Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC, at the Second Reading of the Income Tax (Amendment) Bill
(Bill No. 38/2020)
Sir, the Bill covers a broad range of issues, including the implementation of measures announced in the Unity Budget and COVID-19 crisis measures in the later Budgets.
I have spoken up previously on our COVID-19 support measures, and I am supportive of the increased financial support that we are providing in these difficult times.
In this speech, I will focus instead on another important issue – tax avoidance. This Bill proposes significant changes to strengthen our tax avoidance regime.
I have three points to make on these changes.
Test for tax avoidance arrangements
My first point is on the test for tax avoidance arrangements.
The Bill proposes to repeal and re-enact Section 33, which allows the Comptroller to disregard tax avoidance arrangements.
The test for tax avoidance is set out in the case of Comptroller of Income Tax v AQQ  SGCA 15 which sets out a scheme and purpose approach for interpreting section 33.
CIT v AQQ remains the landmark decision for the approach to applying section 33 and has been followed in subsequent cases.
The IRAS e-Tax Guide on anti-avoidance provisions also states that the Comptroller adopts an approach based on the principles set out by the Court of Appeal in the CIT v AQQ case.
Can Minister clarify if the existing test for tax avoidance in CIT v AQQ continues to apply to the re-enacted Section 33?
Principles for determining tax avoidance
My second point is on the principles for determining tax avoidance.
To determine whether there was tax avoidance, CIT v AQQ requires that the Court look at whether the use of a specific provision in the ITA was within the contemplation of Parliament.
However, the bulk of the guidance on what constitutes tax avoidance has been provided by the Comptroller in the IRAS e-Tax Guide or in case law, rather than Parliament’s clarification on whether certain uses of the ITA provisions constitute tax avoidance.
Can Minister clarify if the arrangements listed in the IRAS e-Tax Guide should be understood as arrangements that Parliament considers as tax avoidance?
Comptroller’s discretion in pursuing tax avoidance arrangements
My third point is on the comptroller’s discretion in pursuing tax avoidance arrangements.
Under the current Act, the Comptroller “may” disregard tax avoidance arrangements. The new Section 33(2) proposed by the Bill replaces “may” with “must”.
In response to public feedback that the Comptroller should be allowed to retain discretion on whether to take action against tax avoidance arrangements, the Ministry stated that the amendment is consistent with the strong stance taken against tax avoidance in Singapore.
While I agree that with the strong stance against tax avoidance, the new Section 33A(7) also provides that the Minister may “for good cause, remit wholly or in part any surcharge or interest payable under this section”. The surcharge here refers to the 50% surcharge that must be paid if a tax avoidance arrangement is found, on top of any penalty.
The ability of the Comptroller to remit the surcharge or interest appears to be slightly inconsistent with the strong stance we have taken against tax avoidance.
Can Minister clarify under what circumstances the surcharge or interest may be remitted? What constitutes “good cause”?
Sir, notwithstanding these clarifications, I stand in support of the Bill.
Watch the speech here