his tax regularly, punctually and to the full amount that he is due to pay under the law. Therefore, all these evaders put a very heavy burden on the honest citizen, and any attempt by the Government to bring these people to book will meet with the support of the Opposition. But in framing proposals to bring these evaders to book, Mr Speaker, Sir, one has always do keep a proper balance between the powers given to officials and undue infringement on the personal liberties of a private citizen. Our system of society is based on that conception of the law and it has worked very well up to now, except, it seems, in so far as income tax goes. Therefore, the Minister has brought in a number of amendments which he hopes will bring to book all these evaders.

Sir, I have on a number of occasions said in this House that the making of a law does not mean that the offender will be brought to book. The most im portant thing is to have an organisation which is capable of spotting the offender, and having spotted him, to bring him to book. I make so bold as to say, Mr Speaker, that if all the existing provisions of the existing Ordinance have been fully availed of by the tax officers, there would not have been this deficit, or this non-payment, of $30 million to the extent that there is now, and many more taxpayers would have been on the roll of taxpayers.

The Finance Minister, I think, in his speech on the Second Reading of the Bill, did concede the point that whatever laws you may have it is the machinery of enforcement that is the import ant thing. Mr Speaker, Sir, even if the powers given to the officers are twice that which the Minister seeks to obtain from this House, but the machinery of enforcement is not there, then not all the powers given to him by this House will enable his bringing on to the tax roll greater numbers of people who should now be on it, thereby resulting in a greater collection of taxes.

At the moment, the taxing office - the Comptroller and his staff - have been given a weapon under the taxing Ordinances. I do not say this in any sense of disparagement, Mr Speaker, Sir, but if they knew how to handle that weapon efficiently, then I think much more could have been done. The gun has been placed in the hands of the taxing departments to bring to book the offending taxpayer and the evader. But it appears that the taxing officials have not yet learnt to use that gun properly. And because they are unable to use it properly and to shoot the tax evader with the first or second or even third shot, they are now asking the Assembly, "Give us a hand grenade. We can spot the thief. We can spot the musang amongst the chickens. We do not know how to use this gun to pick off the musang, but if you will give us a hand grenade, we will throw it in the direction of the musang and we will surely get it."

The Prime Minister: As well as the chickens!

Mr Rajah: But in getting the musang, he has already got all the chickens. Now, that strikes me, Mr Speaker, Sir, as the general intent and purpose of the amendments sought for by the Minister. I have filed a number of amendments and I have also given notice that I will speak on the various clauses. As the Minister himself has on the Second Reading dealt with the Billclause by clause, I think it will be more appropriate for me to speak on these various clauses in the Committee stagerather than now.

4.26 p.m.

Dr Lee Siew Choh (Queenstown): Mr Speaker, Sir, we are glad to note that the Opposition is just as helpful as we are in looking after the machinery of the Income Tax Department. We all know that for a long time the Income Tax Department has been considered fair game for all and sundry who wish to measure wits with the Government officials. Income tax evasion has been the result. Some people have developed this game of tax evasion into a fine art, more often than not with the help of legal and specially trained personnel in accounts, and those who know the workings inside the Income Tax Department. That tax evasion is rampant has been admitted by everybody. Many have indulged in tax evasion unashamedly. They do not consider it a heinous crime to get the better of the Income Tax Department. They have no inhibitions about it with friends and in their in timate circles. It is not uncommon, Sir, for certain tax evaders to get together and discuss amongst themselves ways and means whereby they can match their wits against the probing powers of the Comptroller of Income Tax.

The Member for Farrer Park has just mentioned something about the evader. But what about those who are more circumspect and who go about the business in the so-called legal way? For example, as the Minister has just mentioned, we find the very rich very magnanimously and generously making provisions for the comparatively young and unmarried children and relatives in their so-called settlements. While not questioning their right to provide for dependants, it is quite obvious also that such settlements are cunning devices of the rich to cock a snook at the Income Tax Comptroller. And there is nothing the Income Tax Comptroller can do about it. Then again there are those who, though caught and accordingly assessed, still manage to employ delaying tactics in rather frivolous and systematic appeals to the Board of Review. The huge sum which the Minister says has been held up as a result of all these appeals is simply shocking. One can imagine how the building of schools and hospitals has been held up because of these prolonged tactical appeals. It is not fair for a small number of people to hold up developments which are of benefit to the large majority of the people of Singapore.

We must remember, Sir, that we are now a self governing State. All of us must now bear our fair share in the responsibility of building our economy. It is only right that the responsibility should fall more on the shoulders of those best able to bear it and, as mentioned by the Member for Farrer Park, tax evaders throw an extra burden on the shoulders of the rest of the population. The P.A.P. Government has always the interest of the masses at heart. This Bill, Sir, as has rightly been called in the newspapers and elsewhere, is a war on tax evaders - those, you may say, anti-social elements who deprive the masses of enjoying the maximum benefits that State revenue can bring to the people. This Bill will endeavour to close the net and loopholes against tax evaders. Where loopholes still exist, it will become increasingly difficult and hazardous for tax evaders in view of the increased penalties. This Bill is not meant to harass the taxpayers as has been suggested by some quarters. In fact, far from harassing the taxpayers, this Bill will protect the honest taxpayers. It allows the Comptroller an opportunity to separate the black sheep that have so far besmirched the good name of honest taxpayers.

