Following the High Court's criticism of the Board of Review's delay in handing down a decision1, the Commissioner of Inland Revenue's delay in determining taxpayer objections to assessments has now come under the spot light. Two recent decisions by the High Court demonstrates the Courts willingness to force the Commissioner to issue determinations where there has been unreasonable delay.

Unreasonable Delay

In Kong Tai Shoes Manufacturing Company Limited v Commissioner of Inland Revenue,2 the Court ordered the Commissioner to make a determination in respect of the taxpayer's objections to its assessments. The order was made as a result of Kong Tai's application for judicial review of the Commissioner's failure to make a determination within there has been unreasonable delay.

Section 64 of the Inland Revenue Ordinance (Cap. 112) requires the Commissioner to make a determination "within a reasonable time" of receipt of a valid notice of objection. The Revenue's practice note states that most objections are expected to be settled within four months from the date of receipt of the notice of objection3.

In Kong Tai, the Commissioner failed to issue a determination in respect of the taxpayer's objections for periods of between 3.5 and 6.5 years. The Court held the Commissioner's delay was of an unacceptable magnitude. On 30 September 2011, Justice Reyes granted the order of mandamus requiring the Commissioner to issue a determination within periods of between two and six months of the judgment.

The decision follows the High Court's decision of Yue Yuen Marketing Company Limited and Ors. v Commissioner of Inland Revenue.4 In that case, approximately six years had lapsed since the taxpayer had submitted their objections to the Commissioner. Again, the Court concluded that more than a reasonable time had lapsed - there had been inordinate delay by the Commissioner. The Commissioner was ordered to make determinations in respect of the objections within six months.5

These recent decisions suggest the Courts are now more willing to make an order compelling the Commissioner to make a determination. Previously a delay of four years had been held to be not unreasonable.6 Of course, whether the Court will find there has been an unreasonable delay by the Commissioner will depend on the facts of each case.

Requests for Information no Bar to Relief

The decisions of Kong Tai and Yue Yuen Marketing also indicate the Courts are prepared to dismiss the Revenue's common defence for delay, namely that the taxpayer has not fully complied with the Revenue's request for information or documents. In Yue Yuen Marketing, the Court held that despite the taxpayer's tardy response to some of the Revenue's requests for information, the Court could not attribute to the taxpayer all or even a substantial part of the six years' delay.7

In Kong Tai, the Court noted that the additional information sought had been identified by the Revenue for some time and if the taxpayer failed to fully comply with the request, and if the information required was truly material, then the taxpayer failed to comply "as its peril". The Court recognised that the Revenue would be entitled to draw adverse inferences against the taxpayer in those circumstances.8

Right to Quash Assessments?

In both cases, the taxpayers sought an order from the Court that the assessments be quashed on the basis that the Commissioner had acted in bad faith by reason of the delay in making a determination. On both occasions, the Court refused to make such an order. The Court held in Yue Yuen Marketing that "delay by itself cannot be an adequate foundation for an allegation of bad faith."9 In Kong Tai, Justice Reyes was unable to infer from the two cases that there is a "systematic and wilful culture of delay within the Revenue...".10


The decisions of Kong Tai and Yue Yuen Marketing place pressure on the Commissioner to promptly issue determinations of taxpayers' objections going forward.

The taxpayers' success in Kong Tai and Yue Yuen Marketing may also encourage other taxpayers to apply for judicial review where there has been an unreasonable delay in the Commissioner's determination. If such applications are successful, the Courts may infer a "culture of delay within the Revenue" and in doing so, open the gateway for such assessments to be quashed on the grounds of unreasonable delay in the future.

For inquiries related to this Legal Update, please contact John Hickin, Susanne Reynolds, or your usual contacts with our firm.

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  1. Li & Fung (Trading) Limited v Commissioner of Inland Revenue (HCIA 1 and 3/2010) (18 April 2011).
  2. HCAL 34/2011, 30 September 2011.
  3. Inland Revenue DIPN No. 6 (Revised) issued in November 2006, paragraph 25.
  4. HCAL 49/2009, 17 March 2010.
  5. Paragraphs 63 and 66.
  6. Nina T H Wang v Commissioner of Inland of Revenue [1994] 2 HKLR 356.
  7. Yue Yuen & Marketing, paragraph 60.
  8. Kong Tai, paragraph 56.
  9. Paragraph 40.
  10. Paragraph 64.