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Suspended jail sentence for taxpayer over false claims of home loan interest


A taxpayer was convicted today (July 13) at Kwun Tong Magistrates' Courts on charges of evading salaries tax and property tax. She was sentenced to three months' imprisonment, suspended for two years and fined a total of $30,000, representing 67% of the tax evaded.

The defendant, aged 45, pleaded guilty to five charges of evading salaries tax, wilfully, with intent, by making false statements in connection with claims for deduction of home loan interest under the Inland Revenue Ordinance (IRO) for the years of assessment 1998/99 to 2002/03, contrary to section 82(1)(c) of the IRO.

She also pleaded guilty to one charge of evading property tax, wilfully, with intent, by omitting rental income, which should have been included in the property tax return for the year of assessment 2001/02, contrary to section 82(1)(a) of the IRO.

The court heard that the defendant, jointly with her husband, acquired a property in Tuen Mun in 1998. The defendant claimed deductions for home loan interest in respect of the property in her tax returns for the years of assessment 1998/99 to 2002/03 by making false statements that the property was used as her place of residence during the years of assessment in question. In accordance with these false statements, deductions were granted to the defendant in respect of the interest incurred on the mortgage of the property. Also, in the property tax return issued to the joint owners of the property for the year of assessment 2001/02, the defendant declared that the property had been left vacant throughout the year.

An investigation by the Inland Revenue Department (IRD) revealed that the defendant and her family, at all material times, resided at quarters provided to her husband by his employer. The defendant had never resided at the property at any time during the relevant years of assessment. She in fact rented the property to different tenants during the material times. Under the IRO, one of the requisite criteria for claiming a deduction for home loan interest is that the dwelling is used at any time in the year of assessment by the claimant exclusively or partly as his/her place of residence. For the five years of assessment 1998/99 to 2002/03, the defendant had falsely claimed deductions for home loan interest amounting to $315,315. The total tax undercharged was $38,554.

The investigation also revealed that the defendant let out the property and received rental income during the years 1998 to 2002. The court was told that the defendant omitted the rental income of $53,000 from the property tax return for the year of assessment 2001/02 and the resultant tax evaded was $6,157.

An IRD spokesman reminded people that tax evasion was a criminal offence under the IRO. Upon conviction, the maximum sentence for each charge is three years' imprisonment and a fine of $50,000, plus a further fine amounting to three times the amount of tax evaded.

Ends/Thursday, July 13, 2006