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(Source : Information Services Department)

Community service order and fine for taxpayer falsely claiming expenses for self-education and approved charitable donations


     A taxpayer was convicted on January 22 at the Tsuen Wan Magistrates' Courts of wilfully making false statements in four tax returns with intent to evade salaries tax. He was sentenced today (February 5) to 200 hours' community service and fined a total of $278,800, equivalent to 200 per cent of the tax evaded, after being remanded for 14 days.

     The defendant, aged 47, is a regional sales director for a property agency company in Hong Kong. He was charged with four counts of evading tax, wilfully with intent, by making false statements in connection with claims for deduction of expenses for self-education and approved charitable donations in his tax returns for the years of assessment 2007-08 to 2010-11, contrary to section 82(1)(c) of the Inland Revenue Ordinance (IRO) (Cap. 112). The defendant pleaded not guilty to all four charges.

     The court heard that the defendant claimed in his tax returns the deduction of expenses for self-education at $60,000 for each of the years of assessment 2007-08 and 2010-11; and $70,000 and $80,000 for 2008-09 and 2009-10 respectively. The defendant's total deduction claim for self-education expenses for the four years of assessment was $270,000. The defendant also claimed deduction of approved charitable donations totaling $580,000, being $100,000 for each of the years 2007-08 and 2008-09; $150,000 for 2009-10 and $230,000 for 2010-11.
     An investigation by the Inland Revenue Department (IRD) revealed that the defendant failed to produce any evidence in support of his deduction claims for self-education expenses for 2007-08 and 2008-09 and approved charitable donations for 2007-08 to 2010-11. For 2009-10 and 2010-11, the defendant produced eight receipts for some private language lessons, purportedly issued by an institution which was not an education provider as specified under the provisions of the IRO. The total amount of the false deduction claims for the four years was $850,000 and the total tax evaded was $139,400.

     The IRO provides that self-education expenses paid for prescribed courses or examination fees paid to specified education providers or associations and a donation of money to any charitable institution or trust of a public character which is exempt from tax under section 88 of the IRO or to the Government for charitable purposes are tax deductible. Documentary evidence in support of deduction claims should be retained for seven years (i.e. six years after the expiration of the relevant year of assessment). The IRD will conduct random checks on deduction claims. Taxpayers will be asked to produce supporting documents when their cases are selected for audit.

     A spokesman for the IRD reminded taxpayers that tax evasion is a criminal offence under the IRO. 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.

Ends/Friday, February 5, 2016
Issued at HKT 15:16