XN000022-1995-01-25 — Page 43

I

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(a)

(b)

whether the Government will introduce legislation or other measures requiring trades which carry out transactions on a cash basis to maintain clear records of income and expenditure, and to put into place an accounting system which allows accounts to be traced; and

whether consideration will be given to imposing such requirements on certain types of trades first; if not, why not?

Mr President,

The Government is fully committed to fighting tax evasion. Over the past three years, the Inland Revenue Department investigation and field audit staff tackled over 3,500 cases and obtained more than $2.7 billion in back tax and penalties.

In last year's Budget Speech, the Financial Secretary highlighted the problem of under-reporting of income by businesses and professions which receive cash payments for their goods and services. Part of the problem stems from inadequate business records. Since the last Budget Speech, the Commissioner of Inland Revenue has met and written to professional bodies and trade associations to outline the need to keep proper accounts and issue proper receipts.

Specifically concerning the first point raised by the Hon Member, our law already requires all trades, including those which carry out transactions on a payment- by-cash basis, to maintain records of their income and expenditure. The law also requires the traders to retain such records for a period of not less than seven years. Such records should be sufficient to enable the Commissioner to ascertain them readily for the purpose of assessing tax liabilities. We are currently considering whether and, if so, how we need to strengthen the existing provisions in the light of experience gained from field audit and investigation activities.

On his second point, the requirement to maintain sufficient records applies to every person carrying on a trade, profession or business in Hong Kong. We do not think it would be appropriate or helpful at this stage to single out particular professions or trades for more stringent requirements.

End/Wednesday, January 25, 1995