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Company director gets two years' jail for tax evasion

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A company director convicted in the District Court of evading profits tax was today (July 3) jailed for two years, the longest jail term imposed in a tax evasion case.

The sentence prompted a warning from Acting Commissioner of Inland Revenue, Mr Tam Kuen Chong, who said tax evasion was a criminal offence under the Inland Revenue Ordinance and the Inland Revenue Department would carry out prompt investigation and institute prosecution action as appropriate.

Upon conviction, the maximum penalty for each charge is three years' imprisonment and a fine of $50,000 plus a further fine of three times the amount of tax evaded.

The defendant, aged 46, pleaded guilty to eight counts of wilfully and intentionally assisting another person to evade profits tax. The charges comprised four counts of omitting proceeds of sales from the profits tax returns of a company for the years of assessment 1997-98 to 2000-2001, contrary to section 82(1)(a) of the ordinance and four counts of making use of fraud, art or contrivance, to falsely state in the accounts of the company payments made to suppliers and sub-contractors for the years of assessment 1997-98 to 2000-2001, thereby reducing its assessable profits for the relevant years, contrary to section 82(1)(g) of the ordinance.

The defendant was the shareholder and director of a computer label company which engaged in the manufacturing and trading of woven labels. An investigation by the department revealed that the company issued two types of sales invoices. One type was computer-generated and issued in the company’s name and the second was handwritten and issued in name of a sole-proprietary business formerly operated by the defendant. The sole-proprietary business had ceased operation early in 1994.

For the relevant years the company omitted from its profits tax returns proceeds of sales in respect of all those handwritten invoices. The total amount of sales omitted was $3,171,040.

The court was told that the defendant also used false invoices to claim purchases and other expenses in the company’s accounts, thereby reducing its assessable profits. The total amount of expenses falsely claimed for the relevant years was $2,782,580.

The total amount of profits understated was $5,953,620 and the resultant total tax evaded was $961,978 for the relevant years of assessment.

Ends/Tuesday, July 3, 2007

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