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SCMP Reporter

Nothing is certain but death and taxes, so the saying goes - unless you're an expat who decides to skip town.
A Briton, who insists on remaining anonymous, left the city in 2000 after working here for seven years without clearing his last tax obligation. He received no demand for payment or warnings. The expatriate later visited the city and left again a couple of times without hindrance.
During his third visit back in 2002 he was given a letter from the concierge of the hotel where he was staying issued by the Inland Revenue Department asking him to attend 'an interview' with the department.
'The letter said I was supposed to attend an appointment 'yesterday',' he said, explaining how he had missed the interview by a day.
He left the city once more, again without encumbrances.
But he made a decision when he came back to Hong Kong yet again in 2005 to settle the outstanding tax payment, a sum of more than HK$160,000, which included a penalty for late payment. No interest had been charged.
'I decided to pay up voluntarily,' he said. 'But that was a good loan!' 
The expatriate's experience is not unique. Taxpayers who left Hong Kong without contributing their share to public coffers were estimated to have cost the Inland Revenue Department more than HK$140 million over the past five fiscal years, according to government data. In 2008-09, HK$13 million was written off.
To stamp out the problem the  department has been facing calls to require that all departing taxpayers produce certificates stating that they have settled their bill and owe the government nothing.
Kenneth Leung Kai-cheong, vice-president of the Hong Kong Taxation Institute, said the department had not been tough enough in enforcing the law.
'Some of our members have suggested people, including expatriate employees, could be required to produce a 'payment of tax certificate' to prove that they are free of tax liability when they leave Hong Kong,' he said.
In a random check by the Director of Audit in 2000, of 20 expatriates who left Hong Kong, the amount of individual tax still owed was between HK$37,080 and HK$1.2 million. 
The Audit  Commission  told tax officials nine years ago that the Inland Revenue Department was losing hundreds of millions of dollars in tax revenue.
A spokeswoman for the  department said that after the audit findings, procedures had been improved to secure  payments before taxpayers left and to chase up defaulters.
'Penalties and warning letters were taken against employers who failed to comply with the requirements,'  she said.
An employee is required by law to notify the department at least a month before he leaves Hong Kong for more than month.
His employer is required to file a notice to the department when he starts his job and when he terminates his appointment. The employer is also required to file a departure notice and  hold the employee's outstanding salary for a month or until a 'letter of release' is received from the department. 
Employers who fail to file these notices may be fined up to HK$10,000. But such penalties are rarely enforced. According to the Inland Revenue Department, only two employers have been fined over the past five years.  
The department will issue tax demand notes to the employee. If these are not settled, the department may take action, including civil court action, to recover the outstanding payment from the employee, or even his employer, bank, tenant or debtor.
'But if a tax defaulter has left Hong Kong to reside elsewhere, the IRD may apply to a district court to have a 'departure prevention direction' issued on him,' the spokeswoman said. 'When the defaulter returns, he cannot leave Hong Kong again unless he has settled his tax liability.'
In the past five years, 926 departure prevention directions were issued, and as a result, half of the recipients paid up their outstanding tax. 'A taxpayer's obligation to pay tax will not be relieved through the lapse of time,' she said.
But the law does not allow the director of inland revenue to detain a person simply for having defaulted on a tax payment, she said.
Leung said that although the scale of tax revenue written off due to people leaving Hong Kong was not very large, the public would expect the government to step up law enforcement to minimise defaults.
The fact that there was still an average of HK$28 million each year in written-off tax revenue showed that the department had not done enough to recover default payment, he said. But Leung said it might be difficult to justify denying a person's right to leave Hong Kong because he had failed to pay  tax.
'The Basic Law guarantees freedom of movement,' he said.
Some governments would deduct tax from an employee's salary before the balance is paid to him. But Leung said such an approach would incur considerable administrative costs, which might be a burden to many small and medium-sized firms.
He said he was more concerned about the large number of self-employed people such as tutors and music teachers who do not fill in tax returns and whose activities are difficult to trace.



Fleeing expats one step ahead of the tax man