INCOME TAX (AMENDMENT) BILL

[Mr SPEAKER in the Chair]

Bill committed to a Committee of the whole Assembly.

Assembly immediately resolved itself into a Committee on the Bill.-[Dr Goh Keng Swee].

Bill considered in Committee.

[Mr SPEAKER in the Chair]

5.32 p.m.

Clause 1 ordered to stand part of the Bill.

Clause 2-

The Chairman: There is an amendment standing in the name of the Minister for Finance which I think is consequential on the new clause. It might be more convenient to deal with that amendment under the provisions of Standing Order 71, paragraph 11, which reads:

"After all clauses and schedules have been gone through, any Member may, with the leave of the Chairman, move an amendment to a clause or schedule already passed, provided that the amendment is made necessary by an amendment made to any other clause or schedule."

Is that agreeable?

Hon. Members indicated assent.

The Chairman: We will do that then.

Question proposed, "That clause 2 stand part of the Bill."

Mr Rajah: Mr Speaker, Sir, as the clause reads, it appears that the intention is to give the Minister this power:

"The Minister may from time to time give the Comptroller-General or Comptroller directions of a general character, and not inconsistent with the provisions of this Ordinance, as to the exercise of the powers and discretions conferred on the Comptroller-General ... ".

Mr Speaker, Sir, I am going to suggest to the Minister that this power is not only not necessary but it would also lead to conflict with certain provisions of the law. I refer now to section 7 of the Income Tax Ordinance. Section 7 reads as follows:

"The Malayan Board of Income Tax may from time to time make rules-"

with regard to a number of matters - (a), (b), (c) and

"(d) generally to give effect to the provisions, other than the provisions of section 49 and of Part XII of this Ordinance."

Section 49 of the Ordinance is a section dealing with double taxation provisions, and Part XII of the Ordinance deals with the procedure on appeals from the assessments of the Comptroller. So that section 7 (1) (d) seems, to my mind, the same as the purported new section 3A:

"The Minister may from time to time give the Comptroller-General or Comptroller directions of a general character, and not inconsistent with the provisions of this Ordinance, as to the exercise of the powers and discretions conferred on the Comptroller-General...".

As the Minister himself has said, it is of vital importance in the administration of the income tax laws of Singapore that we should be on all fours, or nearly on all fours, with the Federation as far as possible. Now it was with that intent and purpose that the Malayan Board of Income Tax was brought into existence under the provisions of the Income Tax Ordinance. The composition of the Malayan Board of Income Tax is such that it has representation both from the Federation of Malaya and from the State of Singapore. And the intention was that it would be the Board which would make various decisions on the day-to-day administration that would arise from implementing the Income Tax Ordinance. Because of the necessity that the implementation and administration should be similar in both the territories, it therefore became necessary for one body to give directions to both the Comptrollers as to how they were to administer the Ordinance. I take it, Mr Speaker, Sir, that that was the intention and purpose of creating a Malayan Board of Income Tax on which there were representations both from Singapore and the Federation of Malaya. If this section 3A passes into law, there will, in effect, be three persons who will give directions to the Comptroller as to how the provisions of this Ordinance are to be administered. Whether the Minister can over-ride the rules of the Malayan Board of Income Tax or vice versa, it is not for me at this juncture to state. It would tend to create not only confusion, Mr Speaker, Sir, but it would also tend to create a state of affairs where the Minister in Singapore might give directions to the Comptroller here that a certain provision of the Ordinance should be administered in a certain way, and the Minister in the Federation, in respect of the same section, might give different administrative directions to his Comptroller which would result in different administrations of one particular section. If sec tion 3A passes into law, the Minister here would have power to give directions of a general character and not directions which he could give to the Comptroller with regard to a particular assessment. Therefore, why it is necessary to pass this particular section 3A, Mr Speaker, Sir, I am at a loss to understand. I think section 7 of the exist ing Ordinance provides for it, and there is no need to bring in the new section 3A. If it is brought in, not only will it create confusion in Singapore but I think it will also lead to disparity in administration of the two Ordinances both here and in the Federation. It is vitally important that not only should the income tax laws in the Federation and here be the same, but that the implementation and administration of the laws should also proceed on similar lines. I think section 7 of the Ordinance should prevail rather than the intended new section 3A.

Mr Byrne: Mr Speaker, Sir, I think the Member for Farrer Park has not paid sufficient attention to the actual wording of this new section. I will find that it is specifically stated there that though the Minister may give the Comptroller-General directions of a general character, the directions which he gives must not be inconsistent with the provisons of this Ordinance. If he gives any specific instruction to the Comptroller-General which is inconsistent with the procedures which have been laid down with the approval of the Malayan Board of Income Tax, then he would be contravening the provisions of this Ordinance. That is not the intention. Now, all Ministers have departmental duties to discharge. As political heads, it will be necessary for them to see that the law is administered, and they can give, say, general directions to their departmental heads as to the way in which they want the work of the department to be carried out. That, I suggest, Mr Speaker, Sir, is not in any way in conflict with the rules which are laid down by the Malayan Board of Income Tax. That is all that the new section seeks to do.

Mr Rajah: Mr Speaker, Sir, I appreciate what the Minister for Labour and Law has said, that the Minister for Finance can only give directions of a general character not inconsistent with the provisions of this Ordinance. But the purported new section, Mr Speaker, Sir, does not say "not inconsistent with the provisions of this Ordinance or any rules made there under". It does not say that, to begin with. In any case, section 7 (1) (d) of the Ordinance gives exactly the same powers to the Malayan Board of Income Tax. They can give effect to the provisions, other than the provisions of section 49 and of Part XII, of this Ordinance by framing rules and laying them before the Assembly, and on the Assembly passing them, they will have the effect of law. Whereas here, the Minister, merely by an administrative note to the Comptroller, could ask him to do a lot of things under the Ordinance not inconsistent with the provisions of this Ordinance. My question to the Minister is this. If the new section 3A is intended to increase the efficiency of the Income Tax Department, and also to see that tax evasion is brought to heel, then all these powers are adequately contained in section 7 of the Ordinance. Now if it took the matter any further and gave the Comptroller added powers to do it, then I would agree. But it does not do any more than what is already contained in section 7 (1) (d).

I have noticed, Mr Speaker, Sir, that for the last two or three years the Malayan Board of Income Tax has been by-passed on every possible occasion. Matters which could have been referred to it have not been referred to it by Ministers both here and in the Federation. By getting together over the table, they have decided how the law should be administered, so far as income tax is concerned, and what the amendments should be. Previously the position was that any matter affecting the administration of income tax law - amendments or any other matters pertinent to income tax - was always referred to the Malayan Board of Income Tax for their advice and their views.

5.45 p.m.

I have a feeling, Mr Speaker, Sir, that if this new section 3A is passed into law, we might as well write off section 7 from the Income Tax Ordinance, that in future the Malayan Board of Income Tax will cease to have any meaning whatsoever under this Ordinance, and that the only thing it can do is probably to give ex- emptions to charities. So far as section 7 is concerned, it will be absolutely hamstrung and the only persons who would matter then in the administration of the Ordinance would be the Minister here and the Minister in the Federation. If it is the intention of the Minister here and the Minister in the Federation that section 7 should be wiped out, then they are correct in advocating this new clause. But they have not said so. So long as section 7 remains on the statute book, it seems to, me that there is absolutely no need for a new section 3A.

Dr Goh Keng Swee: Mr Speaker, Sir, when we took office we found the Malayan Board of Income Taxis, as the Member for Farrer Park has stated, in a somewhat peculiar position in that their functions, which were originally thought appropriate to them, had not in recent years been considered part of their normal functions. This may have a long and complicated history, the details of which I am not aware, but it may be that the Board itself already performed much of the important matters, such as laying down procedures and forms for the effective discharge of administration of the Income Tax Ordinance, and that the other matters requiring decision at higher levels could be discharged quite effectively at ministerial level. The Member for Farrer Park said that if you had one pan-Malayan co-ordinating body which is in a position to give directives to the two administrations, then why is this new section 3A necessary? This section is necessary because it will not be possible to send matters of temporary importance for the consideration of the Board. May I give an example? I have already mentioned in my speech during the Second Reading of this Bill that, in order to combat effectively tax evasion, it is necessary to make the public more conscious of the effect of tax evasion upon themselves. This is a matter in which the political leadership rather than the administration must provide the leadership and initiative. At the same time, when we are organising a campaign against income tax evasion, it is necessary to co-ordinate the campaign with the policy of the Income Tax Department. Clearly, this is not a function which could be referred to the Malayan Board of Income Tax, because it deals with a situation which is changing very rapidly from month to month, perhaps from week to week.

Secondly, although the general laws relating to income tax and even specific rules made under the Ordinance should be uniform in the two territories, it does not mean that the implementation should be identical. I have already referred to the fact that the higher rates of personal relief in Singapore would mean that in the application of the powers of exemption under clause 6 of this Bill, the Comptroller in Singapore would have much greater freedom to grant exemptions.

Finally, as my colleague, the Minister for Labour and Law, has pointed out, these directives are of a general character and they should not be inconsistent with the provisions of the Ordinance. I can see no objection whatsoever to the clause as it stands.

