Hong Kong Plugs Commitment To Tax Info Exchange
by Mary Swire, Lowtax.net, Hong Kong
02 December, 2014
Financial Secretary John C Tsang stressed how Hong Kong has made substantial efforts to introduce the new global standard for the automatic exchange of tax information, while also ensuring data confidentiality, during his speech at the first Certified Tax Adviser Conference on November 28.
He pointed out Hong Kong has been liberalizing its exchange of tax information arrangements since 2010, when it amended its tax law to remove the domestic tax interest requirement, in line with international standards. In 2013, it also put in place a legal framework for entering into standalone tax information exchange agreements with other jurisdictions.
Hong Kong has indicated its support for implementing the new global standard, on a reciprocal basis, with those partners that can meet requirements on the privacy and confidentiality of information exchanged and the proper use of the data, Tsang said.
Nevertheless, he clarified that "automatic exchange" does not mean that there will be free flow of information to all jurisdictions. The exchange partners need to enter into a Competent Authority Agreement, which provides the legal basis for the exchange, which has to be conducted within the confines of the agreement signed between the tax authorities of the jurisdictions concerned.
"In enhancing tax transparency," he added, "we are mindful of the need to protect the privacy and confidentiality of information exchanged. The new standard offers explicit clauses on protecting confidentiality. And we would strive to uphold confidentiality rules and safeguards consistent with the international standard."
With regard to compliance by Hong Kong's financial institutions, he pointed out that the city has signed an inter-governmental agreement with the United States to facilitate compliance with the Foreign Account Tax Compliance Act (FATCA). "We believe that financial institutions in Hong Kong could use their institutional arrangements for FATCA to meet the reporting requirements under the new international standard."
However, the Government also recognizes that differences remain between the arrangements required to comply with both, including with the respect to reportable accounts and due diligence procedures. Discussion with the financial sector and the taxation institute will continue to address their concerns about implementing the new standard.
Hong Kong's target is to begin its first information exchanges by the end of 2018, on the condition that the necessary domestic legislation can be put in place before then.
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