 |
|
 |
The Field Audit and Investigation Unit is responsible for conducting field audits and investigations on businesses and individuals with a view to combating tax evasion and avoidance.
Back tax is assessed and penalties are generally imposed where discrepancies are detected. During 2008-09, the Field Audit and Investigation Unit completed 1,862 cases (including avoidance and prosecution cases) and assessed back tax and penalties of about $2.2 billion (Figure 32).
Figure 32 Results of the Field Audit and Investigation Unit
| |
|
2005-06 |
|
2006-07 |
|
2007-08 |
|
2008-09 |
|
| |
Number of cases completed |
1,873 |
|
1,875 |
|
1,864 |
|
1,862 |
|
| |
Understated earnings and profits ($m) |
10,934.9 |
|
10,474.8 |
|
12,133.2 |
|
9,084.7 |
|
| |
Average understatement per case ($m) |
5.8 |
|
5.6 |
|
6.5 |
|
4.9 |
|
| |
Back tax and penalties assessed ($m) |
2,118.3 |
|
2,196.2 |
|
2,528.5 |
|
2,181.2 |
|
| |
Back tax and penalties collected ($m) |
2,189.2 |
|
2,444.6 |
|
2,548.3 |
|
2,566.6 |
|
Field Audit
 Field audit is conducted on both corporations and unincorporated businesses. The work of field auditors entails site visits to business premises and examination of accounting records of taxpayers in order to ascertain whether correct returns of profits have been made.
In 2008-09, there were 17 Field Audit sections.
Anti-tax Avoidance
Two of the 17 Field Audit sections concentrate on tackling tax avoidance schemes, whereas other investigation officers and field auditors handle avoidance cases on an operational need basis.
During 2008-09, the Field Audit and Investigation Unit completed 218 tax avoidance cases and assessed back tax and penalties of about $530 million (Figure 33).
Figure 33 Results of the audit on tax avoidance cases
| |
|
2005-06 |
|
2006-07 |
|
2007-08 |
|
2008-09 |
|
| |
Number of cases completed |
209 |
|
195 |
|
188 |
|
218 |
|
| |
Understated earnings and profits ($m) |
4,542.3 |
|
4,608.9 |
|
4,246.7 |
|
1,978.4 |
|
| |
Average understatement per case ($m) |
21.7 |
|
23.6 |
|
22.6 |
|
9.1 |
|
| |
Back tax and penalties assessed ($m) |
624.2 |
|
778.6 |
|
591.0 |
|
527.1 |
|
|
Investigation Investigation officers are responsible for conducting in-depth investigations where tax evasion is suspected, and taking penal action (including prosecution proceedings in appropriate cases) to create a deterrent to tax evasion.
In 2008-09, there were 5 Investigation sections.
Prosecution
One of the 5 investigation sections focuses on criminal investigation of tax evasion.
Tax evasion is a serious crime. If a person is convicted of tax evasion, the Inland Revenue Ordinance provides for a maximum custodial sentence of three years.
In 2008-09, the Department instituted prosecution on 3 cases involving the making of false or incorrect statements in connection with claims for dependent parent allowances and additional dependent parent allowances. The taxpayers in 2 cases were convicted and were fined and sentenced to 2 months' imprisonment respectively. The other case was mentioned before the court within the year and the taxpayer was convicted and sentenced to 6 weeks' imprisonment in May 2009.
|
Property Tax Compliance Check
In addition to conducting audits on businesses, the Unit also carries out verification checks on the correctness of rental income reported by property owners. Commencing from 2006-07, the Department broadened the scope of review to cover cases with lower rental income. In 2008-09, compliance check was completed on 60,419 property tax cases (Figure 34).
Figure 34 Results of the property tax compliance checks
| |
|
2005-06 |
|
2006-07 |
|
2007-08 |
|
2008-09 |
|
| |
Number of cases completed |
10,294 |
|
18,162 |
|
36,703 |
|
60,419 |
|
| |
Understated rental income ($m) |
330.1 |
|
201.9 |
|
258.1 |
|
257.6 |
|
| |
Back tax and penalties assessed ($m) |
40.9 |
|
25.6 |
|
33.0 |
|
33.8 |
|
|
|
|