Mr Rajah: Mr Speaker, Sir, in replying the Minister made the point that clause 2 is necessary as part of the campaign to get more tax and to make the public more conscious that Mr A is evading tax, and that he should not be assisted in the evasion because, by that, the law-abiding citizen - the man who does his duty to the State - is being made to pay for Mr A who is evading it. That is not something which any legislation can take care of and certainly this particular income tax legislation does not even seek to do it. No legislation can do it. You may remember, Mr Speaker, Sir, the very interesting debates we have had about how Ministries should have their roots in the masses of the people and why it was necessary to have Political Secretaries. To bring home to the public the policies of a particular Ministry or a department, it was necessary to have a Political Secretary. Well, a job like this, I suggest with respect to the Minister, is something which his Political Secretary might adequately do. Who can say that he will not be able to accomplish it thoroughly? But for a Minister to seek to take on to himself a job which can be done more efficiently and more adequately by his Political Secretary - I do not think I can take this any further, Sir, except to say this, that the effect of the new section 3A - I am prophesying this - will be to kill the usefulness of the Malayan Board of Income Tax, except in two aspects : these are two separate functions where they are called upon to exempt certain charities or pronounce on certain institutions regarding whether any contribution to those societies would be exempted from income tax. Except in regard to those two matters, the Malayan Board of Income Tax will cease to have any useful purpose. If it is the intention of both the Gov ernments to lay to rest the Malayan Board of Income Tax, no appropriate section other than the present one can be framed.

Mr Byrne: Mr Speaker, Sir, we on this side of the House are very accustomed to the prophecies of the people who are members of the Singapore People's Alliance. During the election campaign, while perambulating around the Mountbatten area, I remember I used to hear the Member for Mountbatten screeching and begging all women of Singapore -

The Chairman: Order. I was wondering how all this "perambulating around Mountbatten" is relevant to the clause we are debating.

Mr Byrne: Mr Speaker, Sir, the Member for Farrer Park was indulging in prophecies. It is my duty to show thatall these prophecies come from false prophets, in the sense that I have heard this myself - that the Member for Mountbatten used to screech and tell all the women of Singapore, "For God's sake, think wisely before you vote. The moment the P.A.P. is returned, you will all lose your jewellery." We have seen her here, Mr Speaker, Sir, every time -

The Chairman: Order. I cannot see how that statement is, in fact, relevant to this particular clause. I do not know whether the Minister is now thinking of laying his hands on jewellery. I cannot see how relevant that is to this clause. I think, perhaps, if there have to be prophecies, they should be prophecies which are relevant to the clause.

Mr Byrne: Mr Speaker, Sir, there is one point only that I want to deal with. I think the Member for Farrer Park suggested just now that if it was written into the law that the Minister may not give directions which are inconsistent with the rules that are made under this Ordinance, then he would be satisfied. Mr Speaker, Sir, the Member for Farrer Park has been a lawyer for very many years, and he knows that anything which is inconsistent with the provisions of an Ordinance, even if it is the rules made under an Ordinance which are at variance with the Ordinance, is ultra vires. So that it will not be competent for the Minister under the provisions of this clause to make any directions which are in any way inconsistent with any rules made by the Malayan Board of Income Tax, because if he gives directions which are at variance with the rules made by the Malayan Board of Income Tax, then that would be inconsistent with the provisions of the Ordinance itself, Sir, and the Member for Farrer Park very well knows that that is the legal position.

Question put, and agreed to.

Clause 2 ordered to stand part of the Bill.

Clause 3-

Mr Rajah: Mr Speaker, Sir, I beg to move,

In page 2, line 22, to leave out "or on his behalf".

Mr Speaker, Sir, the purpose of this amendment is to bring out features in this particular new section with which I do not agree. With the new subsection (8), Mr Speaker, Sir, I have no quarrel. But with regard to the new subsection (9) , what it seeks to do is to give the Comptroller this power:

". . . the Comptroller may produce or cause to be produced in any Court, in any proceedings relating to income tax, a copy of any particulars...".

Mark the phrase, Mr Speaker -

"... a copy of any particulars contained in any document or return transmitted to him by the Comptroller of Income Tax, Federation of Malaya, under the provisions of any law in force in the Federation corresponding to the provisions of subsection (8) of this section, certified by the Comptroller or on his behalf to be a correct copy of such particulars:".

I take it that there will be corresponding legislation in the Federation. If as a result of a request made by the Comptroller here to the Comptroller in the Federation, a letter is sent to the Comptroller in Singapore setting out certain particulars in the body of the letter, and if it is necessary for those particulars to be produced in Court, then all that would be necessary for the Comptroller to do would be to extract the particulars, type them on a piece of paper and produce them in Court as evidence, and the Court has to accept them without question, except under the provison where it says:

"(a) the Comptroller may produce or cause to be produced the original of any such document or return in any case when it is necessary to prove the handwriting or the signature of the person who wrote, made, signed or furnished such return or document, but only for the purpose of such proof;".

So that if the Court insists on knowing whether it was the Comptroller who signed it, then that letter or document will be produced only for the purpose of proving that it was signed by the Comptroller. So far as the copy of the particulars is concerned, Mr Speaker, Sir, it is quite clear - at least to my mind - from this section that nobody can inspect the original document which was received by the Comptroller in Singapore with a view to checking whether the typewritten copy produced in Court is the same as the particulars set out in the original document. That is as I read it. If my reading of that section is incorrect, Mr Speaker, Sir, I shall be glad to hear of it. But I cannot understand why the Comptroller cannot produce the original document in Court. It is not a State secret. It is something dealing with an individual taxpayer who has perhaps been evading tax. The Comptroller in the Federation has given the Comptroller in Singapore certain information. On that information certain Court proceedings ensue. Why all this secrecy? Why cannot that document be produced in Court? That is all I ask. Why go to this subterfuge and say, "You shall, only produce the original document to prove the signature, but not the contents. Also you cannot inspect the contents and you will have to be satisfied with a copy of the particulars produced by the Comptroller's Department purporting to be a copy." And on such a serious matter as this, apparently it could be certified by the Comptroller "or on his behalf". The matter is so important in this case that if you must have a copy, then at least I think only the Comptroller should be allowed to sign it and not by someone "on his behalf". If for some reason or other - perhaps the Minister might tell us - it becomes necessary to do this, then I suggest that this should be exercised very carefully, and the only person who should be allowed to certify it should be the Comptroller himself and not anybody on his behalf, because I think it would not be right that in an important matter such as this some officer in his Department should certify it as correct when it might not be correct.

Sir, I would be glad for some information as to the necessity for this new section to be drafted, whereas in the normal course, under the Evidence Ordinance, the production of the original document would be obligatory.

Dr Goh Keng Swee: Mr Speaker, Sir, not being a lawyer, I am not fully conversant with the details of thee law of evidence, but it seems to me that the Member for Farrer Park used rather strong language when he referred to the provisions of this section as amounting to subterfuge. Surely in these matters where documentary evidence has to be produced in Court the officials responsible can be relied upon to act with integrity. There are probably very strong reasons why the originals could not be produced in Court. Let us not forget that the two administrations are separate in the sense that they are run by Governments with separate political identities, and it will therefore be a very serious departure from normal practice for a department of one Government to send the original returns and documents belonging strictly to itself. This section tries to bring about a better degree of co-ordination between the two Governments in the two territories in regard to proceedings in Court and I am quite satisfied that the provisions go as far as possible under the existing circumstances.

Mr Byrne: Mr Speaker, Sir, may I add to what my friend and colleague has said by drawing the attention of the Member for Farrer Park to the Evidence Ordinance which he knows quite well? All official secrets are protected from disclosure in the Courts and the permission of the Head of State has to be obtained before any of that official in formation can be disclosed in a court of law. The Member for Farrer Park knows very well that provision of the Evidence Ordinance. This particular section refers to official information that is passing from one Comptroller to another about, say, tax evasion and all that sort of thing. Under these provisions, the original document can only be produced when there is a doubt as to the authenticity of that document, that is, when there is a question as to whether that document is a bona fide document, and it is necessary to establish the source of that document. The question of handwriting arises and that is why such a document can be produced in Court when it is necessary to prove "the handwriting or the signature of the person who wrote, made, signed or furnished such return or document, but only for the purpose of such proof". The contents of that document are protected from disclosure and it would be within the discretion of the Comptroller to certify what particulars may be disclosed. It is not necessary for him to certify that himself. He could leave it also to an official to do so on his behalf. That is all that the section says. I can see no difficulty in that, Mr Speaker, Sir.

Mr Rajah: With great respect to the Minister for Labour and Law, I do not agree with him. I am suggesting to him that it is necessary for the Government to frame this section as it has been framed, because of the simple reason that by virtue of the provisions of the Evidence Ordinance such a thing could not have happened. Because if it is an official secret, if it is a document cov ered by the Official Secrets Ordinance, then, of course, it will be covered by it and it need not be produced. This section, Mr Speaker, Sir, has been framed in order to give protection to the Comptroller where he does not otherwise have protection under the existing law. That is why this section is necessary. Now to say that there is already protection for such a document, and then to suggest that the new section makes doubly sure of that, we are providing this section to my mind, if I may say so, that is absurd. This section is intended to perform a specific function. Without this section, the original document would become producible in Court and no body could then have said, "I heard from the Comptroller in the Federation that such and such is the position." That would be hearsay evidence and that would not be admissible in Court. What this section seeks to do is to get over the hearsay rule by saying that the production of a copy shall be admissible in Court. If it is a document relevant to an official secret, it is already protected under the existing law, and this section is not necessary. This section only becomes necessary because the particular document sought to be put before the Court has not got the protection of the Official Secrets Ordinance. That is why this is necessary.

