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Hong Kong: Expats Face Tax Clampdown

Mary Swire, Tax-news.com, Hong Kong

17 November 2000


The revenue authorities in Hong Kong are hot on the heels of foreign workers not paying their dues. The Audit Director, Dominic Chan Yin-tat, has recommended that expats working in the SAR should be forced to set money aside each month to prevent them from leaving the SAR without paying their taxes.

In a report to the government, Mr Chan said Hong Kong had lost an estimated HK$213m in tax revenue in the past three years from foreign workers who had departed without settling their taxes. He said HK$59m was lost in 1997-1998, HK$77m in 1998-1999 and a further HK$77m in 1999-2000. In 20 random cases examined by the Audit Commission, the unpaid taxes averaged HK$264,766 and ranged from HK$30,080 to HK$1,238,077.


According to Mr Chan's recommendations, the government should look at giving the Inland Revenue Department (IRD) the power to make "high-risk groups'' buy Tax Reserve Certificates whilst employed so they could not escape paying up.


Acting Inland Revenue Commissioner Elmo D'Souza agreed that measures were needed to tackle the problem. He said the department was looking at legislative changes that would require employers to withhold money from foreign workers' salaries to ensure they met their tax liabilities. Mr D'Souza said the IRD would consult employer associations, chambers of commerce and tax experts before deciding whether to introduce such a proposal to the Legislative Council.


The Democratic Party's spokesman for economic affairs, legislator Sin Chung-kai, said foreign workers should be taxed each month, with employers made responsible for passing the money on to the IRD. Mr Sin said such a system would be similar to withholding taxes which are imposed by other countries. Some companies, however, are opposed to the introduction of a withholding tax because of the necessary increase in administrative costs.

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