INCOME TAX (AMENDMENT) BILL

[Mr SPEAKER in the Chair]

Order read for resumed consideration in Committee.

[Mr SPEAKER in the Chair]

2.32 p.m.

Clause 5-

The Chairman: We are on clause 5. An amendment has been proposed*:

• An amendment proposed by the Minister for Finance (Dr Goh Keng Swee) on 11th May, 1960.

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".

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

Mr A. P. Rajah (Farrer Park): Mr Speaker, Sir, I think it was the Hon, the Prime Minister who made the suggestion that the proposed amendment made the section clearer and that without that particular amendment it could have been that the Comptroller could have gone into the premises for any purpose whatsoever, even for purposes outside the scope of the Ordinance. But that cannot be so, Mr Speaker, Sir, for in line 32 of the clause, the purposes for which the Comptroller may exercise his powers under this clause are categorically set out:

"...for the purpose of ascertaining any facts or inspecting any books and documents which the Comptroller considers necessary or relevant for the purposes of this Ordinance...".

Therefore, the Comptroller's entry is limited to the purposes enumerated in that particular clause. So to say that that amendment makes it clearer, I think, Sir, is not right. If anything, it makes it easier and puts the Comptroller outside the ambit of the Courts by introducing that particular amendment. I myself see no point or purpose or usefulness in that amendment.

The Chairman: If there is no other Member wishing to speak, I will put the question.

Amendment agreed to.

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

In page 6, line 3, to leave out "statutory" and insert "legal".

Sir, the purpose of this amendment is to bring within the proviso a category of persons who, under the law - and by law I mean both the common law and the statute law - are precluded from giving any information to any person unless the person in respect of whom the information is sought gives his express permission to that person. On that, I would like to refer to the advocates and solicitors practising in the Courts here.

Advocates and solicitors, Mr Speaker, Sir, are under a legal obligation not to disclose matters, which have been disclosed to them by their clients, to outside persons or parties unless the clients themselves expressly authorise the solicitors so to do. That is covered by many common law decision cases. I am wondering, Sir, whether it is the intention of the Government to overrule the present position by the use of the word "statutory" in this clause. If the intention of the Government is that the words "statutory obligation" should mean that a person who says that he has the benefit of this proviso must point to a particular statute rather than case law, then advocates and solicitors would lose the privilege. If Government does not intend to take it that far, then this amendment would meet the case by preserving the privilege of an advocate and solicitor to maintain secrecy regarding matters of his client, unless his client tells him otherwise. In any case, Sir, since the Comptroller would know who the advocate and solicitor was, he would also know who the client was. Therefore, all that the Comptroller would have to do would be to get hold of the client and exercise on him the rights which the Ordinance confers on him, and through him, he could get at the advocate and solicitor concerned. It would I think be in the best interests of the profession that that privilege should be protected, and if the Government feels that it should be so, I feel that the amendment would meet the case rather than the clause as it now stands.

The Minister for Finance (Dr Goh Keng Swee): Mr Speaker, Sir, the point raised by the Member for Farrer Park has been discussed at length during the meeting between the Governments of Singapore and the Federation in Kuala Lumpur last month. It was agreed between them that it would be the intention of this Ordinance that solicitors would not be exempted from the provisions of this clause, and that only persons under statutory obligation would be outside its provision. These would include officials such as the Controller of Foreign Exchange, the Superintendent of Census, the Registrar of Imports and Exports, and possibly a few other officials. It is felt that in this matter there are no grounds whatsoever in drawing a distinction between the relationships of solicitors and their clients and other professional persons and their clients.

The Minister for Labour and Law (Mr K. M. Byrne): Sir, I would just like to remind the Member for Farrer Park that he drew a distinction in this House between the avoidance of that clause and the evasion of that clause. He praised lawyers of sufficient merit who were able to advise clients on the best way of avoiding these tax laws. I do not see why he must be afraid of that now when he said that he has been able to advise his clients on the best way of avoiding the tax laws. He should be just as prepared to co-operate with the Comptroller and explain to him how these tax laws can be avoided.

Mr Rajah: Sir, the avoidance of income tax is a highly skilled art, particularly when we have such an efficient Comptroller of Income Tax and an efficient Minister for Finance. However, Sir, I will not go into that.

The Minister for Labour and Law has said that so far as the solicitors are concerned it is not against their interests to disclose what their clients have told them. But it has been the law that anything said to a solicitor in confidence must be respected by the lawyer. But any statement made to a clergyman or a doctor or a dentist or any other professional man has never been protected in a Court of law. The lawyer has always been in a privileged position. I was wondering whether to get at the tax evaders it is necessary to take away that privilege which the Courts of law have thought fit to confer upon the legal profession.

