US officials in rare HK trips to audit tax returns

PUBLISHED : Monday, 12 October, 2009, 12:00am
UPDATED : Monday, 12 October, 2009, 12:00am

The long arm of United States tax enforcement extended its reach further into Hong Kong last month as squads of high-level officials made rare trips to the city to audit American tax returns and discuss a voluntary disclosure programme, according to people familiar with the situation.

Two teams of US Internal Revenue Service (IRS) agents - with at least two international division auditors and five criminal investigators - reportedly visited Hong Kong in mid-September in separate trips.

The people said the auditors were reviewing certain individuals' US tax returns and gathering supporting information to verify the claims. The trips were part of an IRS programme to collect a comprehensive amount of information on random targets for research purposes.

'I have never seen one of these in my 16 years of working in Hong Kong,' said one person with knowledge of the audits. 'These are randomly selected returns that evidently happen all the time, but historically the IRS just ignored the ones for overseas taxpayers because of all the time and money involved in conducting those audits.'

Around the same time last month, a handful of IRS investigators gave a presentation at the American Chamber of Commerce in Hong Kong to a standing-room-only crowd of lawyers, tax consultants, organisation members and other officials. The agents discussed the foreign bank account reporting requirements for overseas Americans and the penalties of non-compliance.

'Part of our job at the chamber is to get the word out on these issues as best we can,' said Richard Vuylsteke, the president of AmCham in Hong Kong.

'If people haven't heard about these requirements, they should check the IRS website, and if they have heard about them, they should tell their friends.'

The IRS set up a voluntary disclosure programme this year for US citizens to announce previously unreported income from offshore bank accounts in exchange for leniency. Otherwise, individuals who have not complied with existing tax reporting regulations could face substantial fines and possible prosecution.

The US is one of only a few major countries in the world that requires its citizens living abroad to pay taxes on their foreign-earned income. And the IRS has tightened its enforcement of this requirement in recent years amid suspicion that increasing numbers of Americans may be dodging their taxes by moving abroad, setting up offshore bank accounts and opening up offices overseas.

In Hong Kong, the IRS has an attache and a special agent reporting to the bureau's criminal investigation division, according to two people with knowledge of the matter. The US consulate verified that there is an attach? in the city, but neither confirmed nor denied the posting of a special agent or any other related officials.

The IRS assigns agents to strategic foreign locations to gather information and assist in international investigations - among other things - according to its manual.