Exclusive: ‘Is it a coincidence?' – Hong Kong independent bookstores, publishers face simultaneous tax probes

HKFP

5 days ago

When bookshop owner Leticia Wong goes out to eat with friends, she no longer pays the bill first and then has them reimburse her.
She wants to avoid having many deposits going into her bank accounts, she said. The reason? An ongoing tax audit on her company, of which she is the sole director.
The pro-democracy politician-turned-entrepreneur has been running Hunter Bookstore, an independent bookshop in Sham Shui Po, since 2022. About two years later, in early 2024, the Inland Revenue Department (IRD) began investigating her company's taxes.
In addition to the company's financial reports, Wong had to submit monthly statements of her personal bank accounts to the IRD. Later, she had to report dozens of personal transactions dating back several years before the company was founded.
'It's annoying. For example, if someone transferred HK$300 to you in 2019, would you still remember who it was?' Wong told HKFP in Cantonese during an interview in June. 'The IRD also requested that I submit the residential addresses of the remitters.' The IRD did not confirm the claim when approached by HKFP, citing privacy.
While she understands that the IRD is authorised to investigate a taxpayer's financial records for the past seven fiscal years, she still finds the probe puzzling because she only started running the small business three years ago.
'Books are not a basic necessity today… Moreover, rent is always high in Hong Kong. Our business is very difficult [to run],' said Wong, a former district councillor in her 30s.
Independent bookstores have sprung up across Hong Kong since the Covid-19 pandemic. Unlike major bookshop chains, these smaller bookstores stock collections heavily curated by their founders. They take the time to select books that align with their interests and values, often focusing on local publishers and topics.
According to a survey, independent bookstores are one of the main distribution channels for independent publishers, as major chains reportedly censor books on specific topics or those written by certain authors, such as pro-democracy figures.
Apart from Wong's bookstore, at least five other companies in the publishing sector have faced simultaneous tax audits, HKFP learned. The earliest probe started in late 2023.
The directors of the five companies spoke to HKFP on condition of anonymity due to fear of reprisals. While the IRD has completed audits of some companies, others are still under investigation. Among the five, three were established over eight years ago, while two were set up within the past five years.
Brian, a director of an independent bookshop that opened less than half a decade ago, told HKFP that the IRD informed him the company was under tax investigation in late 2024, soon after the company filed its first tax return.
'Our accountant found it strange. While the IRD can probe tax affairs over the past seven years, it is uncommon for the IRD to investigate newly established companies,' Brian said in Cantonese. 'Ours is such a small-scale operation, and the profit is small; is it worth auditing from an economic perspective?'
The IRD has established procedures to review the information provided by taxpayers and to verify the amount of tax payable in order to protect tax revenue, the tax authority said in response to HKFP's enquiry.
'Such reviews, including audits and investigations, apply to all taxpayers irrespective of their industries or backgrounds. If there is information showing that a person may have breached the provisions of the Inland Revenue Ordinance (IRO), the IRD will follow up on the case in accordance with the IRO,' it said.
'Our sector is targeted'
Lily has been running an independent bookshop for more than eight years. Since it was established, business has been tough, recording losses in most financial years. The IRD had never investigated her company until early last year.
According to an IRD document Lily showed to HKFP, the tax authorities began probing the company's tax assessments over the past six years. It took the bookshop almost a year to answer all the questions from the IRD.
Lily said the audit was completed late last year after the company was fined 'a tiny amount of money' for some understatement of income.
'The IRD said we were selected 'randomly.' Of course, they can do that. But is it just a coincidence that many independent bookshops were investigated last year?' Lily said in Cantonese. 'I feel our sector is targeted.'
Louis, a director of another independent bookstore, told HKFP that his company was put under a tax audit last year, soon after it filed its first tax return.
'It is not reasonable that the IRD decided to inspect us even before the authority assessed our tax for the first time,' he said.
Since the Beijing-imposed national security law was enacted at the end of June 2020, Hong Kong's publishing sector has experienced various forms of censorship. Books on the Tiananmen Square crackdown and those written by pro-democracy figures have been purged from public libraries, citing national security concerns.
Chief Executive John Lee played down the removals, saying the public could still buy those books at independent bookshops. However, the Hong Kong Book Fair – the city's official and largest annual book event – has repeatedly excluded some independent bookstores and publishers, or requested specific titles be removed from exhibitors' shelves since 2022.
Since July 2023, Hunter Bookstore, along with other independent bookshops and publishers, has been co-hosting an annual alternative book fair.
This year's event, held concurrently with the Hong Kong Book Fair 2025, runs until Monday.
The city's independent news sector, from journalists to media outlets, including HKFP, has also faced simultaneous tax audits since November 2023. In a statement, HKFP said it was cooperating with the probe, whilst withholding donor names, having always paid tax in full and on time. According to the Hong Kong Journalists Association (HKJA), which broke the news in May, the situation reflects a worsening press freedom environment.
According to the Inland Revenue Ordinance, the government can conduct tax audits on any company, said Kenneth Leung, an accountant, tax adviser and former legislator.
'Even if the tax was already assessed back then, the IRD can probe assessments over the past seven years, or the past 10 years if any fraud is suspected,' Leung said in Cantonese. The IRD may also conduct tax audits if the authority is tipped off about suspected tax avoidance or understatement by any companies, he added.