The Minister for Finance says, "Because it is a Federation Government letter - perhaps because of some protocol or something like that - that document is prevented from being produced in Court." Mr Speaker, Sir, I am not an expert on those matters. I am only a poor humble lawyer and I only know what is evidence in Court and what is not evidence in Court. When a man is being charged in Court, I only know that the best evidence should be pro duced against him when it is available. The document is available and if a person who is being charged by virtue of the information contained in that evidence might be able to refute the charge, then it is only fair that that document should be produced in Court. Mr Speaker, Sir, even if the Government say that it is because of protocol or for some reason or other which they have not yet explained that such a document cannot be produced in Court, and only a copy of the particulars contained in the document can be produced, they have yet to answer my question: why is it necessary for a mere official in the De- partment to sign on behalf of the Comptroller? Why cannot the Comptroller sign it himself? I dare say, Sir, that not more than three or four cases would go to a Court in one year on a particular document like this. Not only must justice be done, but it must also be seen to be done. In a case like this where the State is departing from the normal accepted code of evidence, I think the Government should try to see that all loose ends are properly tied up and that there is no possibility of any sort of error. What I am seeking by this amendment is to give this power of certification only to the Comptroller and not to anybody else. Is that too much to ask?

Mr Byrne: Mr Speaker, Sir, it is a pity that we have got to waste such a lot of time.

The Member for Farrer Park knows the Evidence Ordinance and it is there laid down very clearly that all official documents relating to affairs of State are prohibited from disclosure. Disclosure can be made only when the permission of the Head of State is sought and obtained. That is the general principle. The hon. Member knows very well that these are official documents passing between the Federation Comptroller and the Singapore Comptroller relating to a man's taxation. In these documents, there would be a lot of official and secret information, and in proceedings against any person for tax evasion, only particulars which are relevant should be disclosed. The Ordinance provides for that disclosure. Only relevant particulars which are certified by the Comptroller may be disclosed. There might be circumstances when the Comptroller cannot certify this himself. He may be away. The matter is an urgent one and the Court wants the production of the document. The relevant particulars will be certified by an official on behalf of the Comptroller. That is all that the section provides for. The Member for Farrer Park should look at proviso (b). It clearly says:

"the Comptroller shall not in any case be compelled to produce in any court either the original of such document or return or a copy of any particulars contained in such document or return." What the Comptroller does is to provide a certified copy of the relevant particulars. The Court itself will have a look at the document. When it is a question as to whether that document really comes from the source to which it is attributed, then only may the original be produced. This is in conformity with old established and well-known legal principles. We are not in any way departing from those well-known and established principles in the drafting of this particular section.

Mr Rajah: I think the Minister for Labour and Law has not understood me. I am not challenging what he has said. What I have done is this. I have addressed my arguments to this House under two heads. It is difficult to understand why the original document cannot be produced. If it cannot be produced for some very good reason which the Government may advance, then please tell the House why the Comptroller himself cannot certify as correct the copy to be produced in Court.

Sir, it may well be that, on the first point, they have answered that for reasons of protocol or some other reason, the Federation Government might object to its Comptroller's letter being produced in our Courts. All right, I will accept that argument. But what is the reply to my second question which I put to the Government, that is, why is it necessary for the letter to be certified on his behalf? Why cannot the Comptroller do it himself or his deputy?

6.15 p.m.

Dr Goh Keng Swee: Mr Speaker, Sir, when two lawyers enter into an argument about the law, the layman joins in at his own peril.

The Member for Farrer Park asked two straight questions. First, why cannot the original documents be produced? I have explained at great length that these are documents belonging to two separate Governments. It is quite different if, say, someone in England were charged in the City of Manchester for tax evasion. The files then are in the Inland Revenue Department in London. It is a simple matter for the original documents to be transmitted. But here there are two separate Governments, two separate political entities, and therefore it cannot be assured that in every instance the administration in one territory is willing to part with the original documents which are most valuable records in its Income Tax Department. That answers the first point.

As regards his second point - why the Comptroller cannot certify these copies - my answer is there is no reason why he should not. There is nothing in this Ordinance to say that the Comptroller must not certify the correct copy. In the detailed work of administration, surely some discretion must be left to the Comptroller - whether he thinks the case or the documents are important enough to warrant his own signature or whether he can leave it to his Deputy or his assistants. I have a feeling that in regard to the second issue, the Member for Farrer Park is not really raising any matter of profound importance.

Mr Rajah: Sir, with due respect to the Minister for Finance, I really think I am raising an issue of fundamental importance in the administration of justice, as I see it. I accept the Minister's statement, Sir, that because of State reasons the original documents cannot be produced. For the purposes of my argument, I accept that. But the law, as it is framed here means this: that if that particular document contains certain particulars relevant in the prosecution of a tax evader, then all that need be done is for those particulars to be copied on to another sheet of paper and certified by the Comptroller or somebody on his behalf. Now, nobody on the side of the evading taxpayer has an opportunity to compare whether the particulars set out on the copy are correct; whether the particulars are set out word for word; or whether there has been any mistake. Nobody has the opportunity to do that. Under normal conditions a defendant or an accused person has the opportunity of inspecting the original and comparing it with the copy to see that the copy is correct. In this particular instance, he has not got the opportunity. All I am asking the Minister is this: since the matter is of such fundamental importance to the taxpayer, the person who certifies it as correct must be a very high official, or the highest official in the Department, i.e. the Comptroller himself. Because the Comptroller will see that the copy which goes out under his hand has been compared by him and he will himself certify it as correct. Whereas under the new subsection as it now stands, if anybody certifies the copy for and on behalf of the Comptroller, "XYZ (Signature illegible)", apparently it is admissible in Court. That is not my idea of justice.

Mr Ramaswamy: Mr Speaker, Sir, I do not understand what we are quarreling about. The definition of "Comptroller" in the Income Tax Ordinance says:

'"Comptroller" means the Comptroller appointed under section 5 of this Ordinance and includes, for all purposes of this Ordinance except the exercise of the powers conferred uponthe Comptroller by sections 95, 96 and 99 of this Ordinance, a Senior Assistant Comptroller or an Assistant Comptroller so appointed;".

Therefore, it means that the Comptroller, or any Senior Assistant Comptroller or Assistant Comptroller on his behalf, can sign and certify the documents.

Mr Byrne: Mr Speaker, Sir, does the Member for Farrer Park seriously say here in this Assembly that we are doing something foolish in allowing a discretion to the Comptroller to nominate officers to certify documents on his behalf? Does he seriously say that the Comptroller would allow a peon in his Department to certify such particulars? Is he seriously saying all that? Surely the Comptroller is given discretion in this matter. There must be somebody to certify these documents when the Comptroller himself may not be here. He may be away and there might be a real occasion when the document must be produced to the Court, and there must be somebody to certify that those particulars are a true and correct copy of the original document. Now, it would be a responsible official who will so certify. He would have to look at the original document. He would have to look at the typewritten document. He would have to compare both documents, word for word. And only when he is satisfied that it is a correct copy of the particulars will he then certify. That is how the business of Government is carried on. I have not yet heard of, say, a Head of Department leaving it to his peon to certify such particulars - the whole contention is absurd, Mr Speaker, Sir!

Mr Rajah: I am glad that the Minister for Law says that the administration of a Department should not be carried on in the silly manner which he suggests. I might also say to him, with equal respect, that the laws of a country should not also be framed in such a way as to, lead to fantastic results. What I am saying is that the law, as it is framed here, might easily lead to that, and yet be lawful.

Now, I am obliged to the Member for Redhill [sic] for drawing the attention of the House to the definition of "Comptroller" in section 2, which reads:

'"Comptroller" means the Comptroller appointed under section 5 of this Ordinance and includes, for all purposes of this Ordinance except the exercise of the powers conferred uponthe Comptroller by sections 95, 96 and 99 of this Ordinance, a Senior Assistant Comptroller or an Assistant Comptroller so appointed;"'.

So, Mr Speaker, Sir, even under the definition of "Comptroller", for purposes of sections 95, 96 and 99, only the Comptroller himself can exercise those functions. So you see the law is not being such an ass. It says, "for the purposes of section 95", and section 95 is a provision for penalty for making incorrect returns. What I am suggesting, Mr Speaker, Sir, is: if the words in the new subsection (9) did not have the words "or on his behalf", then the effect of it would be that the Comptroller could sign it, a Senior Assistant Com ptroller could sign it, or an Assistant Comptroller so appointed could sign it. What I am asking the Government to accept is this: that the power to sign as correct a copy of such particulars should be restricted to the Comptroller himself, a Senior Assistant Comptroller or an Assistant Comptroller so appointed. That would be the effect of the amendment. Mr Speaker, Sir, the words "or on his behalf" must be given a meaning. It must mean that the Government intends that persons other than the Comptroller, the Senior Assistant Comptroller or an Assistant Comptroller so appointed can be allowed to sign. That is why the words "or on his behalf" appear. All I am asking the Government to consider is this: is it not fair in circumstances such as this, that only the Comptroller as envisaged in the defining section of the Income Tax Ordinance should be allowed to certify?

