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Director convicted for assisting other person to evade tax

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Judge Poon of the District Court today (February 26) sentenced a company director for 5 counts of offences, for wilfully with intent assisting other person to evade tax, to 9 months immediate imprisonment plus fines of $90,000 and further fines of $2,062,048, which was equivalent to 2 times of the total tax evaded.

In delivering the sentence, Judge Poon pointed out that deliberate defrauding the Inland Revenue Department (IRD) is a serious matter which affects the community as a whole. Non-custodial sentence is not an appropriate sentence for this case.

The defendant was prosecuted on 5 counts of wilfully with intent assisting other person to evade tax viz., 2 counts by omitting proceeds of sales from the profits tax returns of a company, contrary to section 82(1)(a) of the Inland Revenue Ordinance, and 3 counts by making use of fraud, art or contrivance, contrary to section 82(1)(g) of the Inland Revenue Ordinance. The defendant pleaded not guilty to all the 5 charges.

The Court heard that during the relevant years, the defendant was the director and shareholder of a company engaged in the trading of industrial engineering products. Investigation by IRD officers revealed that the company issued two types of cash sales invoices, one type with serial numbers bearing alphabetic prefix and another with serial numbers bearing no alphabetic prefix.

For the years of assessment 1994/95 to 1996/97, the company omitted from the profits tax returns, which were submitted to the IRD, the proceeds from the sales in respect of all those cash sales invoices with serial numbers bearing no alphabetic prefix. The amount of omitted sales involved was about $6.25 million. The defendant signed the accounts which were accompanied with the 3 returns, and signed the returns for the years of assessment 1994/95 and 1995/96.

The Court also heard that the defendant concealed the aforementioned omitted sales by keeping two separate sets of accounting records for the company and operating an undisclosed personal bank account. It was revealed that the proceeds from these omitted sales were deposited into a personal bank account which was opened in the names of the defendant and the company's book-keeper. The money was then shared between the defendant and another director, who was also a shareholder, of the company. As a result of using such fraud, art or contrivance, the assessable profits of the company had been understated in the amounts of $796,027, $2,787,472 and $2,665,133 for the years of assessment 1994/95, 1995/96 and 1996/97 respectively. The total profits tax undercharged was over $1 million.

A spokesman for the IRD said that tax evasion and assisting other person to evade tax were criminal offences with the maximum sentence of 3 years' imprisonment and a fine of $50,000 on each charge, plus a further fine equivalent to 3 times the amount of tax undercharged.

End/Monday, February 26, 2001

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