The Hong Kong Journalists Association reported last year that several media outlets and journalists were accused of underreporting taxes and were subsequently pursued by the tax authorities. The chairman of the association, Cheung Ka-ju, provided an update on the latest developments, stating that upon investigation, some media outlets were found to have not underreported, but incurred tens of thousands of dollars in administrative and accounting costs. However, some media outlets were found to have underreported $3,000 and were ultimately fined over $50,000.
The Journalists Association, after being required to prepay $300,000 in taxes in 2024, was recently asked to prepay $730,000 in taxes within two days. Cheung criticized the tax department for imposing unnecessary mental pressure and additional costs on media organizations and journalists in the name of tax audits, calling it another round of unchecked scrutiny.
Cheung stated that the Journalists Association is aware of at least four media cases that have been closed, but emphasized that closure does not mean relief but rather the start of another round of unchecked scrutiny.
She cited the case of the online media outlet “Independent Media,” which was accused of underreporting taxes. They spent around $40,000 on administrative and accounting costs for the audit, only to find that there was no underreporting of taxes and no penalty was imposed.
Cheung questioned the tax department’s random audit standards, which require media outlets to invest time and energy even if they are completely innocent, resulting in a “substantial punishment” beyond just fines.
The English-language online media “Hong Kong Free Press” was evaluated by the tax department to have underpaid $3,020 for a single year, leading to a demand for additional tax payment, along with fines and interest totaling nearly $58,000. The Hong Kong Free Press has incurred administrative and accounting costs of $100,000 for the audit.
Cheung noted that the fine in the HKFP case amounted to 135% of the underpaid tax, exceeding the 35% to 75% fine standard for cases where all facts are promptly disclosed after being questioned. She criticized the tax department for extending a slight discrepancy from one year to other years, “substituting presumptions for investigations.”
In addition to media organizations, individual journalists have also been targeted, with a small media owner being asked to prepay taxes continuously for three months, with the amount skyrocketing from $500 in the 2017/18 fiscal year to $37,000 and $32,000 in the 2018/19 and 2019/20 fiscal years, respectively, without any face-to-face meetings.
During the annual press conference held in the afternoon by the tax authorities, a reporter asked about the proportion of media outlets subjected to random checks and how they respond to the Journalists Association’s criticism of scarce auditing resources.
Tax Chief Chan Sze-wai responded, stating that based on confidentiality principles, they do not comment on individual groups or taxpayers’ cases. Tax audits and investigations follow established procedures and do not consider the taxpayer’s background, profession, or industry, only focusing on whether there is a risk of tax evasion, with no specific targeting of individual industries. However, there was no response to the Association’s criticism of scarce resources.
Cheung expressed concerns that in such situations, the tax authorities could keep files open indefinitely and prolong cases, continuously demanding new prepayment amounts without evidence every year.
She mentioned a case where an independent journalist was accused of not reporting taxes without any progress, questions, or meetings, and was asked to prepay around $82,000 with no basis. The journalist believed they had reported taxes at the time and had payment records but did not retain copies of proof, fearing the need to continue prepaying in the future.
Another independent journalist has been unable to open a commercial bank account for their company and had their personal account canceled last year, relying mainly on cash for daily expenses. The tax authorities demanded they pay approximately $220,000 in back taxes and fines, but only accepted checks or transfers, not cash. They suggested purchasing a cashier’s check, but even that could not be bought with cash, leading Cheung to describe the situation as “difficult to pay taxes.”
Since 2024, the Journalists Association has been required to prepay $300,000 in taxes. Cheung stated that they have been in communication with the tax authorities, but the proposed amounts by the association have not been accepted. Last month, the association received another letter demanding a prepayment of $730,000 this year, to be paid within a few days.
Cheung further questioned the tax department’s justification of “random audits,” pointing out that in recent years, the tax department has completed an average of 1,800 tax audit cases each year, with nearly half of the individuals from the same organization being audited. She sarcastically remarked that “for a media organization with seven people, three were audited,” calling it incredibly fortunate.
She also criticized the tax authorities for misallocating public resources towards the news industry. According to tax annual reports, over the past five years, the average amount paid in taxes and fines per case is around $1.62 million. However, in the four media closure cases, the average amount paid was around $80,000, significantly lower, questioning whether scrutiny of journalists dilutes the time and resources for examining high net worth individuals who evade taxes.
The Journalists Association reiterated that media outlets face baseless tax audits, leading to costs and mental pressure for those audited. The issue also relates to press freedom, including whether there is indirect pressure on operations from taxation, finance, regulatory, and administrative oversight.