Dr Goh Keng Swee: I am sure that the legal profession would welcome the provision of the law as it stands, since this will add to the safeguard against any approach by shady characters for assistance from the legal profession either to evade or to avoid income tax. I take it that the Member for Farrer Park is not against the principle of the Comptroller having access to information in the hands of solicitors, since he has put forward the suggestion that this could quite easily be done by direct application of pressure on the taxpayer himself. But the main reason is that there are no grounds whatsoever for distinguishing between, let us say, solicitors and accountants in this particular field. Both deal with tax matters, and if we were to grant privilege to one and not to the other, then we might well be accused of discriminatory treatment.

2.45 p.m.

Mr Rajah: Sir, the discriminatory treatment is already here, having been conferred on the solicitor by the Courts of Law, for reasons best known to them. But if the Comptroller thinks that that should be taken away and that it is in the best interests of the State that it should happen, well, it is for the Legislature to say so and for the Government in power to say so. And I dare say, Sir, when this Bill is passed and becomes law, certainly the legal profession will comply with it in the best way they can. But as matters stand now, they have this protection and they are in duty bound to their clients not to disclose information. If they did disclose it, they would be liable in damages to their clients. That is also a provision of the law.

Further, on the question of tax avoidance, we have heard a number of times about how solicitors encourage tax avoidance. Mr Speaker, Sir, they do not encourage tax avoidance. They advise their clients in tax avoidance. May I put a case in a simple form so that even the Minister for Finance might understand it? Supposing there was a bridge and the Government was charging every vehicle using that bridge a toll tax of a dollar. That is a tax which goes to the Exchequer Fund and it will be used for purposes of the State. If I, as a motorist, avoided the bridge and went to my destination in a roundabout way, was I acting contrary to the interests of the State? Or if I advised a friend of mine, "Do not be such a fool! Why do you pay that dollar? If you go this way and that way, you will avoid paying that dollar." That is all the advice I give. Have I acted against the interests of the State?

Amendment negatived.

Clause 5, as amended, ordered to stand part of the Bill.

New Clause- 'Amendment of Section 2 of the Income Tax Section 2. Ordinance (hereinafter in this Ordinance referred to as the "principal Ordinance") is hereby amended by inserting immediately after the word "sections" appearing in the fifth line of the definition of "Comptroller" therein the expression "67,".'.-[Dr Goh Keng Swee].

Brought up, and read the First time.

Dr Goh Keng Swee: Mr Speaker, Sir, I beg to move, "That the clause be read a Second time."

This is an amendment that would bring joy to the heart of the Member for Farrer Park, because it is the one thing, which he has been persistently clamouring for, that is, the concentration of authority in the hands of the Comptroller himself and not delegation to his subordinate officers.

Clause 6 of this Bill provides that any person who carries on a trade or exercises any trade, business or profession shall keep and retain proper business records, and issue serially numbered receipts for sales. Under the proposed section 67 (3) contained in clause 6, the Comptroller has wide powers not only as regards laying down the form in which the records and receipts are to be kept, but also in respect of waiving the provisions of section 67 (1) either in regard to particular persons or class of persons or classes of records. These powers are so wide that it is desirable that they should be exercised only by the Comptroller himself.

The definition of "Comptroller" in section 2 of the Ordinance includes a reference to a Senior Assistant Comptroller or an Assistant Comptroller. It is proposed to insert the proposed section 67 in the definition of "Comptroller" so that the powers exercisable in that section can only be exercised by him.

Question put, and agreed to.

Clause read a Second time.

The Chairman: If there are any amendments, they can be proposed now.

Tun Lim Yew Hock rose -

The Chairman: Tun Lim, is it an amendment?

Tun Lim Yew Hock (Cairnhill): No. It is just a point of neatness. In view of the proposed amendment to clause 2, which deletes 'Income Tax Ordinance (hereinafter in this Ordinance referred to as the "principal Ordinance")', why does the Government introduce it in this new clause? Could they not just go ahead and call it "section 2 of the principal Ordinance"?

The Chairman: It is a question of neatness, too, is it not? The new clause will be inserted as clause 2, which is prior to the present clause 2. I trust the Member for Cairnhill sees that point.

Clause added to the Bill.

The Chairman: Consequential amendments will be made to the numbering of clauses.

Now, we go back to clause 2. There is an amendment, which is consequential to the new clause, which has been added. Will the Minister please move formally?

Clause 2-

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

In page 1, lines 8 and 9, to leave out 'Income Tax Ordinance (hereinafter in this Ordinance referred to as the "principal Ordinance")' and insert "principal Ordinance".

The reason is that an amendment to section 2 of the Ordinance has been introduced, and this new clause will be inserted after clause 1 of this Bill. This consequential amendment is therefore necessary.

The Chairman: Perhaps the Member for Cairnhill is now satisfied.

Tun Lim Yew Hock: Yes.

Amendment agreed to.

