ACCT 4410 Taxation

Take home assignment # 1 (Topic: Hong Kong Tax administration)

Instructions to Students:

1. Students should complete the assignment on his or her own, i.e., on

individual basis.
2. Each student should submit a separate written paper of not more than 2
pages of A4 papers (all appendixes and references, if any inclusive)
3. No cover page is necessary
4. Font type/Size: Times New Roman/11
5. 1.5 lines spacing
6. Save your file as .pdf for submission purpose
7. Assessment criteria: approach to questions; articulation of arguments; clear
discussion; writing style and approach; report organization and references
8. The total marks of this assignment are 20. It accounts for 4% of total course
assessment.
9. Deadline for submission: 28th February 2022 – Submit the completed
assignment to the online course platform – canvas; by 5:00 p.m. No late
submission will be accepted.

Course Instructor: Dr. MAK Kelvin P.

Lecture sessions: L2; L1 and L3 (denotes sequence of class session)
Subject: Tax administration Case
Date: 22nd February 2022

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Take home exercise #1 (20 marks): ACCT 4410 Taxation – 2022 Spring Semester

Deadline for submission: 28th February 2022, by 17:00 via Canvas assignment box

Answer to Take home exercise #1 – Offence & Penalty

Part a) whether Amy was liable to the additional tax of $3,200

1. When there is a breach of Hong Kong tax provisions, whether or not the IRD can invoke
penalty provisions against a taxpayer depends on whether he or she has a reasonable
excuse.
2. Amy has breached the tax law in Hong Kong of making an incorrect return, i.e., claimed
the dependent parent allowance (DPA) with her deceased mother, Susan Cheung.
3. Unless she had reasonable excuse, she was liable for additional tax for the wrongful
claim of DPA in her return.
4. Analyzing whether Amy had any reasonable excuse to defend her position:
a. after she filed her tax return (through the Tax Rep.) and made the false claim (on
DPA of a deceased parent), she also did not appeal against or review the NoA -> she
never paid reasonable attention to her tax matters.
b. Forgetting the passing of parent (a major incidence of a family) did not form or
support a reasonable excuse, and it was a serious and blatant breach of law
c. Paying tax and declaring tax carefully are therefore basic duties of a taxpayer
d. The CIR or IRD was not required to prove that a taxpayer had the intention to neglect
or deliberately neglected an income or expense information
e. It was held that having no intention to evade tax was never a reasonable excuse,
f. Nor was it a mitigating factor
g. Carelessness of Amy or her tax representative was not a reasonable excuse for
submitting a tax return with incorrect (untrue) information
h. With due deliberation in Amy’s case, she should bear at least the same responsibility,
if not solely responsible for it, as the Tax. Rep.
5. Conclusion: Amy did not have any reasonable excuse to file an incorrect return, with
untrue information concerning the claim for the DPA, she is liable to the additional
assessment as a monetary penalty.

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Part b) whether additional tax made by the IRD was excessive

1. The burden to prove the additional tax excessive is on Amy, the taxpayer
2. Amy is a qualified accountant and being a finance professional, she should have the
ability, method and information to complete her tax return with true and correct
manner
3. Quite the contrary, the tax return she filed contained the DPA information with serious
discrepancies due to negligence or recklessness even
4. Amy did not express her regret; she was not being remorseful
5. Amy did not adopt any measure to prevent the same offence from happening in future,
if she continued to be busy and did not face her tax filing responsibility
6. She engaged her tax representative to take care of her tax filing obligation, but without
taking enough care and attention to it.
7. Through her tax representative, Amy stated the wrongful claim of DPA was a mistake
due to carelessness
8. She disputed the fairness of the monetary penalty and demanded a total repeal of the
additional tax, claiming that she did not have any intention to deceive
9. No intention to deceive or cheat was held not to be a reasonable excuse, and not a
mitigating factor.
10. The maximum penalty of filing incorrect return according to the legislation is either
a. Under prosecution: a fixed fine of $10,000, plus treble the amount of tax under
charged; or
b. Without prosecution: under the jurisdiction of the IRD and impose a maximum of
treble amount of tax under charged as additional tax
11. Claiming DPA in respect of deceased parent was a serious and blatant breach of law,
according to the penalty policy of the IRD, the additional amount could be as much as
100% of the amount of tax undercharged if the mistake was not detected
12. The IRD chose not to pursue prosecution and went for additional tax with an amount
$3,200 that represented 49.54% of the amount of tax undercharged.
13. Conclusion: if we compare points 11 and 12 against 10.b. above, the amount of
additional tax demanded was certainly not excessive