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First, the scope of the Bill. Our aim is to target the use of a service company to disguise an employment relationship. It is not our intention to catch genuine business arrangements. For the avoidance of doubt, I will be proposing amendments at Committee Stage to make it clear that genuine contracts for services, i.e. not employment, involving the use of a service company would not be caught by this Bill, whether the operation is in the form of sole proprietorship or partnership.
Second, certainty. The Commissioner of Inland Revenue will provide an advance ruling system in order to minimize uncertainty and potential disputes. In short, he will, upon application and the submission of the relevant documents, advise the applicants whether the service agreement in question falls within the ambit of the proposed legislation. The Commissioner will set out the details of the arrangement in a Practice Note. This will, as the Honourable Eric Li urged, be down as a matter of priority.
Third, retrospectivity. Let me reassure Members that this Bill, when enacted, will not have any retrospective effect.
Subject to the enactment of this Bill, we intend to implement the new legislation in August this year.
Mr President, with these remarks, I commend this Bill to the Council, subject to the amendments which I shall move shortly.
End/Wednesday, July 5, 1995
Inland Revenue (Amendment) Bill: committee stage (Clauses 1 and 2)
Following is the speech by the Secretary for the Treasury, Mr K C Kwong, at the committee stage of the Inland Revenue (Amendment) Bill 1995 in the Legislative Council today (Wednesday):
Mr President,
I move that Clauses 1 and 2 be amended as set out in my name in the paper circulated to Members.