Dr Goh Keng Swee: Mr Speaker, Sir, I am afraid I cannot quite follow the reasoning of the Member for Farrer Park. He says his original objection was to the effect that copies of documents and not the originals are produced. Now, he is satisfied that properly certified copies can be accepted as evidence in Court, provided that the Comptroller and not others certifies such copies. The Member has quite lightly pointed out that in the discharge of certain functions under the Ordinance, powers are exercisable only by the Comptroller and not by a Senior Assistant Comptroller or an Assistant Comptroller; in particular, he has cited section 95. But surely there is a difference between the duties under section 95, and also in other sections which are only exercisable by the Comptroller, and this particular business of certifying a document.

In section 95 there is scope for the exercise of discretion, namely, the composition of offences committed under the section. In such circumstances, I would agree that the Head of De partment should exercise this power wholly. But in the case of certification of copies, surely in a Department with properly regulated rules, certification by any of the Senior Officers deputised by the Comptroller would be quite ade quate. Honestly I cannot see what possible objections the Member for Farrer Park has to this section.

Amendment negatived.

Clause 3 ordered to stand part of the Bill.

Clause 4-

Dr Goh Keng Swee: Mr Speaker, Sir, I would like to have the assent of the House to move an amendment to clause 4, under the provisions of Standing Order 32. I have discussed this particular amendment with the Member for Farrer Park, and he has raised no objection to it.

The Chairman: Perhaps the Minister will indicate what the amendment is.

Dr Goh Keng Swee: The amendment is:

In page 3, line 3, to leave out the word "or" and insert the word "and".

6.30 p.m.

The Chairman: Standing Order 32 reads:

"Notice shall not be dispensed with in the case of a motion or in respect of any other proceeding for which notice is required except with the consent of the Speaker and the general assent of Members present."

An amendment of this nature would require the requisite two clear days' notice. I give my consent. Is it the pleasure of hon. Members that the amendment be moved?

Hon. Members indicated assent.

Dr Goh Keng Swee: Mr Speaker, Sir, I beg to move,

In page 3, line 3, to leave out "or" and to insert "and".

Clause 4 deals with the question of income arising from settlements. In this particular subsection, it is stated that where a settlement is made for the benefit of any relative of the settlor who is unmarried or has not attained the age of 21 years at the commencement of the year of assessment, the income shall, on such settlement, be deemed to be the income of the settlor and not the income of any other person.

As the subsection now stands, there is a certain amount of ambiguity, and it is not the intention of the legislation to tax a settlement made to relatives who are unmarried and have exceeded the age of 21 years. As the subsection stands, it may mean that an unmarried relative could not be subject to tax-free settlements even though he or she has exceeded the age of 21 years. And that is not the intention of the Bill. Accordingly, I move the amendment as stated.

Amendment agreed to.

Mr Rajah rose -

The Chairman: Does the Member wish to move a further amendment?

Mr Rajah: No, Sir. I wish to speak on the clause.

The Chairman: Can I first propose the Question?

Mr Rajah: I am sorry, Sir.

Question proposed, "That clause 4 stand part of the Bill."

Mr Rajah: Mr Speaker, Sir, I inadvertently omitted to give notice of certain amendments. Had I been aware of the implications, I would certainly have given notice of the amendments. Sir, the matters which are exercising my mind are new subsection (5) , and paragraph (a) to the definition of "settlement" appearing in page 4, line 40, and in page 5, Mr Speaker, Sir, new subsection (7) (c).

The first point concerns subsection (5); the next one is "settlement" in subsection (7) (a) and the third is subsection (7) (c).

Sir, perhaps this is an opportune moment for me to reply to the Prime Minister when he was accusing me and my ilk of doing the Government down by advice. Sir, it has never been the conten tion of any government that tax avoidance is illegal. Tax avoidance is a perfectly legal thing. It is a matter on which highly paid lawyers and accountants are engaged. There is absolutely nothing illegal about tax avoidance. It is tax eva sion which is illegal, and no lawyer or accountant worth his salt would advise his client to evade tax which is lawfully due under the Ordinance to the government. So when lawyers advise their clients, it is on how to get round the Income Tax Ordinance with a view to avoiding tax. That is perfectly legal. I think even the Minister for Finance will accept that. And settlements up till now have been legal. They have been stamped. Government is extracting stamp duty from them. They have been registered in the Registry of Deeds. They have been perfectly legal documents. They have operated to take away from the Govern ment certain tax. The Government now think that that should not be so, and they have therefore put in this clause 4 which will bring in settlements for the purpose of income tax. With that particular aspect of it, Mr Speaker, Sir, I have no quarrel. It is with subsection (5) which says this:

"If any question arises as to the amount of any payment of income or as to any apportionment of income under this section that question shall be decided by the Comptroller, whose decision thereon shall be final."

In other words, what this subsection seeks to do is to give the Comptroller power in respect of a particular item of taxable income which he does not have with regard to the other items of taxable income, because every other taxable form of income is a matter on which the taxpayer could go to appeal, on the basis that the Comptroller was not right, or that he has based his assessment on in correct facts or figures. But apparently when it comes to a settlement, any decision by the Comptroller shall be final, and this, Mr Speaker, Sir, is completely not in keeping with the other provisions of the Income Tax Ordinance. That is the first point, Mr Speaker, Sir.

Then the second point is subsection (7) (a) regarding settlement

"a settlement which in the opinion of the Comptroller is made for valuable and adequate consideration;".

In other words, if the Comptroller says, "In my opinion, this is made for valuable and adequate consideration," that apparently is the last word on the subject. There again there is no appeal to the courts.

Then thirdly in subsection (7) (c), on page 5, lines 11 and 12, are these words "in the opinion of the Comptroller".

Subsection (7) (c) reads as follows:

"any agreement made by an employer to pay to an employee or to the widow or any relative or dependant of such employee after his death such remuneration or pension orlump sum as in the opinion of the Comptroller is fair and reasonable;".

There again he has undisputed powers of saying what is fair and reasonable, and that apparently is the end of the matter.

Mr Speaker, Sir, I think these are matters which should be treated similarly as other items of taxable income are treated. I know it is too late, Mr Speaker, to move my amendments, but if the Government agrees, I understand there is a procedure under the Standing Orders whereby this can be rectified on recommittal. I would urge upon the Government that the words "in the opinion of the Comptroller" should be omitted from "settlement" in subsection (7) (a) and the words "in the opinion of the Comptroller" should be omitted from subsection (7) (c). I would also urge upon the Government that subsection (5) should be amended in such a way as to leave out the words "whose decision thereon shall be final".

Dr Goh Keng Swee: Mr Speaker, can we go on to further clauses and come back to this one later?

The Chairman: Strictly, of course, under Standing Order 71, paragraph (7):

"A clause may be postponed, unless a decision has already been taken upon an amendment thereto. A postponed clause shall, in the absence of an order to the contrary, be considered after the remaining clauses of the Bill have been considered and before new clauses are brought up."

But if the Minister moves that notwithstanding the Standing Order this particular clause be postponed, and that has the assent of the Members, and there is no dissenting voice, then, of course, it can be done. Perhaps the Minister would like to move?

Mr Byrne: Mr Speaker, Sir, I move,

That notwithstanding the Standing Order consideration of clause 4 be postponed.

The Chairman: Is it the pleasure of hon. Members that that motion be moved? No dissentient voice.

Question put, and agreed to.

Resolved,

That notwithstanding the Standing Order consideration of clause 4 be postponed.

Clause 5-

The Chairman: There is an amendment in the name of the Minister for Finance. It could, of course, in the absence of the Minister, be moved by any other Minister The clause, however, by general agreement, could be postponed. Is it the wish of hon. Members that the clause be postponed?

Hon. Members indicated assent.

The Chairman: Clause 5 accordingly by general agreement postponed.

Clause 6 -

Question proposed, "That clause 6 stand part of the Bill."

Mr Rajah: Sir, there are two aspects of this clause on which I wish to address the House. The first one is contained in the new section 67 (1) (b) which says:

"(1) Subject to the provisions of subsection (2) of this section, every person carrying on or exercising any trade, business, profession or vocation -

(b) shall, if the gross receipts from such trade, business, profession or vocation in the preceding calendar year exceeded eighteen thousand dollars from the sale of goods, or twelve thousand dollars from the performance of services, issue a printed receipt serially numbered for every sum received in respect of goods sold or services performed in the course of or in connection with such trade, business, profession or vocation, and shall retain a duplicate of every such receipt:

Provided that where a machine is used for recording sales a receipt may be dispensed with if the Comptroller is satisfied that -

(i) such machine automatically records all sales made; and

(ii) the total of all sales made in each day is transferred at the end of such day to a record of sales."

6.45 p.m.

Now, under the new section 67 (3) of clause 6 of the Bill, it appears that the Comptroller is to be given powers to waive all or any of the provisions of subsection (1) of this section in respect of any person or records or any class or description of persons or records.

