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philosophy. Secondly, it gives the Commissioner of Inland Revenue adequate power to tackle tax-avoidance schemes or transactions. Lastly but just as importantly, it contains sufficient safeguards against abuse of power by the Inland Revenue Department. It is envisaged that the Commissioner of Inland Revenue will exercise his power under such anti-avodiance legislation mainly against blatant tax-avoidance schemes or contrived transactions. The new sections 61A and 61B are both subject to the overriding requirement that the 'sole and dominant motive' is tax-avoidance. Therefore, they should not affect genuine business transactions or transactions not entered into principally with tax avoidance motive, or proper deductions or allowances under the Inland Revenue Ordinance. As far as leasing is concerned, the new section 39E will only affect the two types of tax-based leasing mentioned therein, which if unabated, will continue to result in huge tax deferral and possibly in some cases eventual loss of revenue to the Government. I have been assured by the Commissioner that if the Bill is passed, the anti-avoidance provision would be used with proper discretion and only when it is really necessary. I believe the deterrent effect of such provisions is of great value in protecting our tax revenue. should be no fear that we will create a tax monster. Other countries have much more drastic and complicated anti-avoidance legislation.
There
One important aspect coming out of the introduction of this Bill is the demonstration of the successful consultative process. The combined efforts of the Administration, the UMELCO Panel and the public through representations have resulted in a piece of legislation which I feel is both acceptable and suitable to Hong Kong. Few would doubt its necessity. The new legislation will go a long way to reduce tax avoidance opportunities which
It is, have hitherto been considerable under our simple tax law. however, extremely important that the Practice Notes on the new legislation containing general guidelines including tax clearance
procedures should be issued by the Inland Revenue Department as
soon as possible.
with these remarks, Sir, I support the motion.