Category: APJT Archive

Early studies on taxpayers’ compliance behaviour mainly focused on discussing deterrent factors (such as punishment) to reduce non-compliance. Subsequently research focus shifted toward positively identifying non-sanction factors driving tax compliance. More recent studies support the assertion that taxpayers comply if they are able to, ready to and willing to comply. If they believe that it is the right thing to comply, they will do so voluntarily – so-called tax ethics/ morale. This paper summarises the major literature in this area, then widens its remit to study the tax compliance position in Hong Kong. Tax revenue is the predominant source of public funding in Hong Kong, and the government has expended a lot of effort on educating taxpayers to improve their compliance. This has contributed to a high level of compliance in recent years. This paper recommends that tax education be extended to the undergraduate curriculum to instil better tax ethics/morale in students before they themselves become taxpayers. A positive compliance...

This article reviews the cases reported in Board of Review Decisions Volume 31 ( rst and second supplements). There are six pro ts tax cases, one property tax case, two penalty tax cases, and two cases on administrative matters. The six pro ts tax cases cover a wide variety of issues, including deduction of the acquisition costs of moulds/machinery used by persons other than the taxpayers in mainland China, change of intention in holding a property, source of pro ts, deduction of expenses, and the applicability of sections 20 and 61A of the Inland Revenue Ordinance. The property tax case relates to the issue of beneficial ownership. The Board dismissed the two cases on penalty tax and the two cases on administrative issues....

The digital economy has been booming in recent years following the advance and penetration of information and communication technology. Its impacts can be seen in retail, logistic, and financial industries as well as in manufacturing, education, and media industries. In accordance with Action 1 of the OECD’s final report on base erosion and profit shifting (“BEPS”), the digital economy has been fully integrated into the physical economy and cannot be singled out for tax purposes. Therefore, a better way to tackle the tax challenges of the digital economy would be to observe and analyse its key features and the business model adopted by multinational enterprises (“MNEs”)....

Nearly six years after its implementation, the Foreign Account Tax Compliance Act (“FATCA”) is continuing forward. The landscape of financial institution reporting is a maze of forms, intergovernmental agreements, dates, deadlines, and information. Here are some updates for 2017....

“On almost every measure of investment, Asia stands out as the world leader. Consider Asia’s share of global fixed asset investment: in 2014, the region accounted for 45% of the global total. Or consider foreign direct investment: in 2014, Asia attracted 33% of the global total. Clearly, the region is an attractive place for the world’s companies to deploy their capital.” Asia’s phenomenal economic growth and development in recent decades has predominantly been a result of trade and investment. While trade is not insignificant, economic growth in Singapore and Malaysia is largely attributable to investment and education. Legal and regulatory requirements can impede cross-border investment. Chief among these is taxation, particularly the interaction of domestic tax rules with tax systems and practices in other countries. The reduction of tax barriers to cross-border trade and investment is one of the primary purposes of tax treaties....

This paper is concerned with the split of jurisdiction of VAT on goods and services between a federation and its units. The majority of federations enforce VAT as a central tax whereas a few devolve it to the states or provinces to make federating units autonomous. This paper explores literature on intergovernmental taxation to ascertain the appropriateness of the devolution of VAT, particularly that on services. Later, the performance of the Sindh Revenue Board (SRB) is assessed vis-à-vis its claim to a substantial increase in tax collection after the transfer of jurisdiction of VAT on services to Sindh and other provinces in Pakistan under a major devolution plan. This paper finds that taxes that have mobile bases; and are required for macroeconomic stability and redistribution of income should rest with federations. Further, splitting the VAT base, particularly on the basis of a distinction between goods and services, could add to the complexity. This paper suggests that levying VAT on services...

The Hong Kong Government has closely followed the development of the base erosion and profit shifting (“BEPS”) project undertaken by the Organisation for Economic Co-operation and Development (“OECD”) at the request of the G20. The BEPS project culminated in the publication of reports covering 15 distinct action points. As with most governments, Hong Kong has expressed broad support for the principles and concerns underlying the project and the direction of its proposals and recommendations. Nonetheless, as with many jurisdictions, it seems likely that Hong Kong will, at least in the foreseeable future, choose not to implement those proposals which are considered unnecessary in the current Hong Kong tax environment or which are inconsistent with the broad scheme of Hong Kong’s tax legislation....

I recently published an article in this journal critically assessing the published guidance issued by the Hong Kong Inland Revenue Department (IRD) on the carry forward of unrelieved losses following a court-free company amalgamation under the new Companies Ordinance (Cap 622) (“CO”).1 That article examined in detail the guidance published by the IRD on 31 December 2015, which it subsequently revised on 16 December 2016.2 Accordingly, the purpose of this updated commentary is to identify and discuss certain additional matters raised in the revised guidance in the broader context of the debate on the utilisation of losses carried forward post-amalgamation. Readers should at this stage note that the essence of the IRD’s guidance, and, by extension, of my conclusions on the same, remains unchanged....

Housing in Hong Kong has been rated the most “severely unaffordable” in the world by the Demographia International Housing Affordability Survey (“the Survey”) for seven consecutive years since 2011. When Hong Kong was first added to the Survey in 2011,1 it was the only major metropolitan market with a double-digit (11.4) “Median Multiple”....

Twelve cases are reported in Volume 30 Third Supplement and Volume 31 of the Inland Revenue Board of Review Decisions. The cases include two cases on the locality of profits, three on salaries tax, and one on personal assessment. There are also four cases concerning appeal out of time and two involving penalty tax. All of these appeals were dismissed by the Board....