The Minister himself in his speech on the Second Reading of the Bill has denoted "class" as meaning persons who would be exempted from it, unless the Comptroller calls upon them to comply with the provisions of the proposed section 67 (1) (b). How the department is going to administer section 67 (1) (b), Mr Speaker, Sir, I am at a loss to under stand. $18,000 a year in the sale of goods merely means that if there is a turnover of $50 a day, then that person comes within the ambit of the proposed section 67 (1) (b). To take an instance of a coffee shop. All coffee shops carry on under eating-house licences. I understand there are well over a thousand of such coffee shops carrying on under eating-house licences. The coffee shop proprietor, I am told, runs his own business. He sells coffee, tea, Postum, Ovaltine, aerated water and cigarettes. As part of the establishment, there are a number of hawkers who sell their individual wares inside the shop under and by virtue of the eating-house licence. Is it the intention of Government that all such hawkers who sell within coffee shops should issue receipts? Because, technically speaking, they are all selling under a licence issued to the proprietor of the coffee shop. Are all the sales arising from the sale of food in that coffee shop to be credited to the coffee shop owner, or will they be credited to each of the hawkers who is plying his wares in the coffee shop?

Although the Minister has said that certain categories of persons would be exempted, I find that once this section has been enacted, then all persons whose sales come to $18,000 and over would be brought within its ambit, and it would be very difficult for the Comptroller to make specific exemptions in certain cases.

The other point, Mr Speaker, Sir, is the proposed 67 (2) which reads:

"The Comptroller may by notice in writing to any person carrying on or exercising any trade, business, profession or vocation, or by a notice in the Gazette in respect of any class or description of any such person, prescribe -

(a) the form of the records to be kept under the provisions of paragraph (a) of subsection (1) of this section, and the manner in which such records shall be kept and retained; and

(b) the form of the receipts to be issued and the duplicates to be retained under the provisions of paragraph (b) of subsection (1) of this section, and the manner in which such receipts shall be issued and such duplicates shall be retained,

and every such person shall be bound to comply with such notice.".

I was wondering, Mr Speaker, Sir, whether this function of keeping adequate records should not be left to the Board of Income Tax to prescribe rather than to the Comptroller in the Federation or here, and whether it could be more adequately dealt with by the Board of Income Tax rather than the Comptrollers in the two territories.

Dr Goh Keng Swee: Mr Speaker, Sir, I am not quite clear what was the purpose of the last incursion of the Member for Farrer Park into the deliberations of this Committee.

I do not think he will argue against the necessity for businesses to account properly for their receipts.

He did raise one or two questions, namely, in the case of a coffee shop, whether the separate stalls that operate on the premises would be lumped to gether as one business, or whether they would be considered separately; and, of course, the answer is that they would be considered separate units.

As for passing on the authority of deciding how the provisions of this clause should be administered to the Malayan Board of Income Tax, may I say that a pan-Malayan Board of this nature cannot meet often enough and long enough and go into sufficient detail to give directives that will be needed? I have already explained the pur pose of this clause and the manner in which it is intended that its provisions should be administered. It is my belief that eventually we hope to arrive at a system whereby all businesses keep proper accounts of their receipts and sales regardless of whether they are large or small. But we are very far from achieving this position. In the meantime, the purpose is to concentrate on those businesses from which we are likely to get some form of return by way of income tax.

As regards the question of automatic exemption, I did explain in my speech on the Second Reading that it is necessary, for obvious reasons, to have similar legislation in the two territories. The fact that personal reliefs are much lower in the Federation would mean that it is desirable to have a fairly low form of limit of exemption in the two Ordinances.

Question put, and agreed to.

Clause 6 ordered to stand part of the Bill.

Clause 7 ordered to stand part of the Bill.

Clause 8 -

Question proposed, "That clause 8 stand part of the Bill."

Mr Rajah: Mr Speaker, Sir, the intention of this amendment is to extend the field of limitation within which the Comptroller can take action from 6 to 12 years. In so far as fraud or deliberate evasion of income tax is concerned, there is no time limit and the Comptroller can take action at any time if a fraud is discovered. It would appear, Mr Speaker, Sir, that where an honest mistake has been made either by the Comptroller or by the taxpayer, it is intended that the mistake should remain hanging over the taxpayer for a period of 12 years, and not 6 years as it is now. Where the mistake has happened on the part of the Comptroller, I find it difficult to see why he should be given a further six years in which to rectify his error and charge the taxpayer with the tax that he had failed to tax him with in the first instance.

The second point which arises out of his amendment, Sir, is that this would mean that every business, which keeps accounts up to six years now, would be obliged to keep them for 12 years, because if anything does occur after the 7th or 8th year, the Comptroller is not going to listen to the statement, "Well, I thought six years was the limitation period and I have destroyed my books." It means an additional burden on the preservation of records for the purposes of income tax. I do not know why it is necessary to fix it at 12 years. I would have thought, Mr Speaker, Sir, that if a mistake is to be discovered, it would have been discovered within the 6 years. Beyond the 6th year and within the 12th year I do not know what possible fresh evidence could be brought up, except what the Minister himself said in his speech on the Second Reading, that because the tax office had not been sufficiently geared to its work, the assessment and collection of taxes had not been carried out in the way that it should have been. So it seems to me that the real reason why 6 years is being amended to 12 years is that the tax department has not been sufficiently geared to do the job. Mr Speaker, Sir, I doubt very much whether that is a sufficient reason to extend it from 6 to 12 years.

Dr Goh Keng Swee: Mr Speaker, Sir, I have dwelt at length in my speech on the Second Reading on the reasons for this amendment and I have very little to add to it. I do, however, wish to remind the Member for Farrer Park that the Income Tax Department is a comparatively new department and that the work of income tax investigation is a highly skilled one. The Department was no more than 4 or 5 years old when the Korean War boom broke out during which time enormous fortunes were made and never properly recorded. The work of investigation takes many years to complete. In a young department such as the Income Tax Department was then, it is quite natural - it is, in fact, to be expected - that they could not possibly cope with the problems an the scale which developed during those years. It is not for me to apologise for anybody, because during that time the reins of government were not in our hands. But we intend to strengthen the Investigation Unit of the Department. Steps are being taken to have the officers trained abroad, and when they develop sufficiently powerful muscles, there will be victims for them to operate on.

The Prime Minister: Sir, there is no magic in either 6 or 12. I venture a guess that it was 6 in the first instance, because it followed the British Limitation Act, 1939. If the Member for Farrer Park was sufficiently interested to know what the Government of the Federation thought of the matter, he would have found that they were in favour of keeping things open till eternity. It was because we have, as our Minister for Labour and Law, a man trained in the jurisprudential principle that theoretically there should be finality in the affairs of man that we have left it at 12 years.

The Member for Farrer Park begins with the assumption that the Income Tax Department consists of a lot of perverse types who would go out of their way to give offence and cause mischief amongst a lot of innocent tax-paying citizens. Of course, he knows very well that that is not the case. The Income Tax Department consists of officials who are extremely sensitive to charges of undue harassing of the public. The only people likely to be harassed are those who have not paid their taxes according to what they should have done. Far from their being unable to produce records on the basis that they did not know that 6 years was not the end of all things, I think the problem would be not just the production of records, but the credibility of the records. I ven ture to hazard the guess that the people who are likely to be affected by this clause, and for whom Members of the Opposition are expressing such grave concern, would not be worth the special treatment which they hope would be afforded them by our leaving it at 6 years. The Income Tax Department should find out a mistake immediately after it has been made. If the people concerned are good, honest tax-paying citizens like myself, they would point out to the Income Tax Department that they made a mistake the moment the letter arrived.

Mr Rajah: Sir, I am not saying that the officials in the Income Tax Department are a lot of ogres and goblins. I have met some very nice people in the Income Tax Department, and they are quite human chaps who completely sympathise with you but yet extract your teeth. That is their job. Of course, they have to extract teeth just like a dentist does, but although the extraction is painful, one does not say that they are inhuman. They are quite human chaps. They sympathise with you while it pains you, but they get on with their job.

A further point arises on this amendment, Mr Speaker, Sir. Under the existing Ordinance, six years being the period of limitation, some assessments have been barred by limitation from being further reopened. Is it the intention of this particular clause to reopen all the assessments which are now barred by law? If the Minister for Labour and Law will remember, he went to some pains to explain to the House, when he was moving the Limitation Bill - Mr Speaker, you may remember too - that everything that had been put an end to by limitation at the time when the Bill was being moved would not be revived by the new Limitation Ordinance. So might I ask the Minister for Finance whether such solicitude also is in his mind in so far as taxpayers are concerned?

Dr Goh Keng Swee: The brief answer is that we have every intention of reopening the cases and charging tax to the hilt.

Question put, and agreed to.

Clause 8 ordered to stand part of the Bill.

Clause 9-

Question proposed, "That clause 9 stand part of the Bill."

The Chairman: It appears to me that perhaps clauses 9 and 10 could be taken together.

Mr Rajah: Yes, Mr Speaker, Sir. I was going to ask you whether clauses 9 and 10 could be taken together.

The Chairman: The debate could range over clause 10.

Mr Rajah: Sir, this is a provision which says that if you want to appeal, you must first pay the tax before you appeal. I suppose there is something to be said for that. But there is also the other point of view which I should like to put to the Minister for Finance.

