Yesterday, Mr Donald Tsang, Chief Executive of Hong Kong announced how he has decided to spend the HK$58.6 billion (US$7.55 billion) budget surplus accumulated in the last financial year and which is likely to be sustained after 6.3 per cent economic growth in the first half of 2007.

1. HK$5billion giveaway in the form of corporate tax and salary tax cut by 1 percentage point to 16.5 per cent and 15 per cent respectively in the fiscal year starting next April 2008
2. Rates for property owners totalling some HK$2.6 billion would be waived for the final quarter of the fiscal year
3. Plans to spend US$19 billion on infrastructure, including new links to China/Macau, potentially creating a quarter of a million jobs

Budget surplus may come and go. So the method of distribution should not be made permanent or difficult to reverse ie. in the form of tax cuts. Waiver of collection on a temporary basis in the waiver of property rates would have been more acceptable.

Are they trying to keep up with Singapore with direct tax cuts? The similarity ends there. Singapore raised its indirect tax rate from 5% to 7%. So where is Hong Kong’s indirect tax?

Furthermore, from the economic standpoint, the economy does not need further stimulation with the tax cuts given the low unemployment situation in Hong Kong.

I am in favour of well-thought through infrastructural expenditures as they would be investments for the future of Hong Kong.

Mr Tsang, don’t forget to tackle the issue of broadening the tax base which you gave up towards the end of your last term.

http://taxwithedgar.blogspot.com/2006/12/hong-kong-drops-sales-tax.html

Albeit an honest one.

Mr Looi San Cheng, 63 years old, made $1.06mio selling his famous Tip Top curry puffs from his stall in Ang Mo Kio Ave 8 over the 6 years.

Mr Looi has severely under reported his profits. He said he made $2,800 between 2001 and last year when he actually made $1.06mio.

So he now have the honour of being the first hawker to go to jail for tax evasion. He also have to pay out $487,000 for back taxes and penalty.

Saturday’s article cited the citation by PM Lee on Tip Top’s expansion into Harbin and Shenyang in China. I wonder this may have led to taxman’s focus on Tip Top.

So all you other hawkers out there who are making millions, who have been under reporting your income and who have been recently highlighted in TV programmes, please come clean on your tax returns by emailing IRAS at iid@iras.gov.sg.

a Japanese chef who has left this

The current law on audit exemption applies to individual company but not to a group of companies. So say Mr Joseph Alfred, Technical Advisor for ACCA Singapore.

Which law?

• Companies Act’s Section 205(2) says companies are required to appoint auditors.
• Companies Act’s Section 205A says private exempt companies with less than $5mio turnover and dormant companies are exempted from audit.

Where is the problem?

Let me illustrate with a simple example. Holding company has a turnover of less than $5mio and may be exempted from audit.

Subsidiary company has a turnover of more than $5mio and thus its financial statements would be audited. So far so good.

But when it comes to Group’s consolidated financial statements, the regulator has confirmed that there is no legal compulsion for them to be audited.

Joseph opined that a Group with a turnover of of more than $5mio should NOT be exempted.

As for me, I am still not convinced with the need to audit the consolidated statements. As some practitioners have said, the need to audit should rest primarily on who are the ultimate key users of the statements. We should not just rely on mere criteria.

• One of the banks argued that Chia Teck Leng’s acts were carried out in his capacity as APB’s finance manager – and the company must shoulder the blame.
• Senior counsel Steven Chong, who represents two of the foreign banks, told the court that the fundamental issue was how Chia was able to perpetrate the fraud for almost five years and remain undetected. The obvious answer, he said, is that APB has vested wide powers and authority on Chia without any proper checks and balances in place.
• Chia was also able to ensure that correspondence from the banks was never opened by anyone other than him. His secretary was specifically never to open letters from banks addressed to him.

Background

From 1999 to 2003, Chia, now 47, had submitted to the banks fictitious documents with forged signatures of top APB executives, which convinced the banks to give him credit facilities in APB’s name.

What did Chia do with the monies? He blew $62 million in casinos around the world, before being convicted and sentenced to 42 years’ jail in 2004. Some millions still cannot find.

While Mr Chia sits in prison for the remaining 39 years, many bank officers’ career have been scarred.

• Case 1 – Gaelic Inns vs PlanAssure Public Accounting – I discussed it back in Feb 2007. Take a look. http://accountingwithedgar.blogspot.com/2007/02/denise-ang-and-her-gaelic-victim.html
• Case 2 – JSI Shipping vs TeoFoongWongLCLoong (Tfwl) – Mr John Riggs, the MD of JSI Shipping, made $1.8 million disappeared via its monthly salary! FYI – his salary represented 25% of total staff costs. The Court said “Tfwl should have shown more professional scepticism.” (In another word, the errors are so BIGG that normal human eyes should be able to see and check on them.)

So what is the penalty for not doing your job?