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12 Offence & Penalty - s

12 Offence & Penalty - s - Unit 12 Offence&...

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Unformatted text preview: Unit 12 Offence & Penalties 1 LEARNING OBJECTIVES After this lecture, you should be able to: explain the meanings of tax evasion and tax explain avoidance avoidance explain the powers of the IRD to obtain explain information information explain the obligations of taxpayers and explain employers employers explain various offences and penalties 2 Tax Avoidance & Tax Evasion Tax avoidance / Tax Planning is the Tax attempt to obtain a tax benefit by legal tax legal means. means. Tax evasion is an offence punishable by a Tax offence fine and/or imprisonment. It is the illegal fine avoidance or reduction of tax liability. avoidance 3 Tax evasion IRD considers tax evasion includes: - deliberate non-lodgment of return; - deliberate understatement of income or - deliberate over-claiming deductions; - over aggressive tax planning (DIPN 11 DIPN (Revised)) (Revised)) 4 Offences There are several statutory offences There statutory Different penalties apply to different offences 5 Deemed authority & knowledge A return, statement or form return, - purporting to be furnished under IRO purporting furnished - by or on behalf of any person by - shall be deemed to have been furnished shall deemed by that person or by his authority unless by the contrary is proved & the the person signing shall be deemed to be the signing cognizant ( ) of all matters therein: cognizant s.51(5). s.51(5). 6 S.51(4B)(a) Offence A person commits a s.51(4B) offence if he, without person reasonable excuse, reasonable - fails to supply information / documents in his fails information possession in response to a written notice issued possession by an assessor to him under s.51(4)(a): s.51(4B) by (a); 7 Reasonable Excuse (see par 71-72, chapter 21) not defined in the IRO BoR cases: when a reasonable person has acted in BoR good faith and honestly believed what he did to be legal, he has a reasonable excuse. legal, 8 Reasonable excuse The followings have been held to be reasonable The excuse: excuse: late submission of return: non-receipt of tax return omission of profit: reasonable reliance on professional omission advice that the item is capital in nature and not taxable advice 9 Not reasonable excuse The followings have be held by BoR not to be The reasonable excuse: reasonable ignorance of law poor education the return was filed in English & TP did not know English reliance on bookkeepers or tax representatives or CPAs forgetfulness brought on by domestic pressures omission in return: employer has already submitted the omission Employer’s Return Employer’s incorrect return: reliance on Employer’s Return disputes between directors resulting in delay in submission disputes of tax returns of 10 S.51(4B)(a) offence - fails to attend in answer to a written notice fails issued by an AC to him under s.51(4)(b);or issued - having attended, fails to answer any any having fails question put to him under s.51(4)(b) question 11 S.51(4B)(a) penalty A maximum fine of $10,000 (level 3) will be imposed maximum $10,000 on the convicted person; on CIR may: - compound the offence; compound - before judgement, stay or compound the before stay offence; or offence; - refuse to accept payment of penalty except refuse under a judgment under 12 S.51B(4) offence A person commits a s.51B(4) offence if he person obstructs / hinders: obstructs - CIR - an authorised officer; or an authorised - an officer assisting CIR or authorised an officer officer officer in executing a search warrant under s.51B(1) in search 13 S.77(4) offence A person commits the offence if he departs / person attempt to depart HK where : attempt - a copy of a departure prevention direction has copy departure been served on him; or been - he has been verbally advised of the DPD by an he immigration officer / immigration assistant / police officer; police 14 S.77(4) offence - CIR has not authorised him to depart HK CIR not and - Court of First Instance has not suspended Court or varied the DPD so as to permit him to depart from HK depart 15 S.77(5) penalty The convicted ( ) person is liable to The - a fine at $25,000 (level 4) & fine $25,000 - imprisonment for 6 months imprisonment months 16 S.80(1) offences A person commits a s.80(1) offence if he, without person reasonable excuse reasonable - fails to supply information in support of a fails return as requested by an assessor under s.51(3); return - fails to supply a statement of assets & liabilities fails statement as requested by CIR / DCIR under s.51A(1); 17 S.80(1) offence - an officer employed by the HK Government an or public body fails to supply information in or his possession as requested by