Runaway expatriates owe Hong Kong 9 million U.S. dollars tax a year

The runaway employees have cost Hong Kong 27.6 million U.S. dollars in tax revenue in the past three years - 40 per cent of the total outstanding tax, a report by the Audit Commission has found.

Some of them have even managed to return to Hong Kong and leave again without paying a penny because it takes so long for the legal processes to bring them to book, the report said.

The Inland Revenue Department is now considering a separate pay-as-you earn scheme under which employers withhold a portion of expatriate employees' salaries to cover tax bills.

Hong Kong currently has a system under which all employees must pay their tax in a lump sum at the end of the tax year. A random survey of 20 cases by the Audit Commission found expatriates who had left tax bills behind owed between 4,800 U.S. dollars and 161,000 U.S. dollars.

None were prosecuted and although 10 were threatened with court action barring them from leaving, the orders were only issued after they had left because of the lengthy legal process involved.

The auditor's report said "substantial" amounts of salary tax owed by expatriates were written off because employers failed to notify Inland Revenue about departures. A total of 10 million U.S. dollars was written off in the last tax year alone.

Employers who fail to notify the department about employees who are leaving within a month of their departure are liable to fines of up to 1,300 U.S. dollars but the penalty is rarely imposed. Expatriates should be put in a separate high-risk tax bracket, the Audit Commission proposes.

The report says: "If the amount of tax written off attributable to employees in high-risk groups continues to be substantial, the department should consider the feasibility of requiring them to purchase interest-bearing tax reserves as income is earned."

A government spokesman said a working party would be set up to examine the Audit Commission recommendations.

(la/dpa)