This Bill deserves the support of all who have the welfare of the people of Singapore at heart.

4.32 p.m.

Mr Thio Chan Bee (Tanglin): Mr Speaker, Sir, we on the Opposition side are in favour of any fair and just measure to prevent tax evasion, but we feel that in the case of an important and controversial amending Bill like this one, it would be better if it were to be referred to a Select Committee to enable interested bodies and individuals to make proper representations and to appear before the Select Committee.

I know, Sir, that it is now too late for a Select Committee to be appointed, but if one were to be appointed, it would remove from the minds of the many would be representors that they are treated unfairly. After all, Sir, this country lives on trade and if traders feel that they have been treated unfairly -

The Prime Minister: Then they will not make profits

Mr Thio Chan Bee: - then they may go over to other places like the Federation.

Sir, in the interest of the working people and the unemployed, may I suggest that, where possible, controversial Bills be referred to Select Committees instead of their being rushed through all stages?

The Prime Minister: Sir, I was happy to know that the Member for Tanglin was unable to castigate the Bill publicly. He felt that had representors been allowed an opportunity to do so in the quiet precincts of a Select Committee, they would undoubtedly have felt more satisfied after having been heard out.

Everybody in this Chamber who represents the people of Singapore subscribes to the principle that tax evasion is morally wrong. Everybody knows that professional accountants, income tax consultants and legal advisors all start off on the major premise that it is fair game to beat the income tax man. We have inherited the British tradition that if you are able, either by your wit or your ingenuity, to go round the fiscal laws, then good luck to you. I am glad to see that the Member for Farrer Park is consciously suppressing his more natural attitude to tax evasion and to those who help tax evaders in a legally, orderly and effective manner.

There is only one argument which would move us. If the Opposition can show that any of these laws would result in a man being taxed for what he has not got, then we, as the Government, would be the first to make sure that not only is he not taxed, but that if in the unfortunate event he has been made to pay for something he has never earned, then it will be refunded to him. But all this raising of hands for the poor, good, honest taxpayer as distinct from the tax evader is a lot of hypocrisy if, having subscribed to the major premise that tax evasion should be stopped, we then come round, by devious arguments, to the pro position of allowing it within certain limited ranges.

I strongly support what the Minister for Finance has said, that if other countries like Hongkong, more renowned for their kindness and softness of heart to industrialists and merchants, have found it necessary to deal with them not so much with handgrenades as with dumdum bullets, then I say by all means let us give our Income Tax Department the dum-dum bullets. Sir, in other parts of the world, there is the idea of maintaining two or three sets of accounts - one is for the income tax man, the second is for your partner, and the third is for yourself and your family. Where you do not have such practices, it might well be that you do not require bullets that will pierce through bullet-proof vests. But where you meet taxpayers who are also tax evaders, then it is not only the number of people who are not paying taxes, but also the number of people who are not paying proper taxes who are involved. Where they have got this armour plating, I say that we, as good legislators had better ensure that in the interest of the people our tax collectors have got the necessary instruments of extraction.

Mr S. Ramaswamy (Bukit Merah): Mr Speaker, Sir, I am glad to know that the Opposition are with us in realising that tax evaders should not be let free, but I do not understand why they object to these powers being given to the Income Tax Department.

I wish to deal with a few of the devices of the tax evaders and how the Government is planning to put a stop to them. The Member for Tanglin has said that this Bill should be referred to a Select Committee. What is there in this Bill for a Select Committee to consider when everybody is agreed that tax evasion should be eradicated? There is nothing controversial about the question of settlement. Mr Speaker, Sir, there have been references to the natural instinct to provide for one's family, and suggestions that the proposal to ignore settlements would appear to deny a person's right to spread out the incidence of tax by the disposition of his own property. The natural instinct of a person to provide for his family does not primarily involve the creation of a settlement. In the case of the poorer classes, the lack of assets normally precludes the creation of settlements and, therefore, parents provide for their families in the form of food, clothing and accommodation. It is usually only where the crea tion of settlements results in considerable savings of tax that action is taken by taxpayers to provide for their children and others. It cannot be conceded that to prevent the rich from relieving themselves of tax evasion by these means is a harsh measure. It must be emphasised that the tax in this case is not retrospective. To permit these persons, prior to the passing of this legisla tion, to be relieved of their obligation and only tax those who were not smart in the past would not be just and equitable. You can find similar legislation in other parts of the world - India, the United Kingdom, New Zealand, Australia, Canada and Palestine.

