Reducing Administrative and Compliance Costs through E-tax Solutions and Special Services:
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Reducing Administrative and Compliance Costs through E-tax Solutions and Special Services: What works for micro and small businesses?. Presented by : Mr. Chi-keung Tang Senior Assessor IRD, HKSAR March 2010.

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Reducing Administrative and Compliance Costs through E-tax Solutions and Special Services: What works for micro and small businesses?

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Reducing administrative and compliance costs through e tax solutions and special services what works for micro and small businesses

Reducing Administrative and Compliance Costs through E-tax Solutions and Special Services:What works for micro and small businesses?

Presented by : Mr. Chi-keung Tang

Senior Assessor


March 2010

Tax regime of hong kong

Tax Regime of Hong Kong

  • A simple and transparent tax system

  • Three kinds of direct taxes:

    • Profits Tax

    • Salaries Tax

    • Property Tax

  • Official assessments adopting a territorial source principle

Tax regime of hong kong1

Tax Regime of Hong Kong

  • Other duties and fees

    • Stamp Duty

    • Betting Duty

    • Business Registration Fee

  • No VAT or GST

  • No tax is payable on dividend income, interest, or capital gains

Tax regime of hong kong2

Tax Regime of Hong Kong

  • Total revenue collected in 2008-09 is HK$191.4 billion

  • Earnings & profits tax amounted to HK$146.1 billion (76% of total)

    • Profits Tax – HK$99 billion

    • Salaries Tax – HK$39 billion

  • Stamp duty of HK$32.1 billion

  • Betting duty of HK$12.6 billion

  • 3.6 million files of various categories of taxpayers

(HK$7.8 = US$1)

Tax policy for mse

Tax Policy for MSE

  • No definition of SME or MSE in the law

  • Lower tax rate of 15% for unincorporated businesses (16.5% for corporations)

  • No need to submit supporting accounts and documents if gross income < HK$0.5M

  • Businesses with no taxable profits are reviewed once every few years

  • Simplified filing requirement for sole proprietorship businesses – in Composite Tax Return (CTR)

  • No specific operational unit / group that gears towards SME or MSE in IRD

Compliance requirements

Compliance Requirements

  • Business Registration

  • File Employer’s Return

  • File Profits Tax Return / Composite Tax Return for individuals

  • Pay tax

  • Inform change of address and other business particulars

Business taxpayers composition

Business Taxpayers Composition

  • For 2008/09, in terms of number

Business taxpayers composition1

Business Taxpayers Composition

  • For 2008/09, in terms of assessed profits (HK$)

Business taxpayers composition2

Business Taxpayers Composition

  • In terms of number of employees reported as at 31 December 2009

Use of information technology

Use of Information Technology

  • e-Services as a solution to fulfill demand for quality service with more effective use of resources

  • Help taxpayers to reduce compliance costs

  • Aligned with the Digital 21 Strategy of HKSARG in formulating e-services plans

  • Participated in the Electronic Service Delivery (ESD) Scheme launched in December 2000

  • Provided 9 online services for business registration, e-filing of tax return, tax enquiry and payment

Etax portal

eTAX Portal

  • GovHK, the one-stop portal of the HKSAR Government was launched in 2007

  • eTAX, the new taxpayer’s portal was launched under GovHK in January 2008

Etax account

eTAX Account

  • Provides a one-stop service for individual taxpayers (including sole proprietors) to:

    • Receive e-notification to file return (CTR)

    • Complete and submit the return

    • Receive e-assessment notice

    • Request for revised assessment

    • View eTAX account profile, Tax Position and Messages

    • Update personal particulars

    • Receive e-Alert for approaching filing and payment deadlines

    • Pay tax

    • Receive e-Receipts for tax payments

Other online services

Other Online Services

  • For Businesses

    • Apply for Business or Branch Registration

    • Change Business Particulars

    • Business Registration Number Enquiry

    • Apply for Supply of Information on the Business Register

  • For Properties

    • Stamp Property documents

    • File and view Property Tax Return

  • For Payments

Electronic submission of employer s return

Electronic Submission of Employer’s Return

  • Businesses may develop their own software to submit employer’s return data in electronic format

  • IRD developed employer’s return software for free distribution to small businesses

Measures to reduce administration costs

Measures to Reduce Administration Costs

Back end systems in place to reap the benefits

  • Assessed First Audit Later (AFAL) system

    • Automate screening and issuing of assessments

    • Automate selection of cases for desk audits

  • Document Management System

    • Capture e-filings, e-requests for revised assessment and notices of assessment in addition to paper documents for retrieval and viewing by both internal staff and taxpayers

  • Workflow Management System

    • Route e-requests for revised assessment along with paper requests to relevant handling officers and monitor progress

Taxpayer education

Taxpayer Education

  • Participates actively in the Taxes & Duties Cluster of GovHK

  • Disseminates a wide array of tax information on our website:

    • Practice notes and tax guides

    • Procedural guides and downloadable forms

    • e-Seminars

    • Tax computation programs

    • Frequently asked questions and answers

  • Provides eTAX help desk

  • Partners with professional bodies and participates in outreaching programmes

Experienced gained

Experienced Gained

  • Low popularity of digital certificate

  • Legislative amendment in 2003 to enable the use of password as an alternative means of authentication

  • Number of e-filers rose to 250,000 (around 10% take-up rate) currently

  • eTAX account brought about 4% increase in take-up rate of e-filing

  • Take-up rate of e-filing for sole proprietors is still very low -1.3% only

Experienced gained1

Experienced Gained

  • Around 2.5 million out of 3.2 million of employees data were submitted electronically (around 78%) in 2008-09

  • 36,900 employers used the free software to submit 870,000 employees data

  • Around 56% of 2.4 million payment transactions of Earnings and Profits Tax were made electronically in 2008-09

  • Around 60% of 0.5 million property stamping applications were submitted electronically in 2009-10

Upcoming initiatives

Upcoming Initiatives

  • Law amendment to accept password as authentication means for e-services related to business registration

  • Law amendment to enable the provision of joined–up service for company registration and business registration

  • Implement e-filing of profits tax return for partnership and corporations in April 2010

  • Extend the gross income limit for waiver of supporting accounts to HK$2M

  • Accept individual authentication for e-filing of corporate profits tax returns

  • Accept MARS password authentication to be launched by GovHK in September 2010

  • Online submission of employer’s return in contemplation

Issues for discussion

Issues for Discussion

  • Identification of MSE is not a major problem in Hong Kong

  • Hard to create further incentives for taxpayers to use e-services

    • Extension of filing deadline by one month already granted to e-filers

    • Pre-populated returns already provided

    • Only a few interactions annually

  • Provision of free software for filing of employer’s return seems to be a successful path

  • Provision of deeper forms of facilitation of businesses such as offering free accounting modules or collaborating with software industry?

Thank you

Thank You

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