The Commissioner of Inland Revenue in Hong Kong has issued an apology following a government ombudsman report that identified unclear instructions within the city’s electronic tax filing system as the cause of widespread submission failures. The problematic wording in the eTAX platform led more than 33,000 taxpayers to leave their tax returns incomplete, resulting in penalty notices being issued to over 5,000 individuals and the prosecution of two taxpayers.

Benjamin Chan Sze-wai, Commissioner of Inland Revenue, acknowledged the shortcomings of the eTAX system during a radio interview, saying the department has a responsibility to fix the issues. He assured the public that no taxpayers would face penalties related to the incident, emphasizing that outstanding fines would be waived and that the two ongoing prosecutions would be withdrawn.

An investigation conducted by the Office of the Ombudsman found that ambiguous directions on the submission and signature interface caused confusion. Many users believed that signing their returns via the “IAM Smart” mobile application completed the filing process. However, the correct procedure required taxpayers to return to the eTAX platform to reach a final confirmation page before the return was officially submitted.

Data from the investigation showed that between May 21, 2023, and January 31, 2024, nearly 490,000 taxpayers attempted to file electronic returns using digital signatures through IAM Smart for the 2024-25 tax year. Of these, approximately 33,000 did not complete the process, 5,169 received penalty notices for late filing, and two were prosecuted. Around 14,000 of those who initially failed to submit successfully resubmitted their returns the same day.

Hong Kong taxpayers are required to file returns within one month of issue to allow the Inland Revenue Department (IRD) to assess taxes and approve deductions. The failure to submit on time can lead to fines of up to HK$10,000, with additional penalties calculated as a multiple of any underpaid tax.

The Ombudsman’s report highlighted that the scale of the problem signified systemic flaws rather than isolated user errors. It cited increased inconvenience for taxpayers and additional administrative burdens for IRD staff. The report also noted that similar complaints had been made as early as 2022. Despite initial system updates, the revised instructions still lacked clarity. When the issue resurfaced in 2024-25, the IRD reportedly did not immediately recognize the severity and initially advised taxpayers to simply resubmit their returns upon inquiry.

In response to questions about the department’s slow reaction, Commissioner Chan explained that only a small number of complaints were received initially and cited multiple potential causes for submission failures, such as internet disruptions and computer freezes. He indicated that around 26,000 of those affected ultimately submitted their returns on time.

Before the start of the 2025-26 tax return period in May, the IRD implemented measures intended to prevent a recurrence. These included pop-up reminders prompting users to return to eTAX after signing via IAM Smart, clearer confirmation messages within the eTAX inbox, enhanced on-screen and email notifications, and an auto-save feature to prevent loss of entered information. The department is also exploring further simplifications to streamline the filing process.

Among those impacted by the earlier system failure was Dr. Luk Che-chung, former chief executive of the Hospital Authority’s Hong Kong East region. Luk said he was fined HK$600 for an alleged late submission despite believing he had already filed his return. He described the confusion as distressing and welcomed the investigation, urging the government to take timely action based on user feedback to avoid similar problems in the future.