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In recent years, the Inland Revenue Department (IRD) is committed to combat tax evasion and excessive tax avoidance.  The Field Audit and Investigation Unit, the fourth section of the IRD, has now grown to a total of 22 teams.  In 2019/20, the Field Audit and Investigation Unit completed 1,716 cases, involving a total of HKD2.5 billion in tax and fines.

Serious cases may lead to prosecution.  In 2019/20, the IRD successfully prosecuted 3 cases, of which the defendants were found guilty and sentenced to imprisonment and fines.  Over the years, the IRD has prosecuted cases involving in the following matters, including:

• The proprietor of the company exaggerated the cost of purchase and therefore understated the profits;
• Deliberately intended to omit the rental income that should have been reported in the tax return;
• Deliberately intended to make false statements in relation to the deduction claims for "home loan interest";
• Making false statements in relation to the claims for Dependent Parent Allowance and Additional Dependent Parent Allowance; and
• Making false statements in relation to the claims for deduction of loss on sale of property.

We recommend that taxpayers should be proactive and take quick and active approach in dealing with tax investigation from the IRD when encountered.