Hong Kong pro-democracy business hit with ‘unwarranted' tax demand, owner says

HKFP

2 days ago

A Hong Kong pro-democracy shop owner has said his business is facing 'unwarranted' tax demands.
Derek Chu, an ex-district councillor and the owner of e-commerce company As One, said on Tuesday that the Inland Revenue Department (IRD) demanded in April that his business pay HK$120,075 in profit tax for the financial year 2023-24.
The tax assessment would mean As One made a profit of about HK$1.5 million in 2023-24, but in reality, his shop only recorded a profit of less than HK$100,000, Chu told HKFP in a phone interview.
Most of As One's HK$4 million income last year was spent on salaries, rent, and restocking products, he added.
'The numbers should have been obvious to the IRD,' Chu said. 'I don't know how they could see that much profit.'
The shop owner, who also founded the prisoners' rights advocacy group Waiting Bird, accused the IRD of 'targeting' his business and said he decided to speak up about the tax demand to 'set the record straight.'
'It's about telling people that what the IRD did was completely unwarranted,' he said.
HKFP has contacted the IRD for comment.
Part of As One's business model is selling gift packages for prisoners, which accounted for about a third of the shop's income, according to an Instagram post published on Monday.
The company relies on loans from Chu's family members to maintain cash flow, and it has accumulated debts totalling over HK$1 million since the business started in 2021, he said.
He has been repaying the loan, but there is still an outstanding amount of 'hundreds of thousands' of dollars, Chu told HKFP.
The five full-time staff members and two part-time staffers only earn meagre salaries of less than HK$20,000 a month, while Chu himself has never got paid in full, he said.
The IRD's tax demand has made his business 'harder' as he has to borrow more from his family members to pay the tax, he added.
Independent media's tax audits
Chu's disclosure comes nearly two weeks after the Hong Kong Journalists' Association (HKJA) made a similar announcement last month.
According to the press union, six independent media outlets in the city have been facing tax audits from the IRD since late 2023, with the IRD making errors and 'strange, unreasonable claims' in its tax assessments and demands.
The outlets include HKFP, InMedia, The Witness, ReNews, Boomhead, and one that did not wish to be named.
In a statement, HKFP said it has been cooperating fully with the IRD's tax audit, adding that it has 'always met its tax obligations, paid IRD demands immediately, and ensured meticulous record-keeping' since it was established in 2015.
According to the HKJA, 20 individuals, including heads of media outlets and their spouses, are also subject to the IRD's audits and backdated tax demands. The HKJA also faces the IRD's scrutiny.
When asked by a reporter about the matter, Chief Executive John Lee brushed off HKJA's allegations and said that journalists 'have no privilege to evade taxes.'