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Stepping up tax enforcement
An additional field audit team would be established to step up the campaign on tax evasion, the Financial Secretary, the Hon Sir Hamish Macleod, said today (Wednesday) in the Legislative Council.
This would bring the total to eight teams. In addition, new legislation would be introduced to fight tax avoidance and evasion.
In his Budget Speech, Sir Hamish noted that the Inland Revenue Department's investigation and field audit staff have tackled over 3,500 cases and obtained more than $2.7 billion in back tax and penalties in the past three years.
Sir Hamish said he found the findings of a recent Inland Revenue Department Survey of the problem of substantial under-reporting of income by some professionals were alarming and the situation unacceptable.
Of the 4,500 businesses surveyed, it was found that 60 per cent did not issue receipts or only issued them on request; only 45 per cent kept a full set of books and accounts; and 40 per cent did not keep sufficient records to enable their taxable profits to be readily ascertained.
He said: "Clearly, we cannot rely on self-regulation alone.
"I propose, therefore, to bring forward legislation to specify clearly the minimum records which a business must keep, and to increase the maximum fine for non-compliance.
"In simple terms, a business will be required to keep the records necessary to enable all business transactions to be traced, explained and verified through the accounting system.
"I hope that these new measures will reduce the temptation by some to under- report their business income.
"For those still unable to resist temptation, these measures will help the tax inspector to detect evasion more effectively.
"And, if even this still does not produce the desired results, we will need to go one step further and legislate also to make the issue of receipts mandatory."