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The amendment to Clause 1 is a technical one as the present Bill, if passed today, will be the second amendment to the Inland Revenue Ordinance in 1995.
Most of the amendments to Clause 2 are technical in nature, but I would try to explain briefly the main ones which are of particular concern to the Bills Committee.
First, I propose to add section 9A(1A) to cater for situations where the remuneration under a service agreement includes items other than the remuneration for the services rendered by the individual (i.e. the employee). In these circumstances, the "employee" or the "employer" should be able to advise the Commissioner of Inland Revenue what is the exact amount of the remuneration for the services and what is not. We therefore believe, and the Bills Committee agreed, that it is reasonable to put the onus on them to satisfy the Commissioner that certain sums are not related to the services rendered and thus should be excluded from the remuneration for the assessment of salaries tax. Subject to such an exclusion, the Commissioner will otherwise treat the whole remuneration under the agreement as the amount chargeable to salaries tax accordingly.
I also seek to amend the proposed section 9A(2) to exclude genuine contractors, for instance, home decorators or architects, who are required under a service agreement to carry out services personally but who also provide the same or similar services to other clients at the same time. These are contracts for services, not contracts of employment.
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An amendment to the proposed section 9A(3) is necessary to clarify the circumstances under which business agreements bearing some of the common characteristics of employment may be granted relief at the Commissioner's discretion if the Commissioner, having examined the full picture of the case, is satisfied that the nature of the relationship between the parties does not constitute an office or employment of profit. This is an escape provision.
After careful discussion in the Bills Committee, I now seek to delete the proposed section 9A(4). A Privy Council case from New Zealand, which has persuasive authority in Hong Kong, established that the general anti-avoidance provision can be applied notwithstanding that a specific anti-avoidance provision has been put in place. We firmly believe that the principle is applicable in Hong Kong. This is by no means double jeopardy. The proposed subsection (4) sought to do no more than spell out this point in order to avoid doubt. The consensus we reached in the Bills Committee, however, is that we should leave the legal position as it is and allow the courts to decide and the common law to develop. But meanwhile, we will apply both the general and the specific anti-avoidance provisions where necessary.