FOREIGN workers should be forced to set money aside each month to prevent them from leaving the territory(1) without paying their taxes, the Director of Audit recommended yesterday.

In his latest report to the government, Audit Director Dominic Chan Yin-tat said Hong Kong had lost an estimated $213 million in tax revenue in the past three years from foreign workers who had left the territory without settling their taxes.

He said $59 million was lost in 1997-1998, $77 million in 1998-1999 and a further $77 million in 1999-2000.

In 20 random cases examined by the Audit Commission, the unpaid taxes averaged $264,766 and ranged from $30,080 to $1,238,077.

Mr Chan recommended the government look at giving the Inland Revenue Department (IRD) the power to make ``high-risk groups'' buy Tax Reserve Certificates as they earned their salaries so they could not escape paying up.

Acting Inland Revenue Commissioner Elmo D'Souza agreed that measures were needed to tackle the problem.

He said the department was looking at legislative changes that would require employers to withhold money from foreign workers' salaries to ensure they met their tax liabilities.

Mr D'Souza said the IRD would consult employer associations, chambers of commerce and tax practitioners before deciding whether to introduce such a proposal to the Legislative Council.

The Democratic Party's spokesman for economic affairs, legislator Sin Chung-kai, said foreign workers should be taxed each month, with employers made responsible for passing the money on to the IRD.

Mr Sin said such a system would be similar to withholding taxes implemented in many countries.

Associate Professor Jiang Zhaodong of the Chinese University's School of Accounting agreed withholding tax was one solution to the problem but some companies were opposed to such a system because it could increase administrative costs. The Director of Audit also recommended increased penalties for employers who failed to notify the department about foreigners who had quit work and were planning to leave Hong Kong.

Employers are supposed to advise the department of an employee's expected date of departure, the reason for departure and whether the employee will return.

The report, however, admitted there was no readily available information to ascertain the extent to which employers do not comply with the notification requirements. Mr Chan said heavier penalties for employers who failed to notify the department about departing staff could help tackle the problem.