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

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 smal

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  1. 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

  2. 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

  3. 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

  4. 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)

  5. 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

  6. 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

  7. Business Taxpayers Composition • For 2008/09, in terms of number

  8. Business Taxpayers Composition • For 2008/09, in terms of assessed profits (HK$)

  9. Business Taxpayers Composition • In terms of number of employees reported as at 31 December 2009

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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?

  21. Thank You

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