Advancing the digitalization of Hong Kong’s tax administration

Hong Kong, 13 December 2018

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Highlights:

  • Encourage higher uptake of e-filing with streamlined eTAX account registration and more interactive support
  • Enable the mobile services of Inland Revenue Department (IRD)
  • Offer digital options, such as webchat, for taxpayers to solve tax-related inquiries
  • Extend the eligibility of e-filing service to encourage the usage among corporate taxpayers with turnover exceeding HK$2 million
  • Introduce a registration system and set up a new e-portal for authorized tax representatives to manage clients’ tax affairs digitally

Digital transformation is changing the relationship between tax administrations and taxpayers at an unprecedented rate. To cope with the evolving expectations of taxpayers in this digital era, the receptiveness of taxpayers as well as the feasibility of tax administration digitalization have become a vital and relevant topic for leading global financial centers to address and activate.

As such, EY, in collaboration with CPA Australia, the Hong Kong General Chamber of Small and Medium Business and The Society of Chinese Accountants and Auditors, conducted a survey on the digitalization of Hong Kong’s tax administration in November this year. More than 700 responses were received.

The survey aimed at acquiring an understanding of the current state of Hong Kong’s tax administration, exploring the opportunities for its digital advancement, as well as offering future options for consideration.

The survey concluded that, while the majority of local taxpayers still focus on using conventional means to manage their tax matters, they do have an appetite for more interactive and electronic options to fulfil their tax obligations. The digitalization of the city’s tax administration is considered highly feasible.

When being asked about they connect with the Inland Revenue Department (IRD) for inquiries, the majority of the respondents (60%) have been using traditional methods such as telephone calls, mail, fax and in-person inquiries.

“Taxpayers are consistently asking to be served, rather than just being informed,” said Agnes Chan, Managing Partner, Hong Kong and Macau, EY. “Our recent survey has identified effective ways to achieve this, one of them is to introduce a webchat service that allows access via mobile devices and offers round-the-clock service to taxpayers.”

The survey also asked about the usage of e-filing under eTAX services. Forty-five percent of the respondents said they have never used any e-filing services, while approximately 43% indicated that they did not have any eTAX account.

“To successfully drive taxpayers toward utilizing IRD’s eTAX services, we would recommend that the IRD start by promoting a higher uptake of eTAX accounts,” added Agnes. “This can be achieved by simplifying the registration process, communicating the benefits of eTAX service and creating a step-by-step guideline to ease the burden of tax filing,” added Agnes.

“Another dimension of enhancing the digital transformation of our tax administration is to relax the e-filing eligibility for companies,” said Paul Ho, Asia-Pacific Financial Services Tax Partner, Ernst & Young Tax Services Limited. “At present, electronic filing of tax return in Hong Kong is only available for corporates with turnover no more than HK$2 million and an overwhelming majority of businesses would like to have this service extended to cover all companies. This would greatly minimize the administrative efforts in preparing, reviewing, signing and submitting paper returns.”

The survey findings also indicated that the general public’s wish for their tax representatives to be able to utilize digital process to file tax returns and handle other tax matters on their behalf.

As part of the comprehensive study, EY also looked at the digital journey of tax administrations in countries including the Australia, Singapore and UK. The study also found that these countries have already achieved high usage rate for e-tax filing and that “chatbots” are already created to handle taxpayers’ inquiries.

“Around the world, businesses are progressively becoming more digital and tax administrations are moving in the same direction,” said Albert Lee, EY Global and Asia-Pacific Tax Technology and Transformation Leader, who leads EY’s Digital Tax initiatives to serve corporates in the technology era. “The Hong Kong IRD is following the trend toward digital tax administration, and we think this success will greatly enhance the city’s overall efficiency and competitiveness in the long run.”

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

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