Whilst the decision in Li & Fung (Trading) Limited and CIR (HCIA 1/2010) was a most welcome “win” for the taxpayer, in the Court of First Instance the case highlighted another problem that can arise with Hong Kong’s appeal procedure against tax assessments. Reyes J rightly pointed out:
“I fully appreciate that Board members give up their valuable time in order to render voluntary public service for little or no remuneration. But it seems to me that by any standard, a delay of 3½ years in handing down a decision must be unacceptable.”
Reyes rightly suggested that six months from the date of the hearing was quite sufficient for the Board of Review to hand down its decision.
The Inland Revenue Department was also taken to task in the judicial review, Yue Yuen Marketing Company Ltd & Ors v CIR [2010] HACL 49/2009. The case concerned the Inland Revenue Department’s practice of issuing protective assessments shortly before the expiry of the six-year statutory time limited for raising assessments. Furthermore, the assessments ignored the taxpayer’s offshore claims, and the Commissioner of Inland Revenue demanded that the taxpayer purchase tax reserve certificates for the full amount of the tax in dispute. At the time of the judicial review, which was more than 10 years after the first year of assessment under objection, the taxpayer’s affairs had not been finalised. Reyes J concluded that there had been an “inordinate delay” and that a determination should be made within six months from the date a taxpayer objected to an assessment.
Surprisingly, a similar failure to determine a taxpayer’s affairs was brought to the attention of the Court of First Instance in Kong Tai Shoes Manufacturing Company Limited v CIR [2011] HCAL 34/2011. In this case, the Commissioner of Inland Revenue had failed to respond to the taxpayer’s objections for periods ranging from 3.5 to 6.5 years. Again, Reyes J suggested that six months was more than enough time for the Commissioner of Inland Revenue to determine an objection.
Sadly, whilst these cases highlight the delay that can occur in determining an objection, they do not illustrate the frustration that many taxpayers face in having to answer six-page standard letters, large parts of which are frequently irrelevant, several years after tax returns have been filed. As if this was not hard enough, a taxpayer might have to wait many months for a response.
I sincerely hope that the Commissioner of Inland Revenue takes notice of Reyes J’s comments and endeavours to ensure that his staff conclude taxpayers’ affairs with greater alacrity.
