Rising tax scrutiny puts pressure on private equity, venture funds: report

Authorities are ramping up collection efforts, a tax partner said.

Hong Kong is reportedly intensifying tax checks on private equity and venture funds as it faces pressure to plug deficits, reports Bloomberg.

Some tax advisers said they have seen a jump of as much as 50% in funds seeking guidance on how to respond to inquiries from the authorities during that period.

Authorities are “ramping up” their collection efforts, said Patrick Yip, vice-chair and international tax partner at Deloitte China. “We have seen a noticeable increase in inquiries from fund clients seeking advice on how to deal with inquiries from the Hong Kong tax authorities in the last two years.”

Hong Kong, which prides itself on its low taxes, is battling a sluggish economy and steep deficits after years of political upheaval, strict Covid-19 curbs and a slumping housing market. The government is looking at drastic measures, including cutting 10,000 civil servant jobs and ways to boost revenue, such as potentially regulating basketball betting.

In 2024, it raised taxes on high earners – the first hike in two decades. The city’s top income tax rate is 17% and it has no levies on capital gains.

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