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Property owner jailed for tax evasion

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A property owner was convicted of tax evasion charges at the Eastern Magistrates' Court today (March 30). He was sentenced to two months' immediate imprisonment and fined a total of $180,000, representing 138% of the tax evaded. The defendant lodged an appeal against the sentence immediately and was granted bail.

The defendant, aged 39, pleaded guilty to three charges of wilfully intending to evade property tax by omitting rental income which should have been included in the Tax Returns for the three years of assessment 1997/98 to 1999/2000, contrary to Section 82(1)(a) of the Inland Revenue Ordinance (IRO). He also pleaded guilty to one charge of wilfully with intent to evade tax by making a false statement regarding the loss arising from the sale of a property in connection with a claim for deduction under the IRO for the year of assessment 2000/2001, contrary to Section 82(1)(c) of the IRO.

The defendant acquired a property in 1997 and sold it in 2000 at a loss of about $1.1 million. The defendant lodged a claim to the Inland Revenue Department that the property was acquired for trading purposes and as such, the loss arising from the sale of the property should be brought into the computation of his Personal Assessment. He falsely stated that the property was left vacant throughout the three years he owned it so as to let potential purchasers view it. In tax returns signed by the defendant, he either declared that the property was for his own use or left the relevant sections blank. An investigation by the department revealed that the property was let during the defendant's period of ownership. The omission of rental income in the defendant's tax returns was also revealed.

The court heard that if the department had accepted the statement that the property was left vacant, it would have been a factor in misleading the department to conclude that the loss was a trading loss arising from the sale. Had the defendant succeeded in his claim, the total aggregate income of his and his spouse's for the year of assessment 2000/2001 would have been completely offset by the loss incurred. The resultant total tax that would have been undercharged was $109,140. The total rental income omitted was $386,483 for the three years of assessment and the resultant total tax evaded was $20,949. The overall tax evaded was $130,089.

A department spokesman reminded people that tax evasion was a criminal offence under the IRO. On conviction, the maximum sentence is three years' imprisonment and a fine of $50,000 on each charge, plus a further fine equivalent to three times the amount of tax evaded.

Ends/Thursday, March 30, 2006

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