I know of a recent case where the income tax officials - with a smile on their faces no doubt - assessed a particular gentleman in the "small" sum of $1.8 million or thereabouts. He took a serious view of this matter and he appealed. But that was in the good days before the amendment came into force. So naturally the payment of tax was stopped. But, of course, the Comptroller could have gone to the Board of Review and got sufficient security. Whether he did that or not I do not know. But the point of my story, Mr Speaker, Sir, is this : that after eight days of hearing the appeal, apparently the Board of Income Tax reduced his tax by a "paltry" sum of $1 million! If that particular case had come up after this Bill had been brought into force, he would have had to pay his $1.8 million which he might not have been able to pay, and therefore he would have been deprived of an appeal. It is not for me to say what would be the consequences which would ensue thereafter. Whether he would have to face the bankruptcy court and whether the judge would be sympathetic to him, it is not for me to say. It is purely hypothetical. The Minister for Finance has said that there are $30 million outstanding today in the way of taxes in respect of which appeals have been lodged. May, I, with respect, suggest to him that the reason for the difficulties which he is facing is because his Department is not sufficiently geared to proceed with these appeals expeditiously? It should be possible, Sir, for these appeals to be proceeded with expeditiously. What I cannot understand is why the cases take years and years before they are brought up for final hearing before the Board of Review. In a normal civil suit, after filing a complaint, you get the case heard. The difficulties before the Board of Review are not the same as those before the civil court. There are no pleadings. Things are clear-cut. They should be clear-cut - at least it seems to me. The issues have already been determined in the mind of the Comptroller and he should be ready to go to the Board of Review quite quickly after disagreement between the taxpayer and himself. But for some reason or other, apparently that cannot happen. This clause, as it is framed, Mr Speaker, Sir, might cause hardship in genuine cases. Could not this clause be so framed that, in the case of a frivolous appeal, the Board could be given sufficient power to penalise such an ap peal? Or where there is an appeal and the Comptroller's decision is upheld, then the taxpayer could be called upon to pay the rate of interest from the date of raising the taxation up to the date of appeal? As the Minister has said, if that money had been invested at eight per cent interest, it might have yielded so much. So why not do something like that? Although the intention of the Government is to rake in the money, I think it must also accept the position that in a number of cases hardship could be created. I am suggesting to the Government that they could alleviate that hardship and yet maintain their income by charging a heavy rate of interest which the Board would be allowed to charge in case the decision of the Comptroller is upheld.

The Prime Minister: The Member for Farrer Park is aware that there is a fundamental principle in matters other than imprisonment, that no party should, by the lodging of an appeal, prevent any award or order that was made from being executed against him. The only exception is where a person is to be imprisoned. Because it is not likely that he will abscond where he can put up sufficient surety that he would be present for the bearing of his appeal, he is then let out on bail. On principle, there is no reason why a party should have an order or an award that has been made against him postponed just by the lodging of an appeal. There is provision here, provided the Comptroller in his discretion considers that it is a valid point upon which there could be some doubt - an honest bona fide difference of opinion on assessment - to extend the time limit for the payment.

The suggestion put forward by the Member for Farrer Park is impracticable. There is no appellate court which has the right to punish a frivolous appeal as distinct from a non-frivolous appeal. You will then not only have to decide the rights and wrongs of a particular case, but you will also have to decide whether it was frivolous or otherwise to have appealed. The only form of punishment that can be exacted from the appellant is to make him pay the cost. As has been explained by the Member for Redhill, the business of a lawyer is to stall. The longer he stalls, the more interest capital earns, either in business, industry, stocks and shares or in general speculation. It is worth the speculator's while to pay his lawyer, pay such costs as are awarded against him, pay even the interest if it is a moderate six per cent per annum - because, according to the pawnbrokers, one can get 10.9 per cent interest per annum by investing with them - and still have something to show for it. All reasonable appeals will be allowed. If the gentleman in question has a $1 mil lion estate, and it is an honest bona fide case, I am certain that he would receive due consideration from the Comptroller of Income Tax.

All this passionate plea as to why there are no quick trials is, in my humble submission, a lot of histrionics. As all members of the Bar know, there are no quick appeals, because the appellant is not very anxious for a quick appeal.

The Chairman: I would like to mention to the Prime Minister that the constituency of the Member referred to is not Redhill but Bukit Merah.

Mr Rajah: Sir, I myself made the same mistake in respect of the same person.

The Prime Minister accuses me, of histrionics. Mr Speaker, Sir, I am not capable of histrionics. I think the Prime Minister is capable of it. He himself is indulging in a little bit of histrionics to get over the issues, which I have raised.

He throws a red herring across the trail by saying that once a judicial order is made, and then it has to be carried out. Of course, Sir, I accept it. But this is not a judicial order. This is just a statement by an official saying, "You owe me so much." It is just a matter of opinion Mr Speaker, at that stage. The taxpayer thinks he owes so much. The Comptroller thinks the taxpayer owes so much. In the eyes of the law, it is a matter of opinion. The Comptroller thinks this and The taxpayer thinks that. But it ceases to, become a matter of opinion when a judicial body has pronounced upon it. Being called upon to pay on the opinion of the Comptroller should not penalize all I am saying is that at the stage when it is a matter of opinion the taxpayer. If the opinion of the Comptroller is right and the State has been deprived of the use of that money for a year or two, then, of course, the taxpayer should be called upon to pay a proper rate of interest on that money, thereby preventing any abuse of the processes of the Court.

The Prime Minister says that the appellant should prosecute the appeal. Mr Speaker, Sir, can the Comptroller not prosecute the appeal? There is nothing in the Ordinance to prevent him from doing that. In fact, I should think that as the Government are at the losing end, they would prosecute the appeal and not let the initiative lie in the hands of the taxpayer. Naturally, if the initiative were left in the hands of the taxpayer, he would dodge. Why should he not? He would not be sensible if he did not.

The Prime Minister: I was careful to use the word "award". I never said that it must be an order of the Court before something has to be executed. I said any award by any arbitrator or any party. And I said in this case, by the Comptroller of Income Tax. From the very fact that there is no finality until the Court of Appeal has sat in judgment on a particular issue, it does not mean that an award then existing should not be executed.

As for the Comptroller prosecuting the appeal, I think it is a well-known practice at the Bar that, as between friends, as between brother advocates, as between the Comptroller of Income Tax and advocates where they are reasonably polite to one another, a little amount of leeway is usually given. Such leeway can extend to six months, one year, or 18 months. All we are saying now is, "By all means let us do things in a civilized and leisurely manner. But let us have the money down first."

Mr Rajah: Sir, if the money is put down first and if, in an appeal where $1½ million is involved the Board of Review cuts it down by $1 million, would the Prime Minister agree to give to the taxpayer a return of eight per cent per annum on the money deposited with the Government and which it has used for two years?

The Prime Minister: I think the Member for Farrer Park is fully conversant with the principle that the Crown never pays costs in these matters.

Question put, and agreed to.

Clause 9 ordered to stand part of the Bill.

7.15 p.m.

Clause 10 -

Dr Goh Keng Swee: Mr Speaker, Sir, I beg to move,

In page 8, line 29, to leave out "July" and insert "September".

The reason for this amendment is that at the time it was drafted, it was thought that this Bill would have gone through much earlier than it actually did. It is, therefore, necessary to extend the date by which all tax remaining in abeyance would have to be settled.

Amendment agreed to.

Clause 10, as amended, ordered to stand part of the Bill.

Clauses 11 and 12 ordered to stand part of the Bill.

Clause 13-

Question proposed, "That clause 13 stand part of the Bill."

Mr Rajah: Mr Speaker, Sir, I am not speaking on this clause as the matters which I would have raised have been dealt with in the previous clause.

Question put, and agreed to.

Clause 13 ordered to stand part of the Bill.

Clause 14-

Question proposed, "That clause 14 stand part of the Bill."

Mr Rajah: Sir, this is the case where a "statement purporting to be under the hand of the Comptroller contained in the information, complaint, declaration or claim shall be prima facie evidence of the matter stated therein." and shall be received in Court as such. Does this mean, Sir, that the Comptroller, who gives that information and which information is produced in Court, would not be available in Court should the taxpayer require his presence on a matter arising out of the facts set out in the information?

Dr Goh Keng Swee: The answer is: he could be called to Court in case the facts submitted are in dispute.

Question put, and agreed to.

Clause 14 ordered to stand part of the Bill.

Clauses 15 and 16 ordered to stand part of the Bill.

Clause 17-

Mr Rajah: Mr Speaker, Sir, I move,

In page 11, line 26, after "who", to insert "wilfully".

Mr Speaker, Sir, the purpose of this amendment is to penalise only the person who had intent wilfully and deliberately to defraud the Department when making an incorrect return. As the proposed section is worded, it says this:

"95.-(1) Subject to the provisions of PartXII of this Ordinance, every person who -

(a) makes an incorrect return by omitting there from or understating therein any income of which he is required by this Ordinance to make a return; [etc.]

shall pay a penalty equal to the amount of tax which has been undercharged in consequence of such incorrect return or information, or which would have been so undercharged if the return or information had been accented as correct."

