Hong Kong tax evasion reports increase... but fewer investigations completed by Inland Revenue
Post study reveals fall in number of investigators as unit’s budget soars
A surge in reports by the public of tax evasion and avoidance has not been met with a corresponding rise in completed cases, with the number of probes finalised by the Inland Revenue Department (IRD) actually falling.
As companies and individuals face a wave of new probes by the taxman from the so-called Panama Papers, the Sunday Morning Post can reveal that in the past five years reports of evasion and avoidance have climbed 25 per cent towards 1,900 cases.
Despite the rise, a Post study of the IRD’s performance from 2000 to 2015 shows the number of tax probes completed each year has fallen from 1920 to 1800. The number of specialist investigators hired by the taxman has also fallen, down from a peak of 257 in 2001-2002 to 240 in 2014-15.
Despite the fall in manpower, the Field Audit and Investigation team’s budget has soared, swelling from HK$168.6 million in 2000-01 to HK$213m in 2014-15.
Hong Kong and the mainland topped a global list of individuals and companies hiding money in secretive offshore tax havens, accounting for one in four of the 366,000 overseas shell companies listed in the Panama Papers database.
It is not illegal to keep money offshore but the revelations raise concerns about accountability and transparency.
A spokeswoman from the tax office said it “will take necessary actions based on information obtained by the Department itself or received from other sources. IRD will follow up and, where warranted, conduct further investigation”. The IRD would not comment on the fall in staff numbers and the increased number of complaints.
The data comes after the Commissioner of Inland Revenue, Wong Kuen-fai, said prior to the latest leak the authorities would “follow-up” on the database released by a group of investigative journalists, but provided no detail on how they would pursue it.
“The IRD can similarly pull together some resources to do the same job,” said accountancy sector lawmaker Kenneth Leung, who has been outspoken on the tax disclosures, calling for the taxman to get more funding and resources to thoroughly investigate the Panama Papers.
“But of course, the [IRD] would need to increase its resources to deal with the reports. They just cannot ignore it.”
The lawmaker said the IRD would have legitimate reasons to ask the taxpayer what the offshore company has been doing, if there was any transaction between companies or individual subject to Hong Kong tax to ensure they are not siphoning profits offshore.
Efforts by investigators have yielded HK$2.8 billion in back taxes and penalties in the last financial year, however, it is down on the HK$6.9bn clawed back in 2011-12, and the overall rate of success in cracking down on evasion and avoidance is flatlining over a longer period of time.
