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Businessman convicted and fined for tax evasion

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Magistrate Woo Huey-fang of Tsuen Wan Magistrate's Court today (April 18) sentenced a construction timber businessman for 4 counts of tax evasion offences to a fine of $6,000 and a further fine of $806,000 which was equivalent to 90% of the total tax evaded.

The defendant, aged 58, was prosecuted on 4 counts of making incorrect tax returns to evade tax without reasonable excuse by understating the assessable profits of a company in his tax returns for the years of assessment 1994/95, 1995/96, 1996/97 and 1997/98, contrary to section 80(2)(a) of the Inland Revenue Ordinance. The defendant pleaded guilty to all the 4 charges.

The Court heard that during the relevant years, the defendant was the sole-proprietor of the company which was engaged in the trading of timber used for construction purposes. The amounts of assessable profits of the company as reported by the defendant in the submitted returns for each of the 4 years of assessment ranged from $54,933 to $975,269, totalling about $1.4 million for the 4 years. On the basis of these returned profits, the tax payable by the defendant would have been about $130,000 in total.

Investigation by the Inland Revenue Department (IRD) of the defendant's tax affairs revealed that the assessable profits of the company for the said 4 years of assessment were in the region of $1.4 million to $2.5 million a year and the total tax payable should exceed $1 million. The Court also heard that satisfactory accounting records were kept by the company at all relevant times from which the correct profits of the business could be readily ascertained.

In his tax returns for the years of assessment 1994/95, 1995/96, 1996/97 and 1997/98, the defendant had understated the assessable profits of the company by $5,547,784 and the resultant tax undercharged was $897,073 in total. The understatement represented 73% of the business' total assessable profits or 81% of the total tax payable by the defendant for the 4 years.

An IRD spokesman said that tax evasion is a criminal offence with the maximum sentence of 3 years' imprisonment and a fine of $50,000 on each charge, plus a further fine equivalent to three times the amount of tax undercharged.

End/Wednesday, April 18, 2001

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