The Inland Revenue Ordinance specifies that if a taxpayer has tax in default, IRD can issue a recovery notice to a third party requesting that third party to pay to IRD, within a stipulated time, money not exceeding the amount of tax in default held on account of the defaulter. Failure to do so will render the third party personally liable for the whole of the tax which the third party was required to pay.
However, if the employee is covered by the Employment Ordinance (Cap. 57)(“EO”), the employer must follow section 32(3) of the EO when deducting the wages i.e. the total of all deductions, including other deducted item(s) made in one wage period shall not exceed one half of the wages payable in that period except under some specified circumstances.
In the case of Mr Chan Tai Man, if his wages for the month is $40,000 and there is no other deduction, you should deduct $20,000 from the wages payable to him for payment of tax. However, if his wages for the month is only $30,000, you should deduct $15,000 for payment of tax and explain in writing that the amount of wages deducted cannot exceed the amount specified by the EO.
For details regarding the EO, please visit the homepage of the Labour Department.
Homepage of the Labour Department - Restriction on deduction from wages under the Employment Ordinance