CIR under his s.52(1); s.52(1); - an employer fails to submit an employer’s an employer return as requested by an assessor under return s.52(2) s.52(2) 18 S.80(1) offence - TP fails to supply information as request by CIR in connection with his objection under s.64(2); connection - fails to attend before CIR when summoned to give fails attend evidence re an objection, or having attended, fails to objection or answer any questions put to him under s.64(2) answer 19 S.80(1) offence - fails to attend before BoR when summoned to give fails attend evidence of appeal, or having attended fails to answer any question put to him under s.68(6) answer - a corporation exempt from property tax fails to corporation notify CIR change of ownership or use of the change property in accordance with s.5(2)(c) property 20 S.80(1) offence - a corporation exempted from property tax corporation exempted fails to notify CIR change in ownership s.5(2) change (c); - fails to notify CIR cessation of a source of fails cessation chargeable income s.51(6) chargeable 21 S.80(1) offence - T chargeable to salaries tax, profits tax or chargeable PA fails to inform CIR of his leaving HK for > 1 month s.51(7); month owner of land &/or bldg fails to keep & retain proper rental record for not < 7 years rental s.51D; s.51D; 22 S.80(1) offence - an employer fails to: an employer -- notify CIR of his employee(s) --- commencement; --- commencement; --- cessation; -- --- departure from HK -- retains $ owing to employee who is about to leave -- retains HK or has left HK (s.52) HK 23 S.80(1) offence - fails to comply with a garnishee order fails garnishee ( ) or notify CIR of his inability to comply therewith s.76(3) comply 24 S.80(1) penalty The court: - can impose a fine at level 3 ($10,000); and can fine - may order the convicted person within a may time specified in the order to do the act do which he has failed to do which Any person who does not comply with the Any not court order is guilty of an offence & the court can order a further fine at level 3 the further 25 S.80(1A) offence A person commits an offence if he, without person reasonable excuse, fails to keep and retain proper business record business 26 Penalties for s.80(1A) Offence The court can: - impose a fine at level 6 ($100,000); impose fine - order the convicted person within a time order specified in the court order to do the act he do has failed to do has A person who does not comply with the person order is guilty of an offence & order the court can order a further fine at level 6 the further (s.80(2C)) (s.80(2C)) 27 S.80(2) offences A person commits an offence, if he, without reasonable person excuse: excuse - makes an incorrect return by omitting / understating makes incorrect anything in a tax return either on behalf of -- himself, -- another person, or -- a partnership; 28 S.80(2) offences - makes any incorrect statement re a claim makes incorrect for any deduction / allowance; for - gives incorrect information affecting the gives incorrect tax liability of tax -- himself, -- another person, or -- a partnership 29 S.80(2) offences - fails to submit a return given to him by an fails assessor; assessor; - fails to notify his chargeability to tax fails s.51(2) s.51(2) 30 S.80(2) penalties The court can impose on the convicted person: - a fine at level 3 plus fine level - 3 x the amount of tax undercharged or would have been undercharged had the offence not been detected offence 31 S.80(2) penalties If the convicted person has failed to submit a If proper return, the court may also order him proper the to submit return within such time as may be submit specified in the order (s.80(2A)) specified 32 Time limit for imposing s.80 penalties No person is liable unless the complaint No complaint concerning s.80 offence was made: concerning - in the Y/A in respect of or during which in Y/A the offence was committed; or committed - within 6 years after the expiration of the within years Y/A concerned Y/A 33 CIR’s power to compound s.80 offences CIR may: - compound any s.80 offence; & any - before judgement, stay or compound any before stay proceedings proceedings 34 S.81 Offence Breach of secrecy A person commits an offence if he: - acts under IRO without taking an oath of acts secrecy; secrecy; - acts contrary to the provisions of s.4(1) or to an acts oath taken under s.4(2); or oath aids, abets or incites other person to act contrary to s.4 to 35 S.82 Offences Fraud & wilful evasion A person commits an offence if he wilfully person with intent: with - to evade or to evade - to assist any other person to evade tax - -- omits an income from a tax return -- omits which should be included; 36 S.82 offences -- makes a false statement or entry in a -return; return -- makes a false statement of a claim for -deduction / allowance; deduction -- signs a statement or return without -- signs without reasonable grounds for believing the same to be true; to 37 S.82 offences -- prepares, maintains, authorizes the -- prepares, preparation / maintenance of any false book of account or other records, account -- falsify or authorizes the falsification of -- falsify any book of account or records; or any -- makes use of any fraud, art or contrivance -(Õ n ) or authorize such use È or 38 Penalties for s.82 offences On summary conviction, a fine at level 3 + 3 On summary fine x the amount of tax undercharged … and to imprisonment of 6 months; imprisonment On indictment, a fine at level 5 ($50,000) + 3 On x the amount of tax undercharged … and to imprisonment of 3 years. imprisonment 39 Factors affecting the quantum of s.82 penalties Time span of the offences systems & methods used to evade tax any repayment of tax evaded amount of tax evaded individual culpability of one/more defendants & the individual circumstances of each defendant. circumstances 40 Penalty: S.82A additional tax CIR / DCIR can personally impose s.82A additional CIR tax on a taxpayer if he, without reasonable excuse: tax - makes incorrect return by omitting / understating makes anything in a tax return either on behalf of anything -- himself, -- another person, or -- a partnership; 41 S.82A additional tax - makes an incorrect statement of a claim for makes deduction / allowance; deduction - gives incorrect information affecting the tax gives liability of: liability -- himself, -- another person, or -- a partnership 42 S.82A additional tax - fails to submit a return given to him by an fails assessor; or assessor; - fails to notify his chargeability to tax iaw fails s.51(2) s.51(2) 43 S.82A additional tax no prosecution CIR / DCIR can only impose s.82A penalty if CIR no prosecution ( ) under s.80(2) or s.82(1) has been instituted into the same facts. has 44 Amount of s.82A additional tax The amount cannot exceed 3 x the amount of The tax undercharged or would have been undercharged undercharged 45 Factors affecting amount of s.82A penalty Gravity ( ) extent of tax lost period for which tax was lost cooperation sophistication of taxpayer evidence of deliberate concealment ( evidence )(D42/88) 46 Procedures for imposing s.82A additional tax Before imposing penalty, CIR / DCIR has to Before personally issue a written notice (s.82A(4) notice) to the taxpayer concerned. notice) 47 S.82A(4) notice The notice must: - specify the alleged offence, - inform T of his right to submit written inform representations to CIR /DCIR, and representations - specify a date (not < 21 days) by which specify representations must be received. representations 48 Dispensing with s.82A(4) notice The notice can be dispensed with where CIR / DCIR considers that T is about to leave HK. CIR/ DCIR may then assess T to s.82A CIR/ additional tax immediately additional 49 Raising of s.82A assessment CIR / DCIR will duly consider the CIR representations (if any) received before raising an assessment an Such assessment can be made on the executor Such of a deceased person of 50 Appeal against s.82A assessment (s.82B) The person assessed can appeal in writing to The the clerk to BoR within 1 month. the The notice of appeal must be accompanied by The a copy of: copy - s.82A assessment; - s.82A(4) notice; - written representations (if any) written 51 Appeal against s.82A additional tax T should at the same time he gives notice of should appeal to BoR, serve on CIR a copy of - such notice & such - statement of the grounds of appeal 52 Time for filing of appeal against s 82A additional tax BoR has no power to extend the time limit for BoR appeal at present (Chan Min-Ching trading as appeal Chan Chan Siu Wah Herbalist Clinic v CIR (1999) Chan HKRC 90100; Wong Wing Biu trading as Tai Yip Glass Co v CIR (1985) 1 HKC 433. Yip the IR (Amendment) Bill proposed to the empower BoR to extend time 53 Grounds of appeal against s.82A assessment Only 3 grounds: Only grounds - T is not liable to s.82A additional tax is not - amount of additional tax > the amount T is amount liable liable - amount of additional tax is excessive in the amount circumstances circumstances 54 Six Levels of Fine in Schedule 8 of the Criminal Procedure Ordinance Level 1 2 3 4 5 6 Fine (HK$) 2,000 5,000 10,000 25,000 50,000 100,000 55 Summary Tax avoidance & tax evasion offences s 51(4B)(a): information s 51(4B)(4) : search warrant s 77(4) - departure prevention direction s 80(1) - without reasonable excuse s 80(2) - without reasonable excuse & tax undercharged s 81- secrecy s 82 - fraud & wilful evasion s 82A - without reasonable excuse, additional tax 56 Conclusion penalties appeal against s 82A additional assessment reasonable excuse tax undercharge 57 ...
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