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I also seek to amend the proposed section 9A by adding subsection (6A)(a) to deal with the situation whereby the service company provides the services of more than one individual under the agreement. By virtue of this amendment, the proposed anti-avoidance provision will apply to the individuals individually, and not collectively.

Finally, as I have made clear earlier, it is not our intention to target professional practitioners using a service company in this legislative exercise. To clarify this, we specify in the proposed section 9A(6A)(b) in respect of sole proprietorship or partnership the circumstances under which the new anti-avoidance provision will not apply.

Mr President, I beg to move.

End/Wednesday, July 5, 1995

Inland Revenue (Amendment) Bill: committee stage (new clause)

1

Following is the speech by the Secretary for the Treasury, Mr KC Kwong, at the committee stage to add a new clause to the Inland Revenue (Amendment) Bill 1995 in the Legislative Council today (Wednesday):

Mr Chairman,

I move that new clause 3 as set out in my name in the paper circulated to Members be read the second time.

Some Members have expressed concern that the Bill may impose an onerous burden on the employers. The reporting requirements under the Inland Revenue Ordinance would apply to the employers if the service agreement falls within the ambit of the proposed section 9A. Whilst an employer should know very clearly whether a contract with a service company is in effect one for the provision of services by a particular individual, it may be difficult for him to know or verify whether the individual in fact controls the service company. He may therefore not be in a position to judge whether the agreement is one which falls within the ambit of the proposed section 9A. This is especially the case for small businesses which may not be able to seek professional advice.