Mr Speaker, Sir, the incorrect return might have been an honest mistake. The intention of this section, as framed, is to catch anybody who "makes an incorrect return". Now, he might have forgotten it, or he might have thought that it was not income within the meaning of the Ordinance and therefore omitted to state it in his return, without any wilful intent to defraud the Government, or any deceit or fraud on his part. Is it the intention of the Government to extract a penalty equal to the amount of tax which has been undercharged in consequence of such incorrect return, and on top of that also to extract that amount which he would have had to pay had the correct return been submitted?

What the Government probably means in this proposed new section is to penalise the person who deliberately does this with a view to cheating the Government. If the word "wilfully" is inserted, it will look after that situation, and anybody who innocently makes an incorrect return because of forgetfulness or a mistaken view of the interpretation of the Ordinance would not get into trouble with this particular section.

Dr Goh Keng Swee: Mr Speaker, Sir, I am afraid I cannot agree to the proposed amendment for two reasons. First, it will be the hardest thing in the world to prove that any act is done with a wilful intention. When it has been pointed out to any taxpayer that such an omission has been made, it is all too easy for him to say that he had forgotten, or that he had made an oversight. Let us always remember that the filling of an income tax return is not an under taking lightly to be embarked upon. It is a discharge of a very serious social duty which the individual owes to society. If in the course of discharging such a duty, and through carelessness he fails to make a correct return (as a result of which revenue suffers), then I think it is very just and proper that a penalty should be imposed.

This particular section distinguishes between the making of incorrect returns with reasonable excuse. The other offence where a person cannot provide any reasonable excuse comes under subsection (2) of section 95, and the penalties are correspondingly heavier.

Mr Rajah: Mr Speaker, Sir, if that is the intention of the Government, I must say it is very serious and very drastic. I believe this is one of the occasions where an honest mistake results in a penalty being imposed on the citizen. I am sure there must be cases where even the Comptroller will admit that honest mistakes are made. Is it the intention that such a person should be penal ised because there are no two ways about it? There is even no discretion in the hands of the Comptroller to waive the penalty, "subject to the provisions of Part XII of this Ordinance". Part XII is the Appeals section:

"95.-(1) ... every person who -

(a) makes an incorrect return by omitting therefrom or understating therein any income of which he is required by this Ordinance to make a return;

shall pay a penalty equal to the amount of tax which has been undercharged in consequence of such incorrect return or information, or which would have been so undercharged if the return or information had been accepted as correct."

The Comptroller must exact it; no discretion is given to him. I am afraid it is a very -

The Chairman: Subsection (3).

Dr Goh Keng Swee: Compounding.

Mr Rajah: Compounding, as I understand it, only relates to:

"any offence punishable under subsection (1) or (2) of this section, and may before judgment stay or compound any proceedings thereunder."

There are no proceedings envisaged under subsection (1), Sir, under which no offence occurs. An offence only occurs where:

"(2) Every person who without reasonable excuse or through negligence -

(a) makes an incorrect return by omitting or understating any income of which he is required by this Ordinance to make a return; or

(b) gives any incorrect information in relation to any matter affecting his own liability to tax or the liability of any other person or of a partnership,

shall be guilty of an offence ...".

Subsection (2), Sir, is identical with subsection (1) in so far as paragraphs (a) and (b) are concerned. But under subsection (2) "who without reasonable excuse or through negligence" does it, then he is guilty of an offence which the Comptroller may compound. As under subsection (1), no offence is committed, and I do not see how the Comptroller can compound something in respect of which there is no offence. It would appear to me, Sir, that as the proposed section now stands, it is a statutory obligation on the part of the Comptroller to extract the penalty on top of the tax so lost.

Mr Byrne: Mr Speaker, Sir, the distinction is drawn between the honest type of mistake which the Member for Farrer Park has spoken about, and the deliberate evasion where an offence has been committed without reasonable excuse or through negligence. In the first case, Mr Speaker, Sir, I do not see why, if he has made a mistake and has been undercharged because of that mistake, he should not be made to pay when he is found out. He should be made to pay. Why should he be in a better position than the man who does not make a mistake and pays the income tax that is due? He should be in no better position than that.

Mr Speaker, Sir, where it can be proved that the failure to pay was without reasonable excuse or through negligence, there are additional penalties prescribed. The person concerned can be required to pay double the amount that he has been undercharged, and where it is serious enough he can be fined or imprisoned in default. Of course, the Comptroller has the power in both cases to compound.

7.30 p.m.

The Chairman: Perhaps I ought to point out to the Minister that subsection (3) as it now reads:

"The Comptroller may compound any offence punishable under subsection (1) or (2) of this section, and may before judgment stay or compound any proceedings there under."

would appear, on the face of it, to be nonsense in regard to subsection (1), because under subsection (1) there is no provision that the action done becomes an offence. I am just wondering whether the words have not been inadvertently left out - after "shall" in line 36, to insert, "be guilty of an offence for which on conviction he shall".

Mr Byrne: Yes, that appears to be so.

The Chairman: That would cover the point made by the Member for Farrer Park. If the Minister will then beg leave to move that amendment?

Mr Byrne: Mr Speaker, Sir, I beg leave to move,

In page 11, line 36, after "shall", to insert "be guilty of an offence for which on conviction he shall".

The Chairman: Is it the pleasure of hon. Members that that amendment be moved?

Hon. Members indicated assent.

The Chairman: Will the Minister then move formally?

Mr Byrne: Mr Speaker, Sir, I move,

In page 11, line 36, after "shall", to insert "be guilty of an offence for which on conviction he shall".

Amendment agreed to.

The Chairman: We are back now to the original amendment. I do not know whether the Member for Farrer Park would like to pursue his amendment.

Mr Rajah: As far as I am concerned, I still think that to penalise a man for an honest mistake which he did not know he had made is contrary to every principle that I know of, Sir, and I should certainly object to that. There might be a difference of views about the interpre tation of the word "income"; and the law says he shall be guilty of an offence. I admit this particular amendment does now give the Comptroller a discretion whereby he could waive the whole of the penalty if he so desires, and he probably will do that with a smile. In view of that, may I have leave to withdraw the amendment?

Amendment, by leave, withdrawn.

Mr Rajah: Mr Speaker, Sir, I move,

In page 11, line 42, to leave out "or through negligence".

So that the clause would then read -

"(2) Every person who without reasonable excuse -

(a) makes an incorrect return . . .".

Sir, I am wondering whether "or through negligence" takes the case any further than "without reasonable excuse". Is the suggestion that sometimes "without reasonable excuse" may not connote the idea of negligence? I would have thought that the phrase "without reasonable excuse" takes in negligence too.

The Chairman: Has the Member anything further to say?

Mr Rajah: No, Sir, I was just going to say that the present section 95 (1) reads: "Every person who without reasonable excuse . . .". But the proposed section 95 (1) has, in addition to those words, a new set of words - "or through negligence".

Mr Byrne: Mr Speaker, Sir, the first thing that occurs to my mind is that a person might have an excuse, but it may not be a reasonable excuse. The next thing, Mr Speaker, Sir, is negligence. If you cannot get him on the first, you get him on the second.

Tun Lim Yew Bock: Mr Speaker, Sir, I think the proposed section 95 (1) is meant to cover negligence. When a taxpayer neglects to insert or to give a correct return, he is punished with only one fine. If he does a thing without a reasonable excuse, he is punished twice.

Mr Byrne: Mr Speaker, Sir, where it is an honest mistake, whether it is an honest omission, it still comes under the provisions of the new section 95 (1). But where he is at fault, he is dealt with under the provisions of section 95 (2). There is a distinction between the two subsections.

Amendment negatived.

Clause 17, as amended, ordered to stand part of the Bill.

Clause 18-

Question proposed, "That clause 18 stand part of the Bill."

Mr Rajah: I am not speaking, Mr Speaker.

The Chairman: I do not remember the Member for Farrer Park giving notice that he wished to speak on clause 18.

Question put, and agreed to.

Clause 18 ordered to stand part of the Bill.

Clauses 19 and 20 ordered to stand part of the Bill.

Clause 21-

Question proposed, "That clause 21 stand part of the Bill."

Mr Rajah: On a point of information. Is it the intention of the Government, by virtue of this clause, to produce in Court as evidence against the person, statements which he has made to the, Comptroller, and with those statements to secure a conviction against him? It could well be that the Comptroller or somebody in his office could make certain promises to him. As a result of those promises, Certain statements might be made; certain documents might be written. Is it the intention that those statements and those documents which have been extracted under promise would be admissible in Court, and that such state ments or documents could be used to secure a conviction against that person under this Ordinance? It appears to me that if that is the purpose of this new section then Government believes that to catch a skunk, Government has to use skunky methods!

