There is no equity about tax

THE editorial “Tackling aggressive tax planning” (The Star, Jan 18) raised an important policy issue that impacts the business and industrial sectors.

I wish to correct certain misperceptions on tax liability and tax enforcement issues. The Inland Revenue Board’s setting up of the Aggressive Tax Planning Division under the Special Task Department is a good step towards enhancing tax collection governance and ethical compliance.

However, tax collectors must take diligent note that there is no equity about a tax.

Senior Professor Dr Leo Desmond P. in his book Revenue Law in Singapore and Malaysia states that the law on taxation is neutral.

It neither supports nor demonises the tax payers/tax collectors. This rule that “there is no equity about a tax” is given due recognition in both Commonwealth and civil jurisdictions.

I am reminded of the landmark case of Cape Brandy Syndicate v. IRC (1921), where Rowlat J. reminded taxpayers and tax collectors of this clear rule in paying taxes or otherwise:

“In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing to be implied. One can only look at the language used.”

Thus, when the language of a taxing statute is clear, if an assessee falls within the four corners of the statute, he is to be taxed; if not, no tax is to be levied.

In summary, what it means is: a taxpayer will only pay tax if it is due. And if he avoids paying these taxes, then this is an offence, by whatever name (i.e. tax avoidance or tax evasion, etc).

Taxpayers are advised by the Government and agencies to be competitive and ensure business efficiency at all levels to remain afloat in the red ocean.

In practical fact, how do we strike a deal in mediating conflicting rights by taxpayers on one hand and tax collectors on the other?

One golden rule is to strike a delicate balance in upholding the spirit of tax provisions.

The only person who can strike that balance is perhaps a judge in a court of law.

In the business environment, and especially so under Company Law, the objective is to make profits or revenue.

By focusing on business efficiency, business owners and boards of directors are constantly reminded of business wastage that may attract unnecessary tax liability. Hence, efficiency at business levels at different business structures (and business plan) can be used to minimise exposure to tax liability.

It is a general rule that those who earn more should pay more tax. However, those who earn less due to business inefficiency may end up paying more tax if they did not take steps to maintain business competitiveness.

To reiterate, the law on taxation is neutral. It neither supports nor demonises the taxpayers/tax collectors. What constitutes aggressive tax planning is to be decided by the court of law.

The Inland Revenue Board is obliged to implement tax collection according to the tax provisions.

The board, in upholding the spirit of tax provisions, is also obliged to carry out fair enforcement in light of the clear tax provisions given to taxpayers/business establishments.

Income inequality may be reduced not only with more tax collection but also by good use of the tax monies collected and by promoting good business practices that reduce unnecessary tax liability for the benefit and well-being of every citizen in the taxation ecosystem.

JEONG CHUN PHUOC

Shah Alam