TAX LEGISLATION ON MARRIED WOMEN'S INCOME

Mr David Marshall asked the Minister for Finance whether he will consider introducing legislation to treat the income of married women from all sources as being the income of single women for tax purposes.

Dr Goh Keng Swee: The recent amendment to the Income Tax Ordinance to provide for separate assessment in respect of the earned income of a married woman was to adjust a longstanding inequality and to bring about a social betterment. But to extend this treatment to other sources of income would open new avenues for evading payment of tax. For one thing, a way is open for the manipulation of profits so that the husband's income can be transferred to that of his wife's so as to reduce the incidence of tax and bring about a loss to the revenue. This fact was recognised when the recent amendment was not extended to cover all kinds of professions and businesses. Moreover, an opportunity is created to bring wives into partnership which would lead to the avoidance of both income tax and estate duty. It will be appreciated that, in the absence of gift duty, which is a normal compensatory levy in place of the loss of income tax and estate duty, such loss of revenue could not be accepted.

For these reasons, I do not consider the proposal of the hon. Member a good one.

Mr David Marshall: Admitting the validity of that part of the objection raised by the Minister for Finance, Sir, would he rot recognise that, in fact, the reasons indicated are not applicable where a married woman had unearned income before marriage? She might have inherited property from which she was drawing income. Would he consider in that respect that there can be no question of evasion, making her unearned income prior to marriage taxable as a femme sole?

Dr Goh Keng Swee: Mr Speaker, Sir, I can see one immediate objection to that, and that would be the possible transfer of property from the man to his fiancee. I think this matter is not so simple as it looks. As I said, if there is in force a tax on gifts inter-vivos, then possibly the inducement to avoid income tax by distribution of property would be much less.