Dr Goh Keng Swee: That is indeed the purpose of this clause, Mr Speaker, Sir, and I see nothing wrong with it. In principle, this follows a similar provision in the U.K. legislation, section 34 of the Finance Act, 1942. I may perhaps be permitted to quote a reply to a question asked in the House of Commons on the 5th of October, 1944, as to the present practice of the Commissioners of Inland Revenue in regard to instituting criminal proceedings for alleged fraud under revenue. Sir John Anderson stated:

"The practice of the Commissioners in this matter is governed by section 34 of the Finance Act, 1942, which makes provisionfor the admissibility in evidence of any disclosure made in the circumstances there set out. This section indicates that the Commissioners have a general power under which they can accept pecuniary settlements instead of instituting criminal proceedings in respectof fraud or wilful default alleged to have been committed by a taxpayer. They can, however, give no undertaking to the taxpayer that in any such case they will accept such a settlement or refrain from instituting criminal lproceedings, even if the case is one in which the taxpayer has made a full confession andis given full facilities for investigating the facts. They reserve to themselves completediscretion in all cases as to the course which they will pursue. But it is the practice to beinfluenced by the fact that the taxpayer has made a full confession and is given fullfacilities for investigation into his affairs and for examination of such books, papers, documents or information as the Commissioners may consider necessary."

Question put, and agreed to.

Clause 21 ordered to stand part of the Bill.

Clause 4-

The Chairman: Postponed clauses. Clause 4. Dr Goh.

Dr Goh Keng Swee: Mr Speaker, Sir, the Member for Farrer Park raised the point as to the propriety of the proposed subsection (5) of the new section 33A and certain paragraphs of subsec tion (7). Perhaps I may be permitted to explain the purpose of these subsections and how they will operate in actual practice. If after the passage of this Bill which taxes income from certain types of settlements, we get a situation where the settlor says that the income is apportioned in another way, then the Comptroller has the authority to decide what was the amount of payment of income and what was the apportionment of income between the beneficiaries. It is easy to imagine that where you have, for instance, a settlement in favour of, let us say, two relatives, A under 20 years of age and B aged 40. It might have been a certain proportion right now. But after the passing of the Bill, the proportion could quite easily be reversed in favour of B who is above the income limit, thereby avoiding tax in this manner. In such instances, the Comptroller's opinion on what the apportionment would be, would be final, but not as regards the, quantum of the income nor the amount of tax payable thereon. In these matters, they can still be the subject of appeal to the Board of Review. It is necessary to give the Comptroller such powers in order to arrive at some finality in these matters.

7.45 p.m.

Now as regards subsection (7) (a) and (7) (c), here again the Comptroller will have the authority to decide whether or not, in respect of settlements for which consideration has been given such consideration is adequate, fair or reasonable. These two subsections will give the Comptroller the power to decide whether or not a settlement would come within the provisions of clause 4. But whatever assessment the Comptroller makes under this clause can be subject to appeal to the Board of Review. There are therefore adequate safeguards in this respect.

Mr Rajah: Sir, in respect of subsection (5), I understood the Minister for Finance to mean that the finality, so far as the Comptroller is concerned, is in connection with the apportionment of income arrived at under the settlement between the various beneficiaries. But my reading of subsection (5) seems to take it further:

"If any question arises as to the amount of any payment of income or as to any apportionment of income under this section that question shall be decided by the Comptroller,...".

So that the decision of the Comptroller relates to two things, Mr Speaker - any income under the settlement, and any apportionment of income under this subsection. So the explanation given by the Minister, to my mind, Sir, only touches upon the second limb of the subsection and not upon the first limb.

With regard to a settlement which, in the opinion of the Comptroller, is made for valuable and adequate consideration, the Minister said that the total assessment under the particular section in the Ordinance would go to the Board of Review if the taxpayer so desires. But what I was worried about, Sir, is whether on this particular matter the taxpayer could appeal against the decision of the Comptroller. If the Comptroller says that it is made for valuable and adequate consideration, apparently then it is not a settlement. Now, if he makes a ruling on a particular settlement that is, made for valuable and adequate consideration, does it then mean that that particular ruling cannot be challenged? Or does the Minister say that if the whole of the assessment can be challenged, then his ruling indirectly is a matter for the Board of Review?

Dr Goh Keng Swee: My understanding of the position is that the whole assessment can be brought before the Board of Review. As regards subsection (5), if there is any apportionment of income under a settlement, that would surely cover the payment of income from that settlement. But that does not prevent an appeal being lodged on the total quantum of income as distinct from amounts payable under the scheme of distribution as stated by the settlor.

Mr Rajah: Sir, may I phrase my question in a different way? Suppose there are nine items of income on which the taxpayer is called upon by the Comptroller to pay tax, and the ninth item is under subsection (5). So far as the other eight items are concerned, the taxpayer is in happy agreement with the Comptroller. The only item which he is disputing with the Comptroller is item number 9 which is covered by subsection (5). Would the Minister say that in the circumstances which I have now set out, the taxpayer would be at liberty to take the Comptroller on appeal to the Board?

Dr Goh Keng Swee: The opinion of the Comptroller is final as regards the apportionment of income between different beneficiaries for the reasons which I have explained. But as regards the quantum of the total income arising from the settlement, that is a case where an appeal could be made.

Mr Rajah: It may be that if the Comptroller decides that the apportionment should go in a certain way, then the rate of taxation might increase. If he decides that it should go another way, then it could well be that the rate of tax ation might decrease. In those circumstances, having agreed to the other eight items, and where the decision of the Comptroller is against the taxpayer in the sense that it is putting up his rate of assessment, would the taxpayer then be able to go to appeal? The substance of the appeal would be that the taxpayer contends that the Comptroller has made a wrong decision under subsection (5); or would the fact that the Comptroller's decision is final be looked upon by the Board as a matter which they cannot reopen?

Dr Goh Keng Swee: The position, Mr Speaker, Sir, as I have said before, is that there can be no dispute as to how the income from a settlement is distributed among the beneficiaries.

Question put, and agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5-

Dr Goh Keng Swee: Mr Speaker, Sir, I beg to move,

In page 5, line 27, to leave out "The Comptroller" and insert "Where the Comptroller considers it necessary in the execution of his duties under this Ordinance he".

This amendment was reached in agreement at a meeting between representatives of the Singapore Government and the Federation Government. We reached this position as a result of fears which were expressed that the powers which the Comptroller has under this clause would be improperly used, so it is specifically stated that these powers would be exercised only when the Comptroller considers it necessary in the execution of his duties.

Mr Rajah: Sir, it seems to me that this amendment does not take it very much further than the existing section. I do not know what discussions the Hon. Minister had in Kuala Lumpur, but I venture to suggest that this does not take it very much further. In fact, from the taxpayers' point of view, it makes it worse -

The Prime Muter: How can it be?

Mr Rajah: In a moment I intend to show to the Prime Minister, the Minister for Law, and the Finance Minister that it makes it worse.

"The Comptroller shall at all times have full and free access to all lands, buildings and places, ...".

Mr Speaker, Sir, that section, as it stands, means that the Comptroller can not willy filly enter the premises. If he is challenged in Court, the Comptroller will have to show that it was in the due execution of his duties under the Ordin ance that he so entered the premises. The mere statement by him, "I considered it to be in the best interests of the Ordinance to do it," will not do, Mr Speaker. But in the case of the proposed amendment, all it says is

"Where the Comptroller considers it necessary ...".

Under the proposed amendment, all that the Comptroller has to say is, "I considered it necessary to do that." Once the Comptroller makes that statement, probably the Courts will be shut out. It is the eternal argument, Mr Speaker, Sir, that we are having in this House - "where an official considers it necessary", "where in his opinion", "he thinks". All these phrases are intended to shut out the jurisdiction of the Courts.

Dr Goh Keng Swee: Mr Speaker, Sir, this amendment was considered because there are people who have not had the advantage of the legal training and the ability of the Member for Farrer Park to enter into metaphysical disputations. If the Member for Farrer Park, as a result of his profound understanding of the law, considers that this has not brought matters any further, then I am prepared to defer to his opinion. Nevertheless, less sophisticated people would feel assured by this amendment which is an expression of Government's intention that these powers shall be exercised properly and responsibly.

The Prime Minister: I was aghast, Sir, when I heard the Member for Farrer Park, purely for the sake of argument, contend that not only in his opinion does it not take the matter further, but that, in fact, it enlarges the powers of the Government and the Comptroller.

Sir, if that were indeed the effect of the amendment, then let me say that we would be very happy indeed. But as I read it, Sir, it is a limitation. An official, acting bona fide, must satisfy himself that it is necessary so to enter, in the execution of such powers as are vested in him in the public interest, or in the execution of his duties. Whereas if there were no such limitation, then he would enter willy nilly.

By way of illustration, may I say this? Supposing we send a scout to enter a territory. I should like to believe that if the new section 65B stands as it is,

"The Comptroller shall at all times have full and free access ... ".

it means what it says. Words are given a natural meaning. If you travel by aeroplane, then you go right in and take all the consequences. If not, you walk in and say, "I am a Member of the staff of the Comptroller of Income Tax. Produce your books." Whereas, the section as amended means that the occupier of the land or the custodian of the books can say, "Ah, but are you coming here after due and proper consideration? Is your Comptroller or superior officer satisfied that it is necessary in the exercise of his duties and in the public interest?" Of the two positions, I would say that the one with the wider scope would protect the official more. If the Opposition presses the matter, we are quite willing to withdraw -

The Chairman: Order. Moment of interruption.

Thereupon Mr Speaker left the Chair of the Committee and took the Chair of the Assembly.

Dr Goh Keng Swee: Mr Speaker, Sir, I beg to report that the Committee has made progress on the Income Tax (Amendment) Bill and ask leave to sit again tomorrow.

Mr Speaker: So be it.