As we consult with our clients on structuring a business and its activities, we often have to check ourselves as to whether we are helping the client to manage its tax exposure efficiently as compared to facilitating the client in avoiding tax.
What is it that so difficult, you may ask. Just go and find out the definition of tax planning and tax avoidance and; just follow the letters of the law.
Dr Richard Hu, the then Minister of Finance back in 1999, attempted to give some meat to the meaning of tax avoidance in the second reading of the bill to adopt Section 33A of the Stamp Duties Act. He said,
- tax avoidance schemes are purely tax driven, with little or no commercial value or rationale.
- tax planning are activities/ schemes structured to be tax efficient in accordance with the relevant tax laws.
But am I any wiser after the reading that? I don’t think so.
As we push the boundary of tax planning, are we edging closer to tax avoidance?
In my next posting, I will cite a real case for discussion.
Source – Lim Gek Khim, “Tax Planning – When does it become tax avoidance”, Singapore Accountant, Sep/Oct 2008.