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Safeguard Our Tax Files

The tax records kept by the Inland Revenue Department (IRD) contain an array of biographical and financial details about us which are private and personal. Section 4 of the Inland Revenue Ordinance (IRO) provides protection of their confidentiality in the normal circumstance.

The IRD also possess wide powers to obtain information to an almost unlimited extent. These powers are enforceable by even greater power of imposing fines, search and seizure. The Legislative Council has granted these extensive powers to the IRD for the "sole' purpose of collecting tax revenue. However, the bountiful information kept by the IRD has recently caught the prying eyes of other law enforcement agencies such as the police and the ICAC.

Naturally, the police and the ICAC have their own powers to obtain information, to order search and to seize records. These powers are tailored to the specific needs of crime and corruption fighting. But the use of these prescribed powers are actually more restrictive than those currently enjoyed by the IRD. Getting access to tax records by legislating through the "backdoor" therefore offers a tempting option. By a simple stroke of pen in the name of crime fighting, the police has already gained access under new legislations passed in the past two years to all our tax records which are neither intended for their eyes nor obtained for the purpose of fighting crime in the first place.

The powers of the police to temper with the integrity of tax records now exist under section 20 of the Drug Trafficking (Recovery of Proceeds) Ordinance (DTO) and section 3-5 of the Organised and Serious Crime Ordinance (OSCO). The ICAC is in the legislative process of asking for similar powers under the Prevention of Bribery (Miscellaneous Provisions) (No. 2) Bill 1995 (PBO). The most recent Inland Revenue (Amendment) (No. 3) Bill 1995, which involved exchanging of information under bilateral double taxation relief arrangements with other jurisdiction, can also have the potential effect of cracking section 4 of the IRO wide open. These new legislations taken together pose a serious threat to the confidentiality of our tax records.

I am sure that we all wish to help in fighting crime and corruption. But a balance must be struck between our right to privacy, proper legislative intent and the granting of adequate powers to law enforcement agencies to do a proper job. There is a point where enough is enough.

The most obvious danger of these "backdoor" legislation is that the police or ICAC can go on a "fishing expedition" anytime by combing through our tax files to look for clues (rather than seeking collaborative evidence) of crime. The less obvious danger is that our personal details, sensitive commercial information and confidential contracts and agreements etc. may be paraded in an open court as evidence. At present, all these can happen behind our back and without our explicit knowledge or consent.

Eric has raised these grave concerns with the administration under the PBO Bill Committee. The administration has willingly acknowledged my concerns and we now working on some effective safeguards:-

1. In addition to giving me firm assurance on record that the administration will only make an application to access tax records most sparingly, say few times in a year; the ICAC will further develop internal guidelines to strictly require the personal authorization of the Commissioner or the Deputy Commissioner in order to make such an application. Eric will also monitor the frequency of requests for access to tax records on a periodical basis by asking questions in LegCo.

2. At present, an exparte application must be made to the court on a general ground of public interest for access to tax records. Eric has asked the Attorney General's Chamber (AGC) to expressly state in the law all the legitimate grounds of public interest including the balanced view of preserving taxpayers' needs for confidentiality. The AGC has also been asked by Eric to work out a procedure to notify the affected taxpayers in the event that his/her tax records may be used in an open court. The taxpayer must be granted the right to object and to argue his/her case in court before his/her records can be used as evidence publicly.

3. Eric strongly urged the administration to restrain itself in introducing similar new legislation to LegCo in future. Hong Kong cannot afford to have any further erosion of tax confidentiality which will undermine investors' confidence and our right to privacy.

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