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

Bill reported, with amendments.

Third Reading

3.45 p.m.

Mr Speaker: Third Reading, what day?

Dr Goh Keng Swee: Now, Sir. Mr Speaker, Sir, I beg to move, "That the Bill be now read a Third time."

Question proposed.

Mr Rajah: Mr Speaker, Sir, the Bill, as originally envisaged by the Government, except for a few minor amendments, will, on the Third Reading, be passed. It will become statute law when the Yang di-Pertuan Negara has assented to it.

Sir, I am suggesting to the Minister for Finance that, as a result of these amendments, there is in the Ordinance a hiatus. The present position is that where the Comptroller has raised his assessment for the year of assessment, the taxpayer has to pay the tax within 30 days of the assessment. If he does not wish to pay the tax within 30 days as set out in the Ordinance, then he must file a notice of objection. On the notice of objection, if the Comptroller and the taxpayer come to an agreement, there will then be an amendment to the tax, and the amended tax will be paid to the Comptroller. But if the Comptroller and the taxpayer, on the notice of objection, cannot come to an agreement and - these are the operative words, Mr Speaker, Sir - if the Comptroller so signifies to the taxpayer that he cannot agree with the taxpayer, then and only then will the right of appeal, so far as the taxpayer is concerned, arise. On notification from the Comptroller that he cannot agree with the taxpayer, then within seven days of such notification, a notice of appeal must be filed and the matter then goes to appeal. That is the position under the existing law.

What will be the position after these amendments have been passed? The position will be that, as soon as the Comptroller raises his assessment, the tax must be paid within 30 days. The taxpayer's right of appeal will only arise if he files a notice of objection within 30 days and, mark these words, Mr Speaker, Sir, if the Comptroller signifies to the taxpayer that he is not in agreement with his objection. So that if the Comptroller, under the new law, keeps quiet about the notice of objection, the right of appeal does not arise. In this case, the Government can have the cake and eat it too. I know of cases, Mr Speaker, Sir - and here I am prepared to give facts and figures to the Minister, if he wishes me to, in writing - now pending before the Comptroller where notices of objection have been given, but no agreement has yet been reached between the Comptroller and the taxpayer, with the result that no appeals can arise. That position now is all right so far as the taxpayer is concerned, because tax also need not be paid. But when the position is that tax must be paid within 30 days, you can imagine, Mr Speaker, Sir, what hardship can be caused to the taxpayer.

Let us take a hypothetical case - this is not unusual - where notice of objection has been given but agreement has not been reached between the Comptroller and the taxpayer, and no intimation to that effect, in writing, has been passed on to the taxpayer. Two years elapse and then the Comptroller says, "I do not agree to your objections." The right of appeal then arises. A notice of appeal is filed, and another two years is taken before the appeal is heard - I was told that that is the normal length of time. So four to five years could elapse, Mr Speaker, Sir, before the taxpayer could have his case heard. The Finance Minister is laughing, but it could happen because he himself has told the House that from the time of objection to now - two to three years - nothing has been done by the Board. I am telling the Minister that two to three years have passed in the Office of the Comptroller and he has not signified his dissent to the taxpayer. I think two and three makes five - I believe that is good finance, too. So the Government says, "Pay the tax within 30 days, but the determination of your rights must wait for another five years." I do not think any decent Government, however anxious it is to collect tax, would leave the taxpayer in such a position. I do not know whether it would be necessary to amend the Ordinance to secure a statutory right on the part of the taxpayer to call the Comptroller to give his decision within a stated period. But perhaps the Minister himself, under the new section 3A, might now be able to do it by giving a general direction to the Comptroller that in such matters he must say "yea" or "nay" within 30 days. I hope that one of the more pleasanter duties of the Minister, when he gets his power under the new section 3A, will be to issue a general direction to the Comptroller to the effect that in future he shall say "yea" or "nay" within 30 days.

3.00 p.m.

Dr Goh Keng Swee: Mr Speaker, Sir, the Member for Farrer Park has brought up very clearly the reason why it has been necessary to bring about the amendments that we are seeking from the Assembly. He has given instances of delays resulting from the lodging of an appeal or an objection against an assessment. It is because the present Ordinance makes it so attractive for taxpayers to lodge an objection that we have such a large number of objections raised that it is not possible, within the resources of the Income Tax Department, to deal with them expeditiously. This has a cumulative effect in that the moment people know that there will be delays in giving a decision on this from the Comptroller, there is all the more an incentive to lodge an objection until we get to the ridiculous stage where it may take four to five years to bring about finality in these matters. I can assure you, Mr Speaker, Sir, that when the taxpayer has to pay his tax first, we shall not find large queues of taxpayers lodging objections, and the fears which the Member for Farrer Park has just expressed will not be realised.

Question put, and agreed to.

Bill accordingly read the Third time and passed.