Hong Kong Tax Revenue Falls

by Mary Swire, Tax-News.com, Hong Kong

07 May 2010

The Commissioner of Hong Kong’s Inland Revenue Department (IRD), Chu Yam-yuen has announced that tax collections fell by 6% in the 2009-10 financial year, with a substantial decrease in profits tax being partly offset by a rise in stamp duty and property tax.

The IRD collected HKD179.1bn (USD23.1bn) in revenue in the 2009-10 financial year. The global economic crisis certainly affected tax collections, with profits tax revenue dropping 26% to HKD76.6bn. Salaries tax revenue grew by 6%, since the level of tax reduction for the 2008-09 assessment year was, on the whole, less than last year.

On the other hand, with the recovery in the property market, stamp duty rose 32% to HKD42.4bn and collections of property tax surged 102% to HKD1.7bn.

Chu Yam-yuen forecast that total revenue collected in 2010-11 will be about HKD166bn, down 7%. Earnings and profits tax revenues will remain at about HKD123bn, while stamp duty will fall to HKD30bn.

The IRD is now sending out just over 2m individuals' tax returns for submission by June 3. It will grant an automatic one-month extension to all e-filers to encourage online filing of tax returns. A three-month period is also allowed for sole proprietors of unincorporated businesses. The filing deadline is August 3, which is extended to September 3 for eTAX filers.

This year the department has extended its e-filing service to cover small businesses, including companies and partnerships, by extending the meaning of "small" business to include those having gross annual income of HKD2m or below. The director, secretary or manager of a small company, or the leading partner in the case of a small partnership, can file their company's profits tax returns online via their own eTAX accounts.

In addition, in reply to a question in the Legislative Council, the Secretary for Financial Services and the Treasury, K C Chan, disclosed that, as at March 31, 2010, there were around 28,300 cases with salaries tax overdue, involving about HKD1.6bn, and some 5,000 cases with profits tax overdue, amounting to about HKD5.9bn.

He added that the provisional total of back tax assessed and penalties in 2009-10 was almost HKD2.6bn, reaching the figure seen in 2007-08 after falling back to HKD2.2bn in 2008-09. He assured the questioner that the IRD has dedicated teams to combat tax evasion. In order to enhance the effectiveness of countering tax evasion, Chan said that the IRD may adjust the criteria for selecting cases for audit in the light of the prevailing social circumstances, as well as the development and changing business practices of individual industries.

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