When tax is due, the government must take firm action to collect

Audit Commission report on the Rating and Valuation Department’s poor record makes for sobering reading: HK$172 million in unpaid levies

PUBLISHED : Thursday, 28 April, 2016, 10:17pm
UPDATED : Thursday, 28 April, 2016, 10:17pm

Governments around the world are infamous for being lax when it comes to public finance. Our government is no exception, as evidenced by an array of tax and management irregularities exposed by the Audit Commission last week . Take, for instance, the Rating and Valuation Department. It is astonishing to learn that the total amount of outstanding rates and rent has reached a staggering HK$172 million. Of this, HK$54 million – or nearly one-third – has been due for two years or more. A landlord with 16 properties even dodged the levies – amounting to HK$1 million – for nine years. It was not until December that the case was referred to the Lands Department for action.

The total default amount is more than that earmarked by Financial Secretary John Tsang Chun-wah for increasing residential care places for the elderly this financial year. The revelation does not square with the department’s aspiration to be a “world-wide model” that “provides equitable valuations for efficient and timely collection of rates and rents”.

Hong Kong government owed HK$172 million in rates and rent

In 2012, the department issued more than 3,000 notices to 116 buildings known to have 800 subdivided units for more details; only 44 reported that such units existed. The result? The department simply stopped asking for such information, saying it was not cost-effective to do so.

With millions of assessments to handle each year, the department has a heavy workload. While limited manpower and resources are valid issues, they are not excuses for inertia and slack enforcement. The auditor has rightly expressed concerns over the accuracy of rates assessment, as usually about one-fifth of the notices to file property details for evaluation are ignored. This is compounded by the fact that the department only cross-checks, on average, some 240 of the 300,000-odd returns each year. A random check by the auditor found three in 10 cases had inaccurate information.

Paying on time is, of course, the responsibility of property owners. But there are always those who do not comply. That makes strict enforcement and punishment all the more important. But the audit report gives the impression that officials are remiss when it comes to going after property owners who do not take their legal responsibilities seriously. This is not just unfair to those who pay on time. The current 5 and 3 per cent levies on rates and rent, respectively, amount to more than HK$30 billion in revenue for the government each year. Unless these systemic problems are tackled, there will be serious financial implications.