Then comes the payment of tax despite objections and appeals. First of all, Mr Speaker, Sir, I would like to point out to Members of the Opposition that countries like India, Hong Kong, New Zealand, Australia, Ceylon and Canada have similar legislation. S.P.A. members and local capitalists have often pointed out to us that Hong Kong is an example for setting up conditions favourable for investment. Hong Kong has this legislation and this provision for the payment of tax despite objections and appeals. Why should we not have it too? In India, they have had it for the last two decades, or even for a longer period than that. Ceylon has the same legislation. Nobody will deny that a large number of taxpayers delay payments merely by lodging appeals. It can be argued the Comptroller has power to apply to the Income Tax Board for an order for payment of security towards the tax assessed, and if the Board of Appeal finds that the appeal is vexatious or frivolous, it can order the appellant to pay $250 only. What is this $250 compared to the thousands of dollars which are due to the Income Tax Department? I was once told - I do believe it - that the interest earned by an appellant during the period it took to hear the appeal was enough to cover his lawyer's expenses and other incidentals, and he had a surplus. Therefore, payment of tax before the appeal, i.e. despite the appeal, should be enforced. I would like to point out, Mr Speaker, Sir, that we are not making a precedent, and it is time now that we follow other countries.

There is the suggestion that the taxpayer may be made bankrupt by the Income Tax Department enforcing this provision. It is most unlikely, Sir, that any Court will adjudicate a taxpayer bankrupt where it is not financially possible for him to pay his tax. The tax authorities will think twice or thrice before they begin to waste money to recover an irrecoverable debt. The fact that the taxpayer possesses a lot of wealth should have been the reason why action is taken and the taxpayer then disposes of all his wealth and says that it is a hardship on him to pay the tax. Therefore, Mr Speaker, Sir, I would say that these powers are quite necessary for the Tax Department.

4.47 p.m.

Inche Baharaddin Bin Mohd. Ariff (Anson): (In Malay): Mr Speaker, Sir, I believe Opposition Members on the other side understand the reasons why we are determined to bring in these tax evaders. It should be noted that the P.A.P. Government will not impose a heavy burden on the people. But, Mr Speaker, Sir, to save people from having to shoulder more responsibilities, we are trying to get hold of those tax evaders. One of the best methods to achieve this is by amending many of the provisions of the old Income Tax Ordinance. We find that this is the consensus of opinion not only in Singapore but also in the Federation of Malaya.

Last month, a meeting was held between the representatives of the Governments of Singapore and the Federation of Malaya, and as has been stated by the Minister for Finance, both the Ministers for Finance of Singapore and the Fede ration were present at this meeting. Those who are responsible people and who go thoroughly and carefully through the amendments, will say that the amendments proposed are good indeed. But to those who are irresponsible, Mr Speaker, Sir, people who object for the sake of objecting, as has been expressed by the Member for Farrer Park, naturally the amendments will not be good. Mr Speaker, this matter should be considered in this light, that we should not impose a further taxation burden on those people who are already paying their tax properly. But it is appropriate to catch those who are tax evaders. At the meeting referred to, Mr Speaker, there were many clauses in this amending Bill which did not meet the approval of members of the Federation Government. But in view of the fact that many development pro- grammes have been announced by the Federation Government and that we in Singapore have also similar projects, both Governments agreed to work in close collaboration with each other and approve these amendments.

One of the amendments concerns investigation into the books. In the Federation, this clause has been deleted, but we have reached agreement with the Federation Government on many other amendments. I think the Opposition side should be careful when they criticise and oppose the clauses which will be discussed at the Committee stage later on.

Dr Goh Keng Swee: Mr Speaker, Sir, I spent quite a lot of time yesterday preparing for this debate, but after having heard what the Opposition has had to say, I am wondering whether or not I have not wasted all this time.

Sir, the Opposition Members say that they are completely in agreement with the Government that tax evasion is a very bad thing. But when we propose that something should be done about it, they say, "Better not! The present position regarding powers is good enough. Before we do anything rash, let us refer this matter to a Select Committee." Mr Speaker, Sir, that is not the way the P.A.P. Government look at things. If we think that the position is bad and needs remedying, we get down to the job of remedying it.

In winding up the debate, I am not required to say a great deal, simply because there is not much for me to refute other than one point, perhaps two points, raised by the Member for Farrer Park. He said that if only the present powers available to the Comptroller were used, the tax of $30 million which I mentioned in my speech could easily be collected. I am astonished that, as a lawyer, the Member for Farrer Park could come to this conclusion. Section 85 of the principal Ordinance lays down quite definitely that the taxpayer need not pay any tax under dispute until the dispute is settled either before a Board of Review or a Court of Appeal. So this huge amount of tax is just being held back from Government by persons who use section 85. to deny to Government, for some time at least, the payment of tax due to the Government.

The Member for Farrer Park has also said that he considers that if administration were to be improved, the existing powers are quite adequate. I have already cited one case where the existing powers are quite inadequate. But he on his side has not given any details to support his proposition. I therefore remain firm in my conviction, Mr Speaker, Sir, that the powers requested in the Bill are both reasonable and necessary.

Question put, and agreed to.

Bill accordingly read a Second time.

Mr Speaker: Is it a convenient time to suspend?

Dr Goh Keng Swee: Yes.

Mr Speaker: I will take this Chair again at half-past five.

Sitting accordingly suspended at 4.58 p.m. until 5.30 p.m. Sitting resumed at 5.30 p.m.