Moves by the Inland Revenue Department (IRD) to close loopholes allowing property dealers to substantially reduce their stamp duty bills could prove ineffectual, senior tax sources claim. The IRD will put forward proposals to amend the Stamp Duty Ordinance to the Legislative Council next month to prevent minimisation of corporate outgoings in the area. Many property dealers and speculators have found advantage in using corporate structures - rather than the names of individuals - to trade property. The transfer of property worth in excess of HK$3.5 million gives rise to a 2.75 per cent stamp duty liability where the property is sold by an individual, but only a 0.3 per cent stamp duty where companies are the vendors. The difference between the two figures can mean hundreds of thousands of dollars on individual transactions. The IRD is looking to amend the ordinance by ensuring a full 2.75 per cent duty is paid on all such transactions, regardless of whether a property is sold by a company or an individual. In cases where the department detects that the sole asset of a company is a property, it proposes to treat the de facto sale of the property via a sale of shares as it would the direct conveyance of the site. Prominent accountants say the stamp duty move may only partly serve its purpose. Coopers & Lybrand partner Tim Lui said yesterday the proposed amendment would only deal with Hong Kong companies - leaving the door open for property speculators to use foreign vehicles to avoid stamp duty. 'Many entities registered overseas in tax havens may potentially pay zero stamp duty, if they manage to process [the sale] correctly,' Mr Lui said. Where a property was sold via the transfer of shares in a foreign-registered entity, it was still possible to avoid stamp duty, he said. Another possible avenue of avoidance involved the use of complex local corporate structures, Mr Lui said. The proposed amendments appeared to 'only attack property holding companies', he said. It was therefore possible that a speculator could trade a property by selling shares in an investment company that is the parent entity of the property holding entity, he said. He said it was still not certain if such arrangements were entirely legitimate. Other senior accounting sources who requested anonymity shared similar views on the proposed amendments. They said they believed the stamp duty move could be just an initial step in plans by authorities to more closely scrutinise the tax-paying policies of property dealers and speculators.