According to the IRD guideline on tax audit and investigation, the selection of cases for post-assessment audits and investigations is 'either based on risk areas or by random checking.'
An IRD field investigator has the authority to make enquiries of the taxpayer's bankers to clarify some transactions. At the same time, the taxpayer is also responsible for providing access to their bank accounts and those of their immediate family members.
Leung said he was not able to speculate why the government had investigated the tax affairs of different companies in the publishing sector. However, he pointed to the government's declining coffers.
'As the government has had less revenue over the past few years, it is expected that the IRD will ensure more vigorous enforcement to gain revenue legally. Under these circumstances, small companies might also face tax audits,' Leung said in Cantonese.
Hong Kong logged an estimated HK$87.2 billion deficit for the fiscal year 2024/25, the third consecutive shortfall, after the city recorded a deficit of HK$122 billion in 2022/23.
Personal accounts
Wong was a member of the pro-democracy Civic Party when she was elected as a district councillor in the 2019 District Council elections, in which the pro-democracy camp won a majority of seats.
She quit the party in early 2021 – about three years before it was officially disbanded. She resigned as a district councillor in June that year, after deciding not to take the oath of allegiance as requested by the government.
Wong established her company in July 2021 to open a bookstore. Hunter Bookstore started operations in April 2022.
Earlier this year, during the ongoing tax audit, the IRD demanded that Wong pay provisional salaries tax of around HK$70,000, as it estimated she had additional taxable income of HK$500,000 from 2022 to 2024.
She said the IRD assessment puzzled her. 'As a staff member at Hunter, I am paid a monthly salary of HK$30,000, for which I have paid annual tax,' Wong told HKFP.
She filed an appeal against the provisional tax. Afterwards, the IRD asked her to explain dozens of transactions in her personal bank accounts from 2019 to 2021, before her business existed.
She said those transactions involved relatively large amounts, such as money her parents gave her to pay rent for the bookstore, as well as smaller sums.
'The transaction of the smallest amount was HK$43, which I later remembered was transferred by my ex-boyfriend,' Wong said. 'There was also a deposit from a company called Caring & Sharing S. I searched for a long time and found out it was actually the consumption voucher issued by the government.'
'The most draining part is the human cost… handling all those queries from the IRD,' Wong said. 'Among all the different government departments, the IRD is the one I fear the most because, with its scope and investigative capability, it can be really disconcerting.'
Over the past one and a half years, her business has had to spend extra budget and manpower to deal with requests from the IRD.
Other independent bookstores and publishers told HKFP that they had similar experiences with the IRD's tax audits: Investigations began with the companies' financial reports, and later focused on the directors' personal accounts.
Jimmy, a director of an independent book publisher that has been operating for over eight years, said that the IRD's probe started in late 2024.
The tax authority first inspected the company's financial reports dating back seven years, then asked him about around five dozen transactions in his personal bank accounts from as far as six years ago.
'I really can't remember the transactions from six years ago. Therefore, I had to reply to the IRD that I could not remember,' Jimmy told HKFP. His tax audit is still ongoing.
Meanwhile, Hazel, a director of an independent bookstore that also publishes its own titles, said her company's tax audit was completed after it was fined 'a small amount of money.'
'Obviously, we didn't feel comfortable during this process,' she recalled. 'We feel that our sector has been targeted. We were worried about what we could do if our bank accounts were frozen by the authorities.'
She added: 'Books and the publishing sector make so little profit. Shouldn't the government introduce tax incentives to support this cultural industry?'
'Greetings'
Apart from tax audits, some independent bookshops and publishers face frequent inspections from various government departments, which those in the sector call 'greetings.'
Since Hunter Bookstore's opening three years ago, the Food and Environmental Hygiene Department (FEHD) has made 35 visits to the bookstore or to other venues where it organised activities, according to the bookshop's records.
For most of the visits, the FEHD said they were following up on reports alleging that Hunter was hosting events without the Temporary Places of Public Entertainment Licence.
'They keep giving us warnings, but no prosecution has been made so far,' Wong said.
Hunter also received 'greetings' from the Hong Kong Police Force; the Fire Services Department; the Companies Registry; the Books Registration Office, under the Leisure and Cultural Services Department; the Buildings Department; and the Labour Department over the past three years.
Jimmy said his publishing company's office also received 'greetings' from various government departments, including the Fire Services Department, the Environmental Protection Department, and the Companies Registry.
Louis told HKFP that his bookstore was visited by staff from 10 different government departments within 15 days, from December 2023 to January 2024 – during what he called 'a peak period of 'greetings.''
'They are still inspecting us when we host any activities. Most of the visits came from the FEHD and the Fire Services Department,' he said in Cantonese.
Wong of Hunter Bookstore told HKFP that inspections by various government departments took an emotional toll and caused psychological stress.
And, as the operator of a small business, she does not have a thorough understanding of all the laws and regulations, she said.
'It seems that we're incapable of fully obeying the laws because we do not understand all the details of laws and regulations,' the bookshop owner said.
As Hunter Bookstore is still awaiting further responses from the IRD about its tax audit, Wong continues to run the bookshop.
From late May to mid-July, it held an exhibition titled 'Confronting Fear.' Among the exhibits Wong selected were documents the bookshop received from various government departments related to different types of inspections, and a calendar marking all the